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Auto Industry at a Crossroads
Dec 17, 2008 (From the CalCars-News archive)
CalCars-News
This posting originally appeared at CalCars-News, our newsletter of breaking CalCars and plug-in hybrid news. View the original posting here.
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Thanks to all of you who've written telling us you've missed CalCars-News updates. Recent rapid developments have created a serious overload for us. Then, each time it looked like federal support for the Detroit Three was likely, everything changed. (And we still want to point out the many provocative and illuminating statements from automakers, legislators, analysts and journalists!)

We're going to start to try to catch up with the most urgent subjects, and we hope we'll have time to go back and pick up many of the important developments that don't fall into those categories. Postings that follow this one will cover our proposal for Prepaying for Plug-Ins to Save & Transform the Auto Industry, which has generated quite a bit of interest and kept us busy, developments at the Obama transition, Al Gore's Climate Protection campaign and plug-ins, BYD's first PHEV, and the latest hype on battery obstacles.

WE ENCOURAGE YOU TO FORWARD/REPUBLISH THIS AND ANY OTHER POSTINGS YOU FIND USEFUL!


To jump right in to the MOST IMPORTANT QUESTIONS: What have the global financial crisis, the slides in oil prices and car sales, and the transition in Washington made possible and necessary? How can we now think, talk and strategize differently?

The entire U.S. auto industry is at a critical turning point. This moment rivals:

  • the early 1900 years when the convenient electric starter motor allowed gasoline cars to replace EVs;
  • Ford's introduction of mass production;
  • The lightning-fast switch after Pearl Harbor from cars and trucks when Model Years 1943-44-45 were only planes and tanks; and
  • The extended decline of recent decades when Detroit lost half of its market to imports.

After six years for CalCars -- and decades for Andy Frank on PHEVs and for proponents of previous generations of EVs -- our goals are in view. Every major global carmaker now says it will build PHEVs or EVs in the next five years. BYD in China and small US carmakers are already starting to pre-sell. The embattled Detroit Three brought their plug-in cars to Washington to defend their intentions. They all acknowledged in their testimony that they need to build cars that people want, that make money and that address energy security and climate concerns. They know that whatever the final deal, "outsiders" will have some say in what they build and sell.

We're not looking to support them as they stumble across some "realistic" finish line with a few models that become low-volume production vehicles (starting with the Chevy Volt). The goal is for the industry's move to electrification to gain momentum and breadth as it approaches an End of "Business-As-Usual" STARTING LINE. The Obama campaign recognized this in its call for a million PHEVs by 2015 -- we see that as a goal that can be surpassed.

Last week, NYTimes columnist Thomas Friedman upped the ante (our emphasis added), saying in "The Real Generation X" http://www.nytimes.com/2008/12/07/opinion/07friedman.html, "You want my tax dollars? Then I want to see the precise production plans and timetables for the HYBRIDIZATION OF ALL YOUR CARS AND TRUCKS WITHIN 36 MONTHS. I want every bailed-out car company to move to hybrid electric drive trains, because nothing would both improve mileage and emissions more -- and also stimulate a whole new 21st-century, job-creating industry: batteries. Big batteries that can store electricity for transportation and wind and solar generation are the INDISPENSABLE ENABLERS OF THE ENERGY INTERNET OF THE FUTURE. Any Detroit bailout has to serve that goal."

NOTE ON FRIEDMAN: if you read that entire column and check out the responses at http://www.autoobserver.com/2008/12/nyt-columnist-detroit-aid-should-hinge-on-hybridizing-everything.html, you'll see why he might have made his call more specific, focusing not simply on reducing petroleum use with hybrids but on displacing oil with electricity, which can be done only with PHEVs. And if you look at some of the uninformed comments, you can see that he missed the chance to emphasize that hybridization won't take away any of the fun characteristics that people expect from their cars. Friedman's next column, "While Detroit Slept" http://www.nytimes.com/2008/12/10/opinion/10friedman.html, lauded Better Place's EV solution. And in "Cars, Kabul and Banks" http://www.nytimes.com/2008/12/14/opinion/14friedman.html, he disposed of most tired excuse: "Over the years, Detroit bosses kept repeating: 'We have to make the cars people want.' That's why they're in trouble. Their job is to make the cars people don't know they want but will buy like crazy when they see them. I would have been happy with my Sony Walkman had Apple not invented the iPod. Now I can't live without my iPod. I didn't know I wanted it, but Apple did. Same with my Toyota hybrid."

