Remember the cult movie “Bullitt” with Steve McQueen? There is a legendary 10-minute-long chase scene that features a Ford Mustang and a Dodge Charger. No words are spoken; all we hear are the roaring engines and squealing tires. Ford is introducing the Bullitt Mustang, with at least 475 horsepower, at the Detroit auto show to commemorate 50 years since the film’s release. It comes a little late, quip car connoisseurs. In fact, back then the Ford Mustang wasn’t powerful enough to keep up with the more powerful Dodge Charger and it had to be souped up.
Yet it is a fitting time to look back in history. In those days things were going well for the US automotive industry, with the “Big Three” dominating the world and domestic markets with their giant cars and gas guzzlers. That hasn’t changed much. Today General Motors, Ford and Fiat Chrysler still don’t worry much about fuel consumption, as is evident at this week’s Detroit auto show. After all, big cars are top sellers. Not to mention that pressure from Washington has eased considerably after Donald Trump won the presidential election.
For President Trump time seems to have stood still.
In 2012, former President Barack Obama passed the Corporate Average Fuel Economy, or CAFE, strategy, which requires manufacturers to cut the average gasoline or diesel consumption of their vehicles by at least half by 2025. Now that the new US administration doesn’t care, or cares little, about global warming, less stringent regulations are being discussed in Washington at the industry’s urging.
These developments are reflected in share prices. The market capitalization of the European-American carmaker Fiat Chrysler rose by nearly 90 percent last year, much faster than its competitors’ valuation. It’s the reward for a risky strategy that is, for the time being, working out: Fiat Chrysler took almost all its sedans off the North American market, producing only SUVs and pickups. The company’s CEO Sergio Marchionne and his team made the transition remarkably smoothly, ensuring the Italian-Canadian boss ends his last year in office with a bang.
Yet the Trump card has limited influence. The President will not stop the overall trend of vehicles with lower emissions, a painful realization that Fiat Chrysler will eventually have to accept. Mr. Marchionne currently seems too passive, relying on partnerships with other manufacturers, like BMW, to address issues of the future. But the clock is still ticking. In the US, for example, California is strongly opposed to watering down fuel efficiency regulations. Despite the authority to make such a decision resting in the Environmental Protection Agency’s hands, California has been issuing its own emissions regulations since 1963.
And nothing happens in the US car market without California. The state accounts for 12 percent of all new car registrations and 13 other states, from New York to Massachusetts, followed suit and implemented these same regulations. Air pollution and the environmental issues are high on California’s agenda — as Volkswagen painfully learned when its diesel manipulation software came to light.
But China is even more important for American carmakers than the US. The communist country, the world’s biggest car market, promotes electric cars with strict regulations and it is no coincidence that General Motors is playing a leading role in developing self-driving and e-vehicles. Since 2017, China has been General Motors’ most important market. It’s entirely different for Fiat Chrysler, which has largely missed out on growth in the Chinese market.
Ford, the second-largest US carmaker, is positioned somewhere between General Motors and Fiat Chrysler. After several years of growth they saw sales in China decline six percent, an upsetting turn of events that likely led to former CEO Mark Fields losing his job. His successor, Jim Hackett, is pivoting, employing a Chinese-speaking director and diving all in. Ford wants to double its investment in electric vehicles to $11 billion in the next five years. Their goal is to increase sales in China by 50 percent by 2025.
For President Trump, however, time seems to have stood still and he’s still living in the 1960s. And in the movie “Bullitt,” the hubcaps keep constantly falling off, Steve McQueen always shifts into higher gears and never down, and he keeps overtaking that same green VW Beetle over and over again. If there is one thing we can learn from this, it is that reality is not made in Hollywood – or in Washington.
The author heads Handelsblatt’s office in New York. To reach the author: firstname.lastname@example.org