This pass Monday the Obama administration disclosed the nation's fuel-economy rules for trucks and buses. Implementation is expected to begin in 2014 requiring reductions as high as 20% in fuel use and carbon-dioxide emissions by 2018. This new development is expected to create a massive overhaul in the car manufacturing industry. Although, this new development effects the Automobile Industry it must be understood that the Energy Industry will simultaneously be effected, if not more so.
By the passage of these new standards it must be understood that the Energy Industry must also shift its movements according to legal constraints set by government. Companies such as, Navistar International Corp., Paccar Inc., Daimer Ag, and Volvo Group have already invested in the fuel-efficiency race. The article mainly focuses on the leading company in fuel-efficiency standards Cummins Inc.,. Annually they siphon about 4% in profits to research and development into fuel-efficiency standards, this amount totals to $500 million annually. They have taken a proactive approach to this new development in fuel-efficiency standards, and had the foresight, through planning, to realize that fuel-efficiency would become a major issue.
The government has offered incentives to increasing fuel-efficiency within specific car companies. Up to $54 million has been granted to help in research and development for fuel-efficiency standards and pollution controls. Cummins Inc.'s responded during the 1980's standards by exclaiming, "Let's stop complaining and invest in technology." By taking this approach twenty years ago it has given Cummins Inc. the competitive edge to fight in this new market for sustainability.
How does any of this relate to the Energy Industry? Due to this new change in regulations it is the an imperative of companies, involved in energy production, to pay close attention to developments so they may alter allocation of fuel resources. If a new regulation is imposed it becomes just as essential to realize the new trends in legal standards and attitudes toward energy. This development is one shinning example of how regulation can alter the business strategy of a specific industry, while also effecting all those who are also involved with that industry.
By:Timothy D. Vallario
Source: The Wall Street Journal, Wednesday, October 27, 2010 - VOL. CCLVI No.100"Fuel-Economy Rules Raise Bar for Engine Makers" By James R. Hagerty and Bob Tita, Earnings B5
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