Wednesday, January 28, 2009

Auto Fuel Economy & the African American Community

How will increasing corporate average fuel economy standards (CAFE) to reduce oil imports and to meet global warming mitigation goals affect the black community? Automakers say that quickly forcing requirements for more stringent emissions standards could force them to drastically cut production of larger, more profitable vehicles, and could add to their financial problems. They even state that if the California waiver to Clean Air Act requirements is granted by EPA, it will run them out of business. The big car makers are borrowing billions of dollars from the government to avoid bankruptcy and cutting thousands of jobs.

Dealerships, including black-owned car dealerships, are struggling to sell cars due to the credit crunch. Franchises are also being hit with the cancellation of certain model lines, which creates another business problem for dealers. Can black car dealerships remain open in this climate and will blacks purchase hybrids and other smaller fuel efficient vehicles. Many blacks like the larger vehicles and tend to avoid vehicles styled in the fashion of the Toyoto Prius. A challenge for GM is whether blacks will purchase the Volt and Cadillac Escalade Hybrid in large numbers. These vehicles appear to conform to a more stylish design than the Prius-type and might be a big seller in the black consumer market. Let's hope so.

Although we support the EPA waiver, we would really like to see Congress pass a cap-and-trade global warming mitigation law and international treaty that includes China, India and other countries. Hopefully, such legislation, combined with auto manufacturing company government loans and the stimulus package, will not only restore the economy at large, but will also enhance the black consumer auto market. Automakers also support one set of national requirements that would combine state, federal and stakeholder concerns. The Obama administration should reconcile these problems by designing and passing legislation that will be most efficient and effective for the nation.

Black-owned car dealerships are at significant risk of mass closures. Many have already gone under or have been absorbed by other dealers. Black Enterprise magazine has publicized that this sector represents one-third of the revenue generated by the largest black-owned companies in America. The collapse of this sector would do great harm to the entire black community and its related consumer markets.

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