Abstract:
In 1984, General Motors Corporation was headed for a potentially expensive collision with federal corporate average fuel economy (CAFE) standards. GM had exceeded the steadily increasing standards in the program's early years, when high gasoline prices fueled consumer demand for gas-miserly cars. But when gas prices turned downward in the eighties, their rate of improvement dropped as well. In late 1984, GM notified the National Highway Traffic Safety Administration that it might have to cover the projected 1984 shortfall with fuel economy credits it hoped to earn by exceeding the standards in the future. At the same time, the GM public affairs staff assembled a CAFE "Issues Management Team" to consider what additional actions GM would have to take to meet the standards.
Learning Objective:
The primary aim of the case is to allow students to look at a public policy problem from the perspective of a private sector actor: How can GM manage the politics of the administrative process to achieve its objectives, given the suspicion with which GM's positions on regulatory matters are viewed? The case is enriched by Chrysler's highly visible political opposition to the GM stance and the implications for the market shares of the two firms. This case is a companion to NHTSA and the Corporate Average Fuel Economy Standards (C15-86-672.0) as well as to an earlier case, Corporate Average Fuel Economy Standards (C16-86-670.0).
