Good morning! Welcome to The Morning Shift, your roundup of the auto news you crave, all in one place every weekday morning. Here are the important stories you need to know.

1st Gear: We Do What We Want 

In the final days of the Obama administration, the Environmental Protection Agency has worked to cement aggressive fuel economy and emissions standards before a Trump administration—including a nominated EPA leader who made his mark suing the agency—can cut back regulations.

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But even if the new administration wants to scale back these targets or loosen regulations, it has something else to deal with: the state of California and its Air Resources Board, a powerful and autonomous board that sets its own standards and has more than a dozen other states following its lead. And a new report from its staff made it clear it plans to get “aggressive” on greenhouse gas emissions and ZEV cars. Via Bloomberg:

The staff of California’s Air Resources Board called national efforts to promote electrification “very modest” after 2025 as it released a more than 660-page report Wednesday on the future of zero-emission vehicles, or ZEVs. If federal emissions standards are substantially changed, the state may revisit whether to keep coordinating with Washington’s policies, they said.

“The message we want to send is that post-2025 California is moving not just to moderate, but to very aggressive, stringency on greenhouse gases and zero-emission vehicles,” Joshua Cunningham, chief of the regulator’s sustainable transport staff, said in an interview. “We’re pushing the boundaries.”

The report suggests California should maintain ZEV targets already in place for 2022 to 2025. Elon Musk, chief executive officer of electric-car maker Tesla Motors Inc., said in August the regulator’s standards were “pathetically low” and “a crying shame.”

California’s regs have a tremendous effect on the industry, including the plethora of CARB state-only EV cars like the Fiat 500e. Additionally, of EPA nominee Scott Pruitt:

As the biggest auto market among U.S. states, California has the market clout and legal authority to set pollution rules that are tougher than national standards. Pruitt, who’s gone to court to fight more than a dozen actions by the agency, said he would review California’s authority and stopped short of saying it will be upheld during a confirmation hearing Wednesday in Washington.

2nd Gear: Possible EPA Chief May Try To Limit CARB

This is poised to be an interesting showdown. Here’s how the matter came up during Pruitt’s confirmation hearing on Wednesday, where Pruitt said if nominated he would review the Obama administration’s fuel efficiency rules. Via Reuters:

“It merits review and I would review that,” Pruitt said during a contentious Senate confirmation hearing, questioning the decision of McCarthy to finalize the determination just two weeks after the public comment period closed on Dec. 30.

Pruitt said separately he would not commit to allowing California to continue its own clean vehicle rules under a 2009 decision by the Obama administration.

Major U.S. and foreign automakers have appealed to Trump, who has been critical of Obama’s climate policies, to review the rules requiring them to nearly double fleet-wide fuel efficiency by 2025, saying they impose significant costs and are out of step with consumer preferences.

3rd Gear: “I Knew Nothing”

Speaking of emissions, when called before German lawmakers, former Volkswagen CEO Martin Winterkorn gave a predictable response when asked what he knew about the company’s widespread, egregious diesel cheating, via Reuters:

Upon being asked whether he had known about software cheating earlier, Winterkorn told the German parliament’s committee of inquiry into carmakers’ emissions irregularities: “That is not the case.”

Winterkorn declined to be more specific about when he was informed because it was a matter that was still being investigated by German prosecutors.

“I too am looking for satisfactory answers,” Winterkorn said in his first public remarks since he apologized for the scandal in a televised statement on Sept. 22, 2015, one day before he resigned as CEO of Europe’s largest automaker.

He may want to avoid traveling to the U.S. for a bit just in case.

4th Gear: GM Settles SEC Case Over Ignition Switch

In other scandal news, General Motors came one step closer to closing the door for good on the defective ignition switch fiasco blamed for 124 deaths. Now it just has all those lawsuits to contend with. Via USA Today:

General Motors agreed to pay a $1 million fine to settle federal charges that it failed to adequately assess the potential financial damages of a deadly defect.

The Securities and Exchange Commission said Wednesday that it had agreed to a settlement with GM over the accusations, which stem from the company’s ignition-switch scandal.

The deal brings to a close one of the last remaining government investigations into the company’s handling of the defect.

5th Gear: More Takata Recalls

Yes, there are some Takata airbags that have still not been fixed. The damn things were everywhere. The latest round affects more than 652,000 vehicles in the U.S., the AP reports:

Automakers with recalls posted Thursday are Audi, Nissan, Jaguar-Land Rover, Subaru, Daimler Vans, Tesla, Mitsubishi, BMW, Ferrari, Mercedes, Mazda, McLaren and Karma. All the recalls are to replace front passenger inflators.

Owners can go to www.nhtsa.gov/recalls and key in their 17-digit vehicle identification number to see if their vehicles are part of the recall.

It’s a bunch of cars, from the Audi A4 Cabriolet to Daimler Freightliner vans, so click that AP link to see them all. And get your cars fixed.

Reverse: But Certainly Not The Last

Neutral: Who Will Prevail If A Trump EPA VS. CARB Fight Happens?

I don’t see either side backing down and CARB is quite powerful in its own regard. If automakers want to sell cars in the U.S.’ largest market and other states that follow those mandates, the EPA may be outgunned.

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