http://www.nytimes.com/2003/08/12/business/12AUTO.html?hp
August 12, 2003 Automakers Drop Suits Over Clean-Air Regulation By DANNY HAKIM DETROIT, Aug. 11 - General Motors and DaimlerChrysler are dropping lawsuits against California over a landmark clean-air regulation that requires the production of millions of low-emission cars and trucks over the next decade and a half. The move creates a temporary but momentous environmental truce between the auto industry, which has blocked the zero-emission vehicle mandate that was set in motion in 1990, and California, which wields enormous influence over the global industry. The threat of the Z.E.V. mandate, as it is known in the trade, spurred the development of hybrid vehicles, which supplement gasoline with electric power. Now, with the dropping of the legal challenge - unless other hurdles emerge - every major automaker will have to start selling a range of vehicles with low emission levels of smog-forming pollutants, like hybrids and specially modified gas cars, in a plan that will phase in such vehicles in California between 2005 and 2020. Automakers will also have to sell tens of thousands of zero-emission vehicles, either battery-powered cars or, far more likely in the long term, vehicles powered by hydrogen fuel cells. "Given the fact that General Motors and DaimlerChrysler, the companies with most concern about the regulation, have come to agreement," said Dr. Alan C. Lloyd, the chairman of the California Air Resources Board, "I'm hoping it spells a new era of working more effectively together." G.M. - which sells some high-emission vehicles like Hummers, Cadillac Escalades and Chevrolet Suburbans - withdrew from the battle as part of an effort to enhance its environmental image that included a previous announcement that it would sell hybrids. But it has also been reassured by recent steps of California regulators. The state amended its requirements in April to emphasize more low-emission and fewer zero-emission cars. In recent weeks, coinciding with negotiations over the suits, the air board expanded its credit system for hybrids to include a wider variety of vehicles. Elizabeth Lowery, G.M.'s vice president for the environment and energy, said: "One thing we've been working hard on is getting credit for all the things we do, but people are focusing on the litigation in California. We think we have enough flexibility in this rule in order for us to put this litigation behind us." A spokeswoman for DaimlerChrysler, Ann Smith, said "we've had constructive discussions regarding the settlement" but declined to elaborate. The two big auto companies had filed their lawsuits jointly, but no other major manufacturer took part. The industry and the state could soon clash again. Last year, California passed the nation's first legislation aimed at limiting automotive emissions of greenhouse gases, and a legal challenge is seen as a strong possibility. Dr. Lloyd said the greenhouse-gas law was pointedly not a topic of debate while the two sides were negotiating. "We stayed very much away from that," he said, adding, "It's our hope that we will be able to work together on the greenhouse-gas regulation." Ms. Lowery of G.M. said: "We don't think mandates are a good idea. The resolution of this does not change that position." She added that "the industry will challenge any regulation that is pre-empted by federal law." The zero-emissions mandate was challenged in court on the ground that parts of it went beyond matters of vehicle emissions and tried to supersede federal authority to set fuel economy standards; a Bush administration filing supported the suit. The industry could have a stronger case on greenhouse-gas emissions, because they are directly correlated to fuel economy. Emissions of smog-forming pollutants can be filtered by catalytic converters. California is the largest auto market, and is particularly influential because its air standards predated the federal Clean Air Act. The state thus sets it own air standards and other states can choose California's tougher rules over federal regulations. Northeastern states that have followed California on air-quality standards, like New York and Massachusetts, have previously announced plans to adopt their own versions of the zero-emissions regulation. That will mean that advanced-technology vehicles will be more widely available there. The zero-emissions mandate was introduced in the early 1990's, intended to spur development of battery-powered cars, which the industry now sees as a dead end. Many automakers, though, have built up credits by selling a variety of such vehicles, from gussied-up golf carts to an electric version of Toyota's RAV4 sport utility. The current zero-emissions rule is focused more squarely in the long term on fuel-cell cars, which are electric cars with an onboard power system that generates electricity through a chemical reaction involving hydrogen. Fuel-cell cars emit only water vapor, though producing hydrogen leads to varying emissions. The Bush administration has also talked up the promise of hydrogen, even in the State of the Union address, but has so far restricted its activity to financing research. Automakers are also working on more immediate technologies to cut emissions, from hybrids to advanced diesels to improved internal combustion engines, and any one of them could play a role in meeting the zero-emissions mandate. "Basically, we're talking about a giant technological horse race here and everyone's hoping their horse is Seabiscuit," Gary Cowger, G.M. president of North American operations, said last week. He added that G.M., like other automakers, was hedging bets by developing a variety of prototypes. The settlement coincides with G.M.'s demonstration of many of its green vehicles at Dodger Stadium this week. Earlier this year, it announced a plan to start selling hybrid vehicles of various types, the most ambitious being a hybrid version of its Saturn Vue sport utility in 2005. Toyota and Honda already sell hybrids. G.M. has also been bullish on the fuel cell. Environmental advocates said the prospect that the zero-emissions mandate would take effect after so many years of regulatory limbo would keep California well ahead of the federal government. Their frustration with Washington and Detroit has grown along with sport utility sales. In the 2002 model year, the fuel economy of the average new American passenger vehicle reached a 22-year low. "The Bush administration has been talking about a fuel-cell vision; California is actually delivering on one," said Jason Mark, director of the clean-vehicles program at the Union of Concerned Scientists. "It's encouraging that G.M. has decided to join the fight for clean air in the state," he added. Such groups remain wary of G.M., however. "By suing California on environmental laws and building Hummers, they seem like they're in a race to the bottom to be seen as the worst environmental auto company," said Roland Hwang, a senior policy analyst at the Natural Resources Defense Council. Dropping the suit "removes a real black eye for the company," he added, "but that's a far different thing from saying it will enhance their image." In California, other factors could influence the regulatory landscape, like the gubernatorial recall campaign. It features Arnold Schwarzenegger, the biggest celebrity booster of G.M.'s Hummer, and the columnist Arianna Huffington, an outspoken basher of sport utilities who has likened the current campaign to "the hybrid versus the Hummer." A new governor would have the power to replace Mr. Lloyd. Mr. Schwarzenegger, though, may have an affinity for fuel-cell-boosting regulation. In "Terminator 3," his friendly cyborg character informs the audience that he is powered by hydrogen fuel cells. Unfortunately, the cells have a tendency to rupture and explode, like everything else in the movie. Dave Barthmuss, a G.M. spokesman asked for comment, replied, "Those aren't G.M.-designed." ------------------------ Yahoo! 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