Washington, DC – U.S. Senator Dianne Feinstein (D-Calif.) says that any increase in federal aid for U.S. automakers should come with a mandate requiring significant changes that will transform the auto industry. 

In a November 14 letter to Senate Majority Leader Harry Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.), Senator Feinstein states that any additional federal aid to automakers should be used to pursue new fuel efficient technologies, like hybrid and electric, or be accompanied by a significant increase in Corporate Average Fuel Economy (CAFE) standards. 

Below is the full text of the letter: 

November 14, 2008 

The Honorable Harry Reid                  The Honorable Mitch McConnell
Majority Leader                                      Minority Leader
United States Senate                           United States Senate
528 Hart Senate Office Building         361A Russell Senate Office Building
Washington, DC 20510                       Washington, DC 20510 

Dear Senator Reid and Senator McConnell: 

I am writing to express my view that the Federal government should not invest federal dollars in an automobile industry that continues to pursue a failed business model.  As someone who has watched this industry for many years, I believe assistance to firms must be accompanied by a significant transformation in the automobile companies themselves.

The American people have already put forward $25 billion in low interest loans to help the automakers retool their factories to produce more fuel efficient vehicles.  This public investment should reduce our dependence on oil, create consumer savings at the gas pump, and decrease climate change pollution – all worthwhile investments of public funds.

As you know, the American automakers have requested additional assistance from the $700 billion Emergency Economic Stabilization Act (EESA).  I believe that any additional support to automakers must be funded through this existing stabilization effort.  However, the Congress should require that the automakers shift to a new business model that focuses on hybrid, electric, and other next generation vehicle technologies if it chooses to extend this support. 

Federal support without conditions would likely be used to pay for healthcare costs, pensions programs, other fixed costs, or immediate cash flow needs while leaving their existing business models in place.  I would find it very difficult to support any proposal to assist this industry unless it took at least one of the following steps: 

• Target funding specifically for research, development, and deployment of fuel efficiency related technology.
  
• Increase the fleetwide minimum Corporate Average Fuel Economy (CAFE) standard from 35 mpg to 39 mpg in 2020.  The National Highway Traffic Safety Administration’s (NHTSA) draft CAFE rule proposes to increase CAFE from 25 to 31.6 mpg over the first five years of the Ten-in-Ten Fuel Economy Act.  NHTSA would only have to continue this rate of increase to reach 39 mpg in 2020.
  
• Require NHTSA to use the Energy Information Administration (EIA)’s most accurate gasoline price projection and consider global benefits from reducing greenhouse gas emissions when setting CAFE standards.  EIA’s “high price” scenario has been its most accurate gas price model for years, and EIA’s Administrator recommended that NHTSA use this forecast when setting CAFE standards.  Recent NHTSA analysis concluded that a 35 mpg fleetwide CAFE standard is cost effective and feasible in 2015 if the “high price” scenario continues to be most accurate.   

Congress has the potential to help the American automotive industry establish itself as the world’s leading producer of fuel efficient, cost effective, advanced technology vehicles.  But we must ensure that our limited funds are used to create technological breakthroughs.  I hope you share my commitment to assuring that Federal resources are targeted to a transformation in the automotive industry. 

I look forward to working with you on this important issue. 

Sincerely, 

Dianne Feinstein
United States Senator 

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