Automobile Companies Failing Social Responsibility Obligations

Major automobile companies throughout the years have been excessively profiting off of oblivious consumers while neglecting their civic responsibility of upholding ethical business practices by withholding potential advances in automobile technology. Without those potential advances in automobile technology, the major automobile companies intentionally furthered their contribution to the detrimental decline of preserving the environment. In this paper, I will discuss how the major automobile companies manipulate the position of their capacity towards the expectations of government imposed environmental policies to maximize their profit margins.

Climate change has become more important in the recent years as it is a threat to humankind according to António Guterres, the United Nations secretary general. (Sengupta, 2018) The climate change controversy is not new concept within the automobile industry as there were many government efforts and measures in place. But major automobile companies often pushed back its environmental policies. The environmental policies often focus on improving the fuel efficiency. The measurement of fuel efficiency is often called fuel economy. The fuel economy can be expressed as miles per gallon (MPG) in the U.S. and liters per 100 kilometers (L/100km) in countries that uses the metric system. Over the past decade, major automobile companies have been neglecting the improvements in their fleet fuel economy. As a result, the transportation industry has recently become the largest source of greenhouse gas pollution, overtaking the power generation sector in the U.S. (Milman, 2018) Major automobile companies are often driven by the short-term profits, so they are neglecting the long-term consequences. Unfortunately, recently major automobile companies have not taken the initiatives and opportunities in the early stages to minimize the greenhouse gas emission as a result of their being driven by the short-term profits.

The largest portion of greenhouse gas emission of the automobile sector would be coming from the sport utility vehicles (SUVs), “light truck”, and heaviest vehicles. (Mayer, 2000) Considering this, the sport utility vehicles (SUVs) and “light truck” are subject to more lenient government fuel efficiency standards. (Mayer, 2000) Also, the heaviest vehicles: trucks, buses, and vehicles exceeding 8,000 pounds; such as the Ford Excursion, Dodge Durango, and Chevy Suburban are not subject to federal fuel efficiency standards at all. (Mayer, 2000). As we know, the fuel efficiency can improve as long as there is sufficient funding in the research and development. The research and development are often quite expensive and considered as fixed expenses so automobile companies would need to have a high volume of sales and want to keep their fixed expenses low as much as they can. In order for the automobile companies reach their break-even point and maintain their profit margin. The fact that Mayer (2000) stated that U.S. automobile companies have their highest profit margins in large vehicles, and consumers continue to buy the larger vehicles in record numbers. Hence why U.S. automobile did not see the reason to sacrifice their profits to improve the fuel efficiency beyond the U.S. fuel efficiency standards, especially when their larger vehicle still has the consumer demand. Instead, U.S. automobile companies found a cheaper alternative to research and development by opposing the U.S. fuel efficiency standards to ensure that the fuel efficiency standards do not affect the larger vehicle to stretch their profit longer.

Major U.S. automobile companies opposed not just one, but many of the fuel efficiency standards and policies during the 1990s and early 2000s. Two of the many policies they were opposed to are California Alternative Fueled Vehicle mandates and the U.S. implementation of the Kyoto Protocol. (Mayer, 2000) According to Mayer (2000), the several reasons major U.S. automakers opposed the fuel efficiency standards were; gas is cheap, consumers want size, comfort, and the relative safety of mass in a collision. The opposition campaigns that major U.S. automobile imposed were blaming on the consumers’ demand. Mayer (2000) mentioned that consumer’s choice does including cheap gas and service infrastructure in consideration. The lack of service infrastructure for electric vehicles is one of the reasons why electric cars have lack of consumer demand. Major U.S. automobile companies could have advocated for improvements in the service infrastructure for electric vehicles to create and increase the demand for electric vehicles instead of opposing the environmental policies. Often, automobile companies will have to sell a new vehicle at a substantial loss in order to gain the market share. (Mayer, 2000) None of major U.S. automobile companies were willing to sacrifice and risk their short-term profit until they were forced to do so. For instance, General Motors’ EV1 vehicle was only invented in response to the California Air Resources Board’s zero-emissions vehicle mandate. Once that mandate was weakened, the EV1 vehicles disappeared from the road. For instance, Tesla sacrificed their profit to build the Supercharger stations, a service infrastructure, for their electric vehicles to create the consumer demand for the electric vehicle by rule out the lack of service infrastructure. Major U.S. car companies did not have to follow Tesla’s expensive and risky footsteps as Mayer (2000) states that automobile companies have the responsibility of addressing legal and regulatory concerns pro-actively. For example, major U.S. automobile companies could address publicly that there is better technology exists but lack of service infrastructure. Major U.S. automobile companies can even advocate the U.S. government to provide the incentives for companies that exploring new forms of energy to help with the service infrastructure for electric vehicles. Again, major U.S. automobile companies want to be conservative with their improvements to avoid dealing with substantial loss by introducing their new fleet too often. Therefore, major U.S. automobile car companies choose to oppose the fuel efficiency standards and not being proactively about improvements.

