Increasing fuel economy would boost US auto profits, study says
Big 3 has most to gain as prices rise, if fleets become more efficient
Ford Motor Co., General Motors Corp., and DaimlerChrysler AG's Chrysler unit can boost annual profit by as much as a combined $2 billion by raising the fuel economy of their vehicles, according to a study released yesterday.
The automakers would miss out on $3.6 billion in profit in 2010 should their fleets meet only the minimum government fuel-economy standards and gasoline costs $3.10 a gallon, according to the study by the University of Michigan Transportation Research Institute. Should US automakers take steps to improve fuel efficiency, however, they would gain $2 billion in profit with gasoline prices at that level.
The study considered three gasoline-price scenarios in 2010 and whether the automakers used existing technology, such as adding hybrid engines or special fuel injectors, to maximize economy. US automakers have lost sales to Asian rivals over the past two years as consumers sought more fuel-efficient cars and eschewed light trucks amid higher gasoline prices.
``What is surprising is that each automaker is financially safer if they follow a proactive fuel-economy strategy, regardless of what their competitors do," Walter McManus, the lead author of the study, said in the report.
US automakers have the most to gain by boosting fuel economy because they depend on generally less-efficient sport-utility vehicles and pickup trucks for a higher portion of profit than do Asian rivals, the study said. Researchers found that Ford stands to reap the greatest gains of any US automaker.
Japanese rivals such as Toyota Motor Corp. and Honda Motor Co. would see profits decrease by $800 million in 2010 if gasoline costs $3.10 a gallon and they don't work to maximize fuel efficiency.
McManus said US automakers may profit from boosting fuel economy even if gasoline sells for $2 a gallon, the lowest price the researchers considered. US automakers would gain $1.3 billion in 2010, whereas Japanese carmakers may lose $300 million in income because their cars wouldn't have shown as dramatic a fuel-efficiency improvement, the study said.
The study used gasoline prices of $2.30 a gallon as its basis for comparison. If US automakers don't take steps to improve fuel economy beyond current federal standards and gasoline costs $2 a gallon, they would gain as much as $1.4 billion, while Japanese manufacturers would profit by $300 million from the lower fuel price.
