Ford Motor Company (F +3.54%) CEO Mark Fields said on Thursday that President Donald Trump might be willing to renegotiate some tough regulations set to come into force in a few years -- and that might be a good thing for the Blue Oval's bottom line.
Insight from two meetings with the new president
President Trump met with a diverse group of corporate leaders on Monday, and with the CEOs of the three Detroit-area automakers on Tuesday. Fields attended both meetings, and was cautiously optimistic about the new administration's approach in remarks to investment analysts during Ford's fourth-quarter earnings call on Thursday.
Ford CEO Mark Fields with F-150s at Ford's Dearborn Truck Plant in Michigan. Image source: Ford Motor Company.
"I think, first off, it's a very positive sign from my perspective that literally in his first two days in office he had his first morning meetings with manufacturing companies, including automotive companies," Fields said. "I think he's going to be very focused on driving policies that drive investment and job creation in American manufacturing and in automotive manufacturing."
In particular, Fields said, Trump might be willing to revise some regulations that have caused consternation among many of the automakers.
"He asked very clearly, what are the things that are inhibitors in terms of growing jobs and new business?
We talked about regulations. Particularly, we talked about the rule-making, the finalized rule-making that was pushed through at the end of the year on the fuel economy, one national standard. That really was a decision that we felt was premature and inconsistent with the promised data-driven approach that we think is really important to get a balanced outcome. [The outcome needs to be] balanced between making sure that we reconcile interest in reducing carbon into the atmosphere, which we're all for, but also with jobs and also affordability for customers. So we may see some actions on that, which could be positive for our business. "
Exploring current regulations
Here's the background to what Fields was saying.
In 2011, the Obama administration put in place new regulations that call for gradually tightening fuel-economy standards to a fleet average of 54.5 miles per gallon by 2025. Those regulations were broadly backed by the auto industry at the time: Gas prices were high, and the automakers were glad to have a set of rules that forced them all to push more fuel-efficient products to market.
But part of the deal between the automakers and the Obama administration was that the rules would be reviewed in 2017 (using, as Fields said, a data-driven approach) to ensure that the stricter targets set to come into effect after 2020 were still reasonable.
That review was expected to happen later this year. But the review was pre-empted by the Environmental Protection Agency earlier this month, shortly before Obama left office, when it abruptly moved to declare that the the tougher standards set to come into play next decade were feasible and didn't need changes.
Why Ford wants changes to the EPA's fuel-economy standards
The EPA's move upset the automakers. It's not that the industry (or Ford) hates tough fuel-economy rules per se. (In fact, most auto executives are in favor of improving fuel economy and lowering emissions.) The industry's concern is that consumers haven't been willing to pay the added costs of fuel-efficient drivetrains (including hybrids and plug-ins) because gas prices have been much lower than the industry expected when the plan was adopted back in 2011. That has made it hard to offer costly but-effective new technologies that would improve fuel economy without crushing their own profit margins.
Automakers were hoping to convince the EPA to agree to relax the standards, or at least extend the schedule for adoption of the tougher requirements, so that they could roll out the more advanced technologies as they become cost-effective. The EPA's move on Jan. 13 pre-empted that discussion.
But it appears that Trump might be amenable to reopening a review of the fuel-economy rules. And Fields said that Ford is glad to have a seat at the table.
"My impression walking away is this is a president who's going to be focused on a number of important priorities and make sure that he makes progress on those," Fields said."We want to be helpful in the process. Whether it's in terms of trade or tax or regulatory reform, we want to be a trusted source for input."