RANDY REISINGER ON FRIEDMAN: Our CalCars associate (and early Apple exec) says, "while the major automakers have the assembly lines and engineering to build millions of vehicles, only the start-ups (which the auto makers shun as potential competition) have demonstrated the ideas and technologies to deliver the "iPods" of future vehicles. Automakers must look outside their own walls for new ideas and smaller vehicles. This would bring investments to start-ups because they'd get a market instead of simply competing with the majors. An example could be a smaller, lighter, lower-power and lower-price Volt for commuters."


This is a time for the industry to abandon science projects and sideshows. Carmakers can no longer afford to bet on every horse. Their path to survival is the PHEV, a solution that stands on its own merits -- and can accommodate all other fuel types and reinforce engine efficiency.

IT'S TIME TO MAKE CHOICES!

NEW REALITIES: months of headlines have turned settled and confident assumptions into quaint theories:

  • THE FREE MARKET ENSURES OPTIMAL OUTCOMES? Our economy, our purchasing power, our savings and our futures are now victims of markets gone haywire, as "financial instruments" that depended on ever-rising valuations have brought down the mightiest institutions.
  • TOO MUCH REGULATION AND GOVERNMENT ARE THE PROBLEM? It was wishful thinking to encourage financial competition with fewer and fewer rules. Even those who hatched collateralized debt obligations and other complex instruments did not fully understand them or appreciate their potential impact. No one was minding the store. And had industry supported national health insurance and portable retirement programs, U.S. products would have been more competitive internationally.
  • GOVERNMENT SHOULDN'T PICK WINNERS? It's a myth that we haven't been doing that all along. For decades, we've backed petroleum, leaving us with today's economic, environmental and national security crises. As Al Gore memorably said in July, "We're borrowing money from China to buy oil from the Persian Gulf to burn it in ways that destroy the planet. Every bit of that has to change."

The prevailing wisdom has been "try everything" and let the market sort out the best solutions. "Silver buckshot but no silver bullet" is the fashionable cliche. This reassuring mantra may apply to a limited extent to global warming because every source and use of energy has to at least evolve. BUT IT DOESN'T APPLY TO TRANSPORTATION.

Public officials and automakers, who used to call for "alternative fuels," now have retreated to even less specific generalities. In November, in "Will the US Increase Support to the Detroit Three?" at http://www.calcars.org/news-archive.html, we wrote about, "SPEAKING IN CODE: Now when legislators, journalists and analysts call for 'new' and 'green' automotive technologies, they mostly refer to plug-in cars. That's the result of all the efforts by advocates -- and, of course, carmakers' announcements that PHEVs and EVs will be available globally in 2010-2012. Other solutions are less scalable, less green, or more long-term because they need new fuel delivery infrastructures or technologies. These include the relatively simple conversion of existing vehicles to be able to accept ethanol blends. Of course, if they use corn ethanol, there's little if any CO2 benefit, and we don't know when we'll get cellulosic ethanol. And, influenced by Pickens' $56 million efforts, they consider compressed natural gas, which still has the inefficiency of internal combustion, and has only 20-30% lower CO2 than gasoline."

The latest, since we wrote that, is legislators (and often President-Elect Obama) switching to new code words: "advanced" or "high-efficiency" cars. Why are they afraid to ask for what they want? It's time to get specific -- because naming the solution can help build support and momentum.

