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.

 

This report provides data on the fuel economy and technology characteristics of new light-duty vehicles (cars, vans, sport utility vehicles (SUVs), and pickup trucks) for model years 1975 through 2006. Since 1992 average fuel economy has been relatively constant, ranging from 20.6 to 21.4 miles per gallon (mpg). Based on sales projections provided by automotive manufacturers to EPA, model year 2006 vehicles are estimated to average 21.0 mpg, the same as last year, but five percent below the fleet-average fuel economy peak value of 22.1 mpg achieved in 1987. After two decades of steady growth, the light truck market share has been relatively stable for five years.