U.S. Auto Industry Will Ask Trump for Relaxed Regulations Covering Trade and Fuel Efficiency

The U.S. auto industry is set to pursue its agenda with an incoming president broadly critical of government policies, aiming to roll back at least some regulations imposed during the past eight years of the Obama administration.

Among the industry's top targets most likely will be federal Corporate Average Fuel Economy (CAFE) standards, which rise to a 54.5 mile-per-gallon fleet average by 2025, a level that General Motors (GM) and other automakers worry may not be achievable.

President-elect Donald Trump, who has criticized trade policies and expressed skepticism about policies designed to slow global climate change, could agree to take steps --perhaps in conjunction with the U.S. Congress -- to set new, lower fuel-efficiency targets. The government also could revisit financial incentives to stimulate demand for battery-powered electric vehicles, solar and other energy technologies meant to replace fossil fuels.

"As car prices rise, it becomes vital to look at the full cost of regulatory initiatives," said Mitch Bainwol, chief executive of the Alliance of Automobile Manufacturers, in a letter to the Trump transition team. "Well-meaning regulatory action risks increasing compliance costs to the point that additional safety and fuel-efficiency technologies put new vehicles out of financial reach of the average new car purchaser."

During the election campaign, Trump criticized Ford (F) for the loss of jobs in the U.S. in connection with the automaker's plan to transfer production of small cars to Mexico, a country where production costs are lower than in the U.S.

On Tuesday, Mark Fields, Ford's CEO, said the company's move in Mexico will free up factory space in Michigan for new truck models. Earlier, he noted that the Trump campaign failed to recognize that the automaker had added 25,000 jobs in the U.S. in the past five years.

Fields said that a proposal by the new president to impose a 35% tariff on cars built in Mexico and imported to the U.S., along with other protectionist initiatives, would be a disaster for the U.S. economy. So far, Fields is the only U.S. auto executive that has spoken out. But there are likely to be more in next few months.

"I continue to be convinced that the right policies will prevail, because I think we all share the same objective, which is a healthy and vibrant U.S. economy," Fields told Bloomberg News. "We expect to work very effectively and positively with the president-elect's administration as well as the new Congress."

Other issues are likely to be addressed by automakers as well, namely a lowering of corporate taxes to a rate more in line with global standards. Many U.S. corporations are keeping cash overseas in order to avoid significant tax liability.

U.S. automakers and parts suppliers have been constant critics of what they call "manipulation" of currencies from export-oriented countries like Japan, which they say are unfair and should be challenged by government.

Doron Levin is the host of "In the Driver Seat," broadcast on SiriusXM Insight 121, Saturday at noon, encore Sunday at 9 a.m.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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