In 1993, U.S. government and U.S. automobile companies have spent $1.6 billion dollars into a partnership called, “Partnership for a New Generation of Vehicles (PNGV)”. (Mayer, 2000) The Partnership for a New Generation of Vehicles (PNGV) is a historic partnership between the U.S. government and automobile companies and one of the goals of the partnership is to improve the fuel efficiency up to three times of 1994 comparable vehicle. (Chalk, Patil & Venkateswaran, 1996) In order that, the vehicles can have better fuel efficiency as much as 80 miles per gallon by 2003. With this in mind, Plumer and Popovich (2018) stated that 24.7 miles per gallon is the average of all vehicles in 2016. Let alone, Bush Administration took over and trimmed the program in 2001. (Stoffer & Stoll, 2001) Eventually, the program was replaced with Freedom Cooperative Automotive Research program. (“Freedom CAR”, 2002) To get back to the point, the PNGV program was up running for eight out of supposedly 10 years and yet major U.S. automobile companies dropped their progress and promises to bring 80 miles per gallon car on the road by 2003. Clearly, major U.S. car companies did not want to continue funding the project on their own as that would reduce their profit margin and provide less reason for government-funded research in the future. During the PNGV program, two Japanese automakers (Honda and Toyota) offered hybrid gas-electric models with ratings above 60 mpg. (Mayer, 2000) Japanese automobile companies took the risk and initiative to push their fuel efficiency to the next level. Mayer (2000) stated that major U.S. automobile companies adopted a “wait and see” attitude. Even though U.S. car companies did have several prototype vehicles that have over 60 miles per gallon ratings at the time. This shows that major U.S. car companies were hoping that two Japanese automakers would fail the introduction of their high fuel efficiency cars.

The Obama Administration set fuel efficiency standards for transportation that aimed to roughly double the average fleetwide fuel economy of new cars, SUVs, and light trucks by 2025. (Plumer & Popovich, 2018) Keep in the mind, the Obama Administration’s fuel efficiency standards are still less than 80 miles per gallon that PNGV program were strived for or even less than two Japanese automakers’ hybrid vehicles with 60 miles per gallon. Unfortunately, Boudette (2017) stated that U.S. car companies did not wasting their time in pushing Trump administration to reverse a decision by the Obama administration to move forward with tougher fuel-economy standards that carmakers are supposed to meet by 2025. This is a form of manipulation by major U.S. car companies as many of them agreed to the standards during the negotiations with the Obama Administration and now opposing to the same standards. (Vlasic, 2017) Even though, this is not the first time U.S. car companies changed their decision regarding government policies. Wintson (2017) stated that a weakening of efficiency standards may save the automakers some money in the short-run. As mentioned earlier in this paper, the introduction of a new vehicle lineup does cost money so major U.S. car companies save some money by delay the introduction of new vehicles. Again, U.S. car companies are short-sighted as their actions will have greater consequences for themselves in the few years. For instance, Wintson (2017) pointed out that U.S. car companies will diminish their competitiveness as the rest of the world has continued to raise its standards – China, Japan, and the EU all have equivalent or higher targets. Now the actions of U.S. car companies may jeopardize their market share in international market as their vehicle are not compliant with their market requirements. This shows that U.S. car companies only care about its short-term profits and small image of the fuel efficiency standards policies. Not only that, U.S. car companies, especially General Motors acknowledged that carbon dioxide buildup could be changing the world’s climate in 2000. (Mayer, 2000) Eighteen years later, General Motors still have not made good progress to reduce the greenhouse gas emission by increasing their vehicle fuel efficiency. Instead, they are in the manipulation cycle with the government regulations and policies for their own benefits.

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