The US has the lowest fuel-economy standards for vehicles in the developed world. While the Japanese, the Europeans and even the Chinese have been working hard to improve fuel-economy standards, the US auto industry went down a different road - a strategy that has so far proved quite unsuccessful. In 2006 Ford Motor reported its biggest annual loss ever, $12.7 billion. General Motors' (GM) year was not quite as bad, total losses only reached $8.6 billion.
Earlier this week, chief executives of America's four largest car companies Ford, DaimlerChrysler, Toyota North America and General Motors (GM) acknowledged they intend to change their ways. Collectively the group told lawmakers that they would accept a US economy-wide strategy to reduce carbon emissions as long as it did not disproportionately target car producers. In addition they agreed on the merits of devising a US-wide carbon emission "cap and trade" regime. Their pledge, which took place in a rare joint appearance before Congress, marked a significant step forward for the new Democratic majority on Capitol Hill, which aims to draft America's first national global warming legislation in the next few months. Although the auto executives differed on the degree to which they would accept tougher fuel economy standards for vehicles the consensus was that the Corporate Average Fuel Economy (CAFE) regime, enacted in 1975, had failed to achieve its purpose of reducing US dependence on foreign oil and reducing domestic petrol consumption. Rick Wagoner, chief executive of GM, said, "it is time to move away from approaches that divert resources to solutions that actually work." We agree. :: Financial Times