DETROIT — Eighteen large institutional investors in General Motors banded together Friday to tell GM they want the carmaker to take aggressive action to protect federal fuel economy standards.
GM has said it wants one national fuel economy standard modeled on the existing zero emissions vehicle program in California. It would establish zero emissions requirements (by credits) each year, starting at 7% in 2021 and increasing 2% each year to 15% by 2025, then 25% by 2030.
But in a letter sent to GM CEO Mary Barra ahead of GM’s June 4 annual shareholders meeting, the investors said GM’s position calling for one national standard will weaken the current standards and undermine California’s authority to set strict standards.
“By claiming a commitment to climate action publicly while lobbying against strong federal standards, GM exposes itself, and investors, to significant reputational and legal risks, regulatory uncertainty and delay, and systemic economic risks,” said Rob Fohr, director of Faith-Based Investing and Corporate Engagement for the Presbyterian Church U.S.A., an investor named in the letter. Fohr said GM stock is currently held by the Foundation of the Presbyterian Church U.S.A.
A spokesman for GM said the company is reviewing the letter and will be responding directly to the shareholders.
Shareholders said that GM’s proposal for a national ZEV program would “effectively preempt California and states that have adopted” California’s program. The result would be little progress in the reduction of emissions despite the deployment of more electric cars.
GM has said it wants a future of “zero crashes, zero emissions and zero congestion” and supports electric vehicle deployment as part of that as well as a national emissions standard that reduces emissions, but still allows flexibility to meet consumer demands.
“We believe in a policy approach that better promotes U.S. innovation and starts a much-needed national discussion on electric vehicle development and deployment in this country,” Mark Reuss, GM’s executive vice president and president of Global Product Group and Cadillac, has said in the past. “A national zero emissions program will drive the scale and infrastructure investments needed to allow the U.S. to lead the way to a zero emissions future.”
Collectively the group of shareholders in the letter manage $1.96 trillion. The group is “concerned that the company, either through its industry association or through its own lobbying, is actively working against maintaining the existing clean vehicle standards,” said Jamie Bonham, manager, of corporate engagement at NEI Investments, which owns 167,689 shares in GM. “Our concerns are driven primarily by the risks we feel this strategy is exposing the company to, such as, reputation, legal, regulatory uncertainty and delay.”
Bonham said GM’s position also could worsen climate change.
“Ultimately we want to see the company publicly distance itself from some of the positions of the Alliance of Automobile Manufacturers and oppose any significant weakening of the CAFE standards,” said Bonham, referring to federal Corporate Average Fuel Economy rules that automakers must meet. “We want them to play a constructive role in working with both California and federal interests to find a compromise that avoids the path we are currently heading down.”
Similar to GM, the Alliance of Automobile Manufacturers also wants California and the federal government to find a solution that sets continued increases in vehicle efficiency standards while also meeting the needs of America’s drivers. It has said one national program will keep new cars affordable so that drivers can replace older vehicles with models that are cleaner, safer and more energy-efficient.
AFE standards are up for grabs at the moment. Under a regulation finalized by the Environmental Protection Agency at the end of the Obama administration, the fleet of new automobiles would have to get 36 mpg by 2025, 10 mpg higher than the current requirement.
But President Donald Trump wants to freeze the standards starting in 2021, saying that waiving the tougher requirements would make cars more affordable, which would get safer cars into consumer hands faster.
Currently, federal and California gas mileage standards have been the same since 2010. But if Trump relaxes the requirements, it could create two standards, one for California and the states that follow it, and another for the rest of the nation. California, battling severe pollution, has a waiver under the Clean Air Act to set its own vehicle emissions standards.
GM has long said it wants one national fuel economy standard. It doesn’t support the freeze, but wants flexibility to deal with the shift in consumer preferences from cars to less-efficient SUVs and pickups.
Its proposed requirement would be based on current standards now set in California and nine other states. Under those rules, GM must sell a minimum of around 2,200 fully electric vehicles in California this year, or about 1.1% of the roughly 200,000 cars, trucks and SUVs that it normally sells in the state each year.
GM has said it will abide by historical annual fuel economy standard improvements, which is about a 1% improvement per year, along with increased credits.
But the shareholders say GM’s overall proposal would provide a 1.4% improvement per year versus the current national program, which calls for a 4.5-5% boost per year, the letter said.