A three-judge panel of the Ninth Circuit Court of Appeals, in San Francisco, voided the new regulations for 2008-2011 model year vehicles and told the Transportation Department to produce new rules taking into account the value of reducing greenhouse gas emissions.

The court, siding with 4 environmental groups and 13 states and cities, also asked the government to explain why it still treated light trucks — which include pickups, sport utility vehicles and minivans — more mildly than passenger cars.

Under the rejected rule, the average fuel economy of light trucks was to rise to 23.5 miles a gallon in 2010, up from the current standard of 22.5 m.p.g., but still well below the current standard for passenger cars of 27.5 m.p.g.

The ruling, which is likely to be appealed to the United States Supreme Court, represents a major setback for both the auto industry and the White House at a time of growing public concern over the rising price of gasoline and the issue of climate change.

Lawyers specializing in environmental issues said on Thursday that the decision had significant implications beyond the automobile industry’s struggles over fuel-economy standards.

Hybrid car economics will face a new road test this month with the arrival of fresh models sporting revised mileage ratings from the Environmental Protection Agency.

The New Yorker
The Financial Page
Fuel for Thought
by James Surowiecki July 23, 2007

In the auto industry, there’s one thing you can always count on: if a new environmental or safety rule is proposed, executives will prophesy disaster. In the nineteen-twenties, Alfred Sloan, the president of General Motors, insisted that the company could not make windshields with safety glass because doing so would harm the bottom line. In the fifties, auto executives told Congress that making seat belts compulsory would slash industry profits. When air bags came along, Lee Iacocca told Richard Nixon that “safety has really killed all our business.” A few years later, when Congress was thinking about requiring fuel-economy standards, auto executives warned that instituting such standards would create “massive financial and unemployment problems.” And now, with Congress debating a bill to raise fuel-economy standards, for the first time in almost twenty years, the Chicken Littles are squawking again, forecasting doom for Detroit and asserting that making higher-mileage vehicles is technologically unfeasible and economically suicidal.

Of course, much of this is simply stonewalling by executives determined to keep meddlesome politicians out of their business. But sometimes the industry’s fears have been founded on real market research. In the case of safety glass, G.M. believed that consumers weren’t prepared to pay more for cars with safety glass, so Sloan worried that it would be hard to recoup the cost of installing it. Similarly, when, in the mid-nineteen-seventies, G.M. offered front-seat air bags as an option on Cadillacs, Buicks, and Oldsmobiles, they didn’t sell. Fuel-economy standards present the same difficulty: although there are plenty of affordable models that get good gas mileage, over the past two decades some of the most powerful and least fuel-efficient vehicles on the market—S.U.V.s and pickup trucks—have also been among the best-selling. Thirty years ago, so-called “light trucks” accounted for about a fifth of all auto sales. Today, even with a recent slowdown, they account for more than half.

ROCHESTER, Mich., July 11 - John W. Snow, the chairman of the private equity firm that is buying Chrysler, said Wednesday that a Senate bill to significantly raise fuel economy standards could devastate the American auto industry.

Mr. Snow said he was optimistic, though, that lawmakers would ultimately agree on a less stringent way to reduce dependence on imported oil. He said his company, Cerberus Capital Management, would fight the Senate measure because it intended to own Chrysler long term. Chrysler lost $1.5 billion last year and is cutting 13,000 jobs in efforts to reverse a long decline in its share of the United States vehicle market.

"We're committed to Chrysler; we're committed to making it an enormous success," he told a Detroit Economic Club audience here. He also said that Cerberus had no plans to sell Chrysler or to take it public after making it profitable again.

Home page for the Wharton School's courseware service.  Includes information on getting a Wharton computing account when you are taking a course at the School, along with over 100 answers to frequently asked questions for using the courseware service.