Auto Industry Under Fire from Wallstreet: More Transparency and Flexibility Needed for Climate Change

Ceres issued a new report that called for policy certainty and better climate change risk disclosures so analysts can better estimate the fair value of the auto companies in their portfolios. 

Experts agree that U.S. automakers have less flexibility to meet changing regulatory and consumer demands. The report states that only two manufacturing facilities in the U.S. -- facilities owned by Nissan and Honda -- are capable of rapidly switching from producing SUVs to more fuel-efficient vehicles.

"Steadily rising fuel prices since January 2002 have already shifted consumer demand away from large SUVs and pickup trucks, but U.S. manufacturers responded not by shifting their future product plans but by lowering prices on the same inefficient vehicles they've been offering for years," said Dr. Walter McManus, Director of Automotive Analysis for the University of Michigan Transportation Research Institute. "The SUV cash cow has turned out to be a Trojan horse."

The Ceres report analyzes several key trends that could affect the valuation of auto companies' securities:

• High oil prices and unstable gas prices at the pump.
• New energy independence measures and climate change regulations taking effect globally. For the first time in 13 years, the United States passed a federal energy bill in 2005 that provides tax credits to consumers for purchasing fuel-efficient vehicles, and creates new mandates and incentives for the production, distribution and sale of renewable "biofuels."
• Alternative technologies and fuels will result in leaders and laggards. Some automakers, like Toyota and Ford, have increased their focus on hybrids and clean diesel, while others, like GM, have concentrated on deploying flex-fuel vehicles capable of operating on gasoline or ethanol.