Fact Checking Auto Industry Claims of Job Losses

The auto industry has a decades-long history of spreading mis-information about the costs of meeting stronger pollution and fuel efficiency standards. So it should come as no surprise that the auto industry is now claiming a 62 mpg standard by 2025 will lead to a loss of almost a quarter of a million auto jobs. To support their assertion, they cite the results of a recent U.S. Department of Energy (DOE) forecast. But a closer examination of the DOE forecast reveals the exact opposite conclusion: under 62 mpg standard, jobs in the vehicles manufacturing sector will increase—not decrease—by 280,000 from 2010 to 2025.

Auto Industry Claim: 62 mpg will lead to “loss of almost a quarter of a million jobs”

As reported in the Detroit News, the primary auto industry lobbying association, the Auto Alliance, sent a letter on May 11 to Secretary LaHood and Administrator Jackson claiming that a 62 mpg standard will lead to a “loss of almost a quarter of a million auto jobs.”

The basis of this assertion is an April 2011 forecast by a branch of the DOE, called the Energy Information Agency (EIA). The Auto Alliance letter claims the forecast shows that “setting a CAFE standard at the level of 62 mpg by 2025 would reduce sales by 14 percent.” The letter then simply asserts that “a 14 percent loss in jobs from today’s 1.7 million job base represents a loss of almost a quarter of a million auto jobs.” [Emphasis added. Note that the 1.7 million job estimate comes from this study for the Auto Alliance and includes auto makers, suppliers, and dealers.] 

Fact Check: DOE Study Actually Shows Job Increase of 290,000 with 62 mpg Standard

Fortunately, the DOE has put all their results online for public review here.   A close examination of the DOE forecast results reveals something far different than what the Auto Alliance claims:

  • DOE estimates vehicle sales will increase from about 10.8 million units in 2010 to 14.8 million units by 2025, as the population grows and the economy recovers. This is a 37 percent sales increase between 2010 and 2025.
  • DOE estimates between 2010 and 2025 jobs in the automobile manufacturing and other transportation equipment industries are forecast to increase by 280,000. This is a 21 percent increase in jobs between 2010 and 2025.

Error #1: Auto Industry Uses Wrong Base Year

The 14 percent “loss” in vehicle sales that the Auto Alliance cites is a comparison of two future 2025 cases. In the 62 mpg case, 2025 sales increase to 14.8 million units and increase to 17.2 million units in the case with no new standards (“Reference case”).

But the Auto Alliance claims there will be reduction in auto industry employment from “today’s” jobs levels. As stated above, the DOE study shows exactly the opposite, that with a 62 mpg standard by 2025, there will be more 21 percent more jobs and 37 percent more sales in the automobile manufacturing and other transportation equipment industries. 

Even if comparing the 2025 Reference case to the 62 mpg case, the estimate of the difference in employment in the automobile manufacturing and other transportation equipment industries is 1.5 percent. Given the assumptions that go into these models, there is essentially no difference in jobs between the two scenarios.

Error #2: Auto Industry Ignores Higher Standards Creates More Jobs Per Vehicle

The Auto Alliance simple formulation also ignores the job creation aspect of more technology content per vehicle. The DOE forecast shows  that there is essentially no difference between the 2010 to 2025 jobs growth for the 62 mpg case compared to the case with no new standards—21 percent versus 22 percent.  This is because the loss in sales in their analysis is offset by the higher value of the vehicles sold due to the greater technology content needed, such as batteries, turbochargers and lower rolling resistance tires.

UAW in a March testimony before the Congress recognized the job creation benefits of fuel-efficiency components:

“ The simple equation for understanding how this job creation occurs is that the new technology required to meet tailpipe emissions standards represents additional content on each vehicle, and bringing that additional content to market requires more engineers, more managers, and more construction and production workers.“

Testimony of Barbara Somson, UAW, before the Senate, March 17, 2011

DOE Study Overestimates Impact of 62 mpg on Auto Sales

Even this 14 percent sales difference is too high since DOE relies upon older estimates of the costs of new fuel-efficiency technologies. The DOE estimates the average cost for a new vehicle will go up by $4600 and requires 23 percent electric vehicle sales to meet the 62 mpg standard.

