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New fuel economy rules favor Detroit Three: report

By Deepa Seetharaman

CHICAGO (Reuters) - The Obama administration's proposed fuel economy standards for 2025 are unfairly tilted in favor of the three U.S. automakers and put their foreign-based rivals at a disadvantage, according to a House Republicans report released on Friday.

According to the report written by the House Oversight and Government Reform Committee staff, the standards are also based on an "overly optimistic" outlook of American consumers' willingness to buy hybrid and electric cars. The committee is chaired by California Republican Darrell Issa.

The report comes days before the White House is expected to release the fuel economy standards in their finalized form. The proposed standards call for companies to roughly double their average fuel efficiency to 54.5 miles per gallon by 2025.

The figure was announced last year after more than a year of talks between the Obama administration and automakers. The House Republicans' report quotes emails and handwritten notes from executives and government officials that shed light on those negotiations over a new target for automakers' corporate average fuel economy, or CAFE.

White House spokesman Clark Stevens defended the new CAFE standards, saying they "will save families thousands of dollars at the pump and dramatically reduce oil consumption." Stevens said more than a dozen major automakers supported the new rules.

According to Friday's report, one key point of contention was the separate standards made for cars and light trucks, which some executives said favored General Motors Co, Ford Motor Co and Chrysler Group LLC.

According to the proposed standards, automakers must show an average annual increases in fuel economy of 5 percent for cars and 3.5 percent for light trucks through 2021, with a 5 percent increase for all vehicles after that.

In an email, Tom Lehner, a lobbyist for Toyota Motor Corp, described the separate fuel economy standards for light trucks as a "second auto bailout."

Toyota spokesman Steven Curtis said the Japanese automaker "has long supported a single national fuel economy program" and has worked with the Administration on the standards for Model Years 2017-2025.

"Our overriding objective was to help achieve a true, single national standard with some certainty, clarity and flexibility," Curtis said in an email to Reuters.

The three Detroit automakers build the vast majority of trucks sold in the United States. These vehicles also boast higher profit margins than passenger cars.

David Geanacopoulos, general counsel for Volkswagen's U.S. unit, said the overall proposal "lacks competitive equity." He added that the light truck proposal was unfair because the largest trucks made by the U.S. automakers were under "almost no burden in the first three years."

Volkswagen, one of the few automakers which did not back the proposed rules, was not immediately available for comment.

Automakers are now redesigning their cars and trucks by using lightweight, but costly materials like aluminum to meet the standards. They are also expected to build more electric vehicles and hybrids, which need pricier batteries.

(Reporting by Deepa Seetharaman; Editing by Richard Chang)

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