PLUG-IN CARS HAVE EMERGED AS THE MOST AVAILABLE, PRACTICAL TECHNOLOGY. Here's the package:

  • RAPID TRANSITION: change the primary vehicle propulsion fuel from gasoline/diesel to electricity, starting with everyday, local commuter miles.
  • DOWNGRADE LIQUIDS TO "RANGE EXTENSION" FUELS for PHEVs.(They vanish for vehicles where an all-electric range of 100+ miles is sufficient).
  • ALL FUELS EVOLVE: generate electricity from increasingly renewable, low-carbon sources and use it mainly off-peak. Change the range extension fuel to blends with increasingly low-carbon biofuels.
  • "HIGH EFFICIENCY" PITCHES IN: electric motors are already 4-5 times more efficient than internal combustion engines, and any engine modifications enable less use of liquid fuel.
  • OPTIMIZE NEW VEHICLE DESIGNS: lightweight materials and streamlining reduce consumption of both electricity and liquid fuels.
  • COMMERCIALIZE SAFE, AFFORDABLE RETROFIT SOLUTIONS: partially electrify millions of large internal combustion vehicles that will otherwise guzzle gas for decades, whose conversion, compared to scrapping, saves energy while accelerating market penetration and petroleum displacement.
  • REDUCE VEHICLE MILES TRAVELLED: promote and expand mass transit, ride sharing, smart communities, satellite offices and telecommuting.
  • POLICY MEASURES: prime the pump with public and private fleet orders, incentives and benefits for new and converted plug-in vehicles, and incentivize more efficient cars with revenue-neutral "feebates."
  • READ "Energy guru Lovins to carmakers: time for big bets" at http://news.cnet.com/­8301-11128_3-10112893-54.html by Martin LaMonica for a good summary of many of these steps; also see Amory Lovins's 20-minute talk at the 2005 TED Conference (when Rocky Mountain Institute had just published "Winning the Oil Endgame," but was not yet focusing on plug-in cars).

THE DETROIT THREE HAVE A LONG WAY TO GO: See Joseph Romm's excellent summary, http://climateprogress.org/­2008/­12/­02/­
bailout-plans-ford-drops-hydrogen-cars-while-gm-remains-confused-about-ethanol/­
You'll find links to their business proposals. Romm notes that Ford no longer invokes a hydrogen future, expecting EV sedans in 2011 and PHEVs in 2012 and meanwhile improving engine efficiency and profitability for small cars. GM continues to promote ethanol. GM brought its Volt prototype to DC, paired with its hydrogen Equinox, and CEO Rick Wagoner repeatedly linked them, thereby diluting his message about the company's new direction. Chrysler showed its Jeep PHEV and its roadster EV outside the December Senate hearings, but it's not committed to production.

We contrast two Chrysler quotes: In 1971, CEO John Ricardo told US Transportation Secretary John Volpe, "John, what your government planners don't understand is that the American consumer buys, and will continue to buy, any automobile that we decide to advertise." And on November 18, CEO Bob Nardelli told the House Committee on Financial Services hearing that because Chrysler cannot afford to do everything; we're choosing electricity as our future path. (Will someone help us by finding his exact quote, in a response to a US Rep's question? Watch the extended Q&A following the testimony, let us know! http://www.house.gov/­apps/­list/­hearing/­financialsvcs_dem/­hr111908.shtml .)

Finally, we continue to emphasize why the plug-in solution needs to encompass retrofits, not just of hybrids, but also of internal combustion engine vehicles -- and why incentive programs should cover both. You can see prototypes at http://www.calcars.org/ice-conversions.html, and read Ron Gremban's "Should We Crush Gas-Guzzlers? Or Convert Them to Plug In? An Analysis." Ron's addition to our "package" of points above is:

  • BUILD AS FEW NEW NON-PHEV VEHICLES AS POSSIBLE FROM NOW ON, AND QUICKLY RETROFIT AS MANY OF THOSE AS POSSIBLE: In the U.S., we've been building 17 million new cars and light trucks each year; now we're down to 12. Each million new compact cars getting 30 mpg commits us to an additional 5 billion gallons of gasoline -- or as-yet-nonexistent biofuel -- consumption over its 150,000 mile lifetime; and each million 15 mpg (above average) light trucks are a commit us to 10 billion gallons of consumption. (You can do the translation into dollars on imported oil and tons of CO2.)

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