The best, most up-to-date analysis of fuel economy potential is by the U.S. Environmental Protection Agency, the U.S. Department of Transportation, and the California Air Resources Board. These agencies estimate the cost to meet a 62 mpg standard is between $2800 and $3500 and would require between 4 to 14 percent electric vehicle sales.

These newer, lower cost estimates will reduce, or even eliminate, any loss in vehicles sales. Indeed more recent analysis by the University of Michigan for Citi Investment Research suggests that reducing fuel consumption 6 percent per year would boost vehicle sales by 6 percent by 2020 since the fuel savings substantially outweigh the costs.

Previous Auto Industry Cost and Job Loss Claims Discredited

Iacocca

Former Ford president Lee Iacocca

The Auto Alliance appears to be switching gears from relying on a widely criticized study by the Center for Automotive Research (CAR)—an organization heavily sponsored by auto companies. Not surprisingly, the CAR study found a very high price tag, $6,435 per vehicle, to meet a 62 mpg standard that would lead to a 22 percent sales loss and 220,000 less auto sector jobs.

Unfortunately for the Auto Alliance, the independent International Council for Clean Transportation concluded in a strong critique that the CAR study had “so many fundamental technical and scientific errors” and it “cannot… serve as a basis for serious policy discussion.”

Again not surprisingly, the most recent auto industry claim is consistent with their statements over the past four decades:

  • During a 1972 Congressional testimony, General Motors vice president Earnest Starkman declared that if automakers were forced to introduce catalytic converters on 1975 models, “It is conceivable that complete stoppage of the entire production could occur.”
  • In 1972, Ford president Lee Iacocca claimed that if the U.S. Environmental Protection Agency does not suspend the catalytic converter rule, it will cause Ford to shut down and would result in: 1) reduction of gross national product by $17 billion; 2) increased unemployment of 800,000; and 3) decreased tax receipts of $5 billion at all levels of government so that some local governments would become insolvent.
  • During a 1994 review of the California Air Resources Board’s Low Emission Vehicle program, the automakers estimated the cost of meeting key standards to be between $862 and $2,799. Actual costs? Between $120 and $336, depending on the emissions level.
  • In 2007 under testimony in the Vermont trial of the California Clean Car Program, GM’s expert claimed that GM’s cost to meet California’s standard would be greater than $6,000 per vehicle, and they would have to completely stop selling cars and small trucks in states that had California’s standards.

Conclusion: Auto Industry Claims of Job Losses are False

A close examination of the DOE’s analysis leads one to the simple conclusion that the auto sector jobs will substantially increase from 2010 to 2025 with a 62 mpg standard.

The Obama administration begins finalizing new fuel efficiency and auto pollution standards this summer—in preparation for a decision in September.  It’s likely the auto industry will be filing new reports and studies that show how prohibitively expensive it will be to meet the new levels. For the sake of our energy security, economy and environment, let’s hope the auto industry puts aside the rhetoric and instead puts its engineers to work.

Roland Hwang is the Transportation Program Director for NRDC’s energy program, working on transportation energy and global warming issues at the state and national levels. Before coming to NRDC, Roland was the director of the Transportation Program for the Union of Concerned Scientists in the Berkeley office, having also worked on energy forecasting models at Lawrence Berkeley National Laboratory and as an air pollution engineer at the California Air Resources Board.


  • Capt. Concernicus

    But why would the auto industry lie? What benefits would they extract from lying to us and the government?

    *sarcasm alert*

  • Van

    A bigger lie is that the “government mandate” results in improvement. In the mid 1980′s government regulators took credit for the mileage improvement and pollution reduction resulting from going from carburetor technology to fuel injection. Now they are posed to take credit from going from all gas to plug-in hybrid. What we really need is something like the NMC lithium battery that doubles the energy storage and does not raise the cost, thus halving the price per kwh. Once we can make those, vast improvement will result in mileage. But we will need to somehow pay for the road infrastructure maintenance and upgrade when we burn half as much gas. But does government include that tax in its mandate, nope. So just more of the same incompetence from the lefty loonies.

