Overtaken by the market

23 March 2006 By Dan Ackman

The White House is considering forcing SUVs and light trucks to adopt the same fuel economy standards applied to cars. That s fine. But the market has already done its dirty work. High petrol prices are killing this segment for GM and others.

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The Bush administration may impose for the first time fueleconomy standards on the biggest vans and sportutility vehicles, the Wall Street Journal reported. The move would close a gap in current regulation and would please conservationists. But the rules would also hit US carmakers, particularly General Motors, especially hard.

The possible new regulations, which would be issued by the National Highway Transportation Safety Administration, would apply to vehicles weighing between 8,500 and 10,000 pounds, the paper said. These vehicles have been exempt from the standards since they were mandated in the 1970s, a time when vehicles of that size were mostly used by farmers and businesses. Regulators did not apply fuel economy standards to smaller SUVs until 2003. If enacted, the standards would apply to larger light trucks starting in 2011.

GM would be the most affected by a change in the law since it sells three of the four SUVs that weigh in over 8,500 pounds.

In a similar moves, the UK government announced higher taxes for gas gazzling vehicles, and China introduced a 12% tax increase on large cars. Small car taxes remained unchanged or reduced.

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