GM, Daimler Lose Bid to Block State Emissions Rules (Update6)
By Karen Gullo and Alan Ohnsman
bloomberg.com
Sept. 12 (Bloomberg) -- General Motors Corp. and other carmakers lost a bid to block carbon-reduction rules in Vermont, suffering a defeat in the first case to challenge states' right to regulate pollutants linked to global warming.
U.S. District Judge William Sessions ruled against the auto industry today in Burlington, Vermont, saying regulations enacted by California and adopted by Vermont and other states aren't pre- empted by federal rules as carmakers argued. He also said the industry, which claims it would cost billions of dollars to comply with the rules, hadn't shown they were too burdensome.
``The court remains unconvinced automakers cannot meet the challenges of Vermont and California's'' regulations, Sessions said in his ruling.
The decision, if upheld, will bolster efforts by California, Vermont, New York, Massachusetts and other states to regulate carbon dioxide and gases linked to global warming in advance of federal regulations. The decision could force car companies to spend more to speed up development of more fuel-efficient vehicles. States that have adopted the California rules represent about 40 percent of the U.S. auto market.
``This is one of the few times where the entire industry is universally holding hands and saying `this is a bad thing,''' said Dan Poole, who helps manage $31 billion at National City Bank in Cleveland including shares in Honda Motor Co., Toyota Motor Corp. and diesel-engine maker BorgWarner Inc.
Fuel Economy
The states' regulations require increases in fuel economy for small cars and light trucks to 43.7 miles (70.3 kilometers) a gallon by 2016 from 27.6 miles a gallon in 2009, car industry lawyers said. The rules will take effect for model year 2009 vehicles, meaning carmakers could have just a year to comply.
``Today's decision marks another important victory in the fight against global warming,'' California Governor Arnold Schwarzenegger said in a statement. ``California and other states that want to take aggressive action will no longer be blocked by those who stand in our way. We're confident we have a very strong case.''
Dave McCurdy, president of the Alliance of Automobile Manufacturers, an industry trade group that joined the car companies in suing, said the group is considering an appeal. GM referred all comment on the ruling to the alliance.
``Federal law is designed to ensure a consistent fuel- economy program across the country,'' McCurdy said in a statement. ``It makes sense that only the federal government can regulate fuel economy.''
GM Shares
GM shares fell 29 cents to $30.25 in New York Stock Exchange composite trading.
Detroit-based GM, the world's biggest carmaker, and Stuttgart, Germany-based DaimlerChrysler Corp., the world's largest truck maker, sued Vermont, claiming the state emissions law would cost them billions of dollars for the required redesign of their vehicles.
Since the suit was filed, DaimlerChrylser sold 80.1 percent of its Chrysler unit, the seller of Chrysler, Dodge and Jeep vehicles, to Cerberus Capital Management LP.
Under the U.S. Clean Air Act, California can set emissions rules that are stricter than federal standards once it obtains a waiver from the Environmental Protection Agency. The EPA has yet to rule on a waiver request from California, which has threatened to sue if it's turned down.
Schwarzenegger has given the EPA until Oct. 25 to issue a decision about California's waiver request before filing a lawsuit, the statement said.
Governors' Request
The Clean Air Act allows other states to adopt California's rules or the federal government's. Currently, 11 other states have adopted the California requirements.
Governors of California, New York, Massachusetts, Pennsylvania and nine other states sent a letter to chief executive officers of GM, Ford Motor Co., Toyota Motor North America and three other automakers today asking that the industry drop legal challenges to their efforts to lower carbon emissions, citing a recent U.S. Supreme Court ruling that the EPA has authority to regulate greenhouse gases.
``We do not believe it is productive for your industry to continue to fight state implementation of clean tailpipe standards,'' the governors said.
Sessions said in his ruling that he assumed the EPA would grant California the waiver. If California is denied a waiver, the Vermont rules are invalid, he said. The EPA has never turned down a California waiver request.
California Lawsuit
The auto industry has also sued in California, where the rules require 30 percent cuts in carbon-dioxide emissions beginning with 2009 models. That case is pending in federal court in Fresno, California.
The auto industry favors more gradual increases in fuel economy, or how many miles a vehicle runs on a gallon of gas. It supported a U.S. House of Representatives proposal to require cars to average 35 miles per gallon and light-duty trucks to get 32 miles per gallon by 2022. The current standard is 27.5 miles a gallon for cars and 21.6 for trucks.
In a trial in April, GM told Sessions it would have to spend $15 billion to comply with Vermont's rules. The measures will cost jobs, reduce car sales and do little to improve air quality, lawyers for the industry said during the trial.
They accused states of trying to set fuel-economy standards, an area over which the federal government has sole authority.
Sessions said the California rules focus on reductions in greenhouse-gas emissions ``and are sufficiently unrelated to fuel economy standards.''
Lawyers for Vermont denied that the state is dictating standards and said automakers exaggerate the effects of the rules, which require gradual cuts in emissions. They said the state's skiing and maple syrup industries will be harmed by rising temperatures.
The case is Green Mountain Chrysler v. Crombie, 05-302, U.S. District Court, District of Vermont (Burlington).
To contact the reporters on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net ; Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net .
Last Updated: September 12, 2007 18:35 EDT |