  • DC

    Keep in mind, even if the idea put forward that high-MPG trash-bins would boost employment, that is not something the industry wants to hear either. US industry (generally) and the auto sector definately, have been happily shedding jobs to China, Mexico, anywhere that has even laxer employee and enviromental regulations than the United Snakes, for decades. They dont WANT more employees, they want less. Employess in american corporateland, cost money, and cut into profits. Theyve allready mastered the trick of maxing profits while reducing the work force. Last thing they would ever want to actually have to hire even more people(and be forced to provide benefits and other annoyances like that) and pay to make there crappy mobile trash-bins.

  • Samie

    Two conclusions you can draw here:
    1. 62mpg standard for 2025 by this administration will not happen

    2. The job loses claimed by the auto industry are grossly exaggerated

    Sure its a weird world of DC politics and leveraging but this is how the game is played.

    My opinion is that at some point companies like UPS FedEX and other transportation industries will want government to set higher fuel standards. This could reduce influence from the auto industry.

    I would like to see legislation/standards (step-up approach in technology) that rewards auto-manufactures who produce electric vehicles as a way to off-set some tax liabilities or say CAFE standards. I also would like to see some government assistance for helping freight companies move towards more fuel efficient vehicles. This I argue could have greater significance in mass adoption of EVs/hybrids then the consumer based tax rebates we have seen in the past.

  • Anonymous

    Our dependence on foreign oil represents a clear and present danger to our national security. (Not to mention the security of Israel!) In WWII we had gas rationing and a national speed limit of 45 MPH. We need gas rationing again. Never mind, it would create a “black market” and there would be cheaters. We had all that in WWII. But the gasoline consumption went down.

    Today, we could allocate 2 gallons of gas per day per licensed driver. And the plan would include accumulation of unused gas up to 90 gallons so a could burn accumulated gas during a traveling vacation where we travel more than we could go on 2 gallons, even in a Prius PHV.

    This would actually lower the price of legal gas because the market price would fall with reduced consumption, and help the economy.

  • Anonymous

    And if you needed to burn more than 2 gallons a day, say someone using a pickup truck to haul tools and materials for construction or repair, you could exceed your allowance but a surcharge of say 25% would be added to gas in excess of the accumulated allowance, so $4.00 gas (market price) would cost $5.00 if you exceeded the allowance.

    All the equipment is already in place, swipe card technology and swipeable driver’s licenses. To implement all it would take is programming and political will. Which brings us back to the left loons who talk the talk, but take no action that actually works.

  • Yegor

    It is just selfish! The standard has to be raised for many reasons – air pollution, national security, recessions created by high oil price.

    In my opinion it is highly improbably that auto industry will loose some jobs because there will be more work required to produce green cars.
    But even if auto industry may be will loose some jobs so
    Auto Alliance does not care about air pollution!
    Auto Alliance does not care to jeopardize national security!
    Auto Alliance does not care to jeopardize job security of millions of people who lose their jobs because of the recessions created by high oil price!
    Shame on you Auto Alliance!

  • SpeedRacer

    While I support high CAFE standards to ensure sustainability; to say a 62mpg standard will increase auto jobs is ludicrous. The 62mpg standard will require high price technologies like electric hybrid that will increase consumer costs thousands of dollars at point of sale. Economics 101 will tell you that there is a price-demand curve. Raising the price will reduce sales and therefore jobs. This should be common sense.

  • Shines

    SpeedRacer the high price technologies are high price partly because more workers are needed to produce them (engineers to develop and assembly to add the “extra” technological components to the vehicles). So although the price demand curve will reduce sales there may be more jobs created/used per unit. The auto industry is constantly developing robotic, software and other technologies to reduce the number of workers needed to create and assemble vehicles, but that has nothing to do with CAFE standards. In the end, anybody claiming that CAFE standards will increase or decrease jobs in the auto indistry is mostly spouting nonsense.