Washington (Platts)--1Apr2009

The US auto industry Wednesday shot back at the ethanol industry for its
request last month that the US Environmental Protection Agency allow motorists
to use intermediate blends of ethanol without jeopardizing car warrantees.

Currently, auto manufacturers are only required to honor warrantees for
conventional cars if motorists use 10% biofuels blends.

A biofuels group known as Growth Energy submitted a waiver to EPA last
month citing studies including one conducted at the Energy Department's Oak
Ridge National Laboratory that showed 15% and 20% blends do not significantly
affect tailpipe emissions, engine functionality or drivability when compared
with conventional gasoline.

The Alliance for Automobile Manufacturers argued Tuesday in a letter that
those studies were incomplete.

"While a few screening-level studies have been done, as cited in Growth
Energy's petition, several more studies are in the pipeline to expand on
collective understanding," the group said.

The letter pointed to two studies, one conducted by DOE and another by an
Australian lab, which suggested that E20 did increase the risk of catalyst
deterioration after 50,000 miles.

The alliance, which represents foreign and domestic car companies,
requested that Congress and the president continue to fund research into the
effects of higher blend biofuels on vehicle operating systems, and "make
decisions based on sound science."

Several farm state senators, including Iowa's Tom Harkin, a Democrat,
and Charles Grassley, a Republican, have supported the biofuels industry's
call for slightly higher blend limits while the federal government completes
its research.

General Motors and Chrysler, both of which are AAM members, hope to
receive additional federal funds in the months ahead to allow them to skirt
bankruptcy and stay in business. To shore up consumer confidence during this
process, the Obama administration announced Monday that should either company
fail the federal government will back up customer warrantees.

If the EPA approves higher blend levels, the federal government could be
responsible for servicing warrantees for cars that run on higher-than-10%
biofuel blends.

--Jean Chemnick, jean_chemnick@platts.com