Detroit Should Support Obama’s Efficiency and Emissions Laws (But They Won’t)
Not surprisingly, automotive industry groups expressed opposition on Monday to President Obama’s plan to increase vehicle efficiency laws at both the state and federal levels. The opposition was generally expressed in the standard “this is too costly” language, with a dose of “in these harsh economic times” thrown in for good measure.
But we’ve heard this a thousand times before. Of course it is costly to meet new efficiency standards, and of course times are especially difficult right now. But given that automakers always warn that regulations will put them out of business and cost jobs, they have questionable credibility in this debate. READ MORE
How to Save Detroit Automakers From Ourselves
There is concern that the Detroit bailout (which is, in part, requiring the automakers to devote resources towards developing more efficient cars) could backfire. In a couple of years if gas prices have remained relatively low and the economy recovers, high SUV demand from the public could very well return. However, since Detroit is being forced to redirect its focus away from SUVs, it could once again be producing cars that the public does not desire.
The most obvious way to avoid this situation is to set a higher price floor for gas prices so that demand for bigger cars is permanently softened.
DotEarth takes a look at this issue, noting that a new report co-authored by John D. Graham, a former Bush administration official, argues that a series of incentives could actually help accomplish this goal: READ MORE
Ford to Sell Small Electric Car by 2011
Ford Motor Co said on Sunday it planned to introduce a small electric car in North America in 2011 as part of a plan to introduce electric, hybrid and plug-in hybrid vehicles over the next four years.
Ford, the No. 2 U.S.-based automaker, said it was working with auto parts supplier Magna International to bring a small battery-powered car to market in North America in 2011, using a lithium-ion battery, with a range of up to 100 miles per charge.
Ford’s product development chief, Derrick Kuzak, said pure electric car sales would be focused on urban markets with initial sales targeted at the 5,000 to 10,000 range.
In a presentation at the North American International Auto Show, Ford said its next generation of hybrid vehicles would include a plug-in version by 2012. The automaker also plans a battery electric commercial van in 2010.
Michigan May See Growth in Local Battery Production
Given that battery technology will be the key to any Detroit renaissance, it is welcome news that domestic companies are beginning to apply for the government loan program for next generation battery development. One such company is A123Systems, which said on Wednesday that it had applied for such a loan under the U.S. Department of Energy’s Advanced Technology Vehicles Manufacturing Incentive Program.
If the company receives this nearly $2 billion loan, they intend to build a series of factories in Michigan to produce lithium-ion batteries for hybrid and plug-in hybrid cars.
The Detroit News notes that “more than 70 companies have applied to the $25 billion retooling program, with Detroit’s Big Three requesting more than $21 billion. None have been approved yet.”
It is unclear whether A123Systems would also be applying for local tax rebates recently made available to battery companies by the state of Michigan.
Michigan Law to Encourage Local Battery Production
While the federal government was busy with the travel habits of CEOs and propping up a failed business model, the state legislature in Michigan was planning for the future. Recognizing that the real technology for 21st century cars will be battery technology, the state legislature has agreed to offer up to $335 million in local tax rebates for the development of next generation car batteries. With this move, Michigan is aiming to carve out a piece of what is predicted to be a $50 billion market by 2020.
Ford Rains on Its Own Parade: ‘Fusion Hybrid May Face Battery Shortages’
It was so refreshing to write a positive post about a Detroit automaker earlier this week. The topic was Ford’s new Fusion hybrid which is rated by the EPA to get 39 mpg combined, which would make it the third most efficient mainstream car on the road in the U.S. (After the Prius and Civic hybrid).
However, ensuring that this excitement didn’t become contagious, or last too long, Ford is already warning that they cannot get enough hybrid batteries to meet potential demand. Ford Americas President Mark Fields said, “We are constrained by the amount of components, including batteries, that the supply base can provide us.” The Fusion uses nickel metal hydride batteries that are supplied by Japanese company Sanyo.
Two things. First, this comes as little surprise. Ford hasn’t had a really hot car since the Ford Explorers began imploding ten years ago and it probably doesn’t remember how to be successful anymore. And second, this reinforces the importance of encouraging a domestic battery industry. Of course, battery shortages could still occur with domestic production, but the sheer importance of batteries in the 21st century is so enormous that it would behoove us to have our own industry and expertise, as well.
America Enters the ‘Trance’ Phase of ‘Shock and Trance’
Tom Friedman presents another in-depth case for a dramatic increase in the national gasoline tax, or an economy-wide carbon tax, in the NY Times on Sunday.
His basic argument is that with falling gas prices, we’re quickly falling back into a sense of trance, which is the second half of America’s standard “shock and trance” cycle that has shaped American energy policy over the past forty years.
Although President-elect Obama has articulated his concern that we avoid this oft-repeated mistake of following petro-panic with petro-complacency, he has been opposed to new gas or carbon taxes. Friedman says that this is a terminal mistake.
Here are the highlights of Friedman’s argument:
Regarding the current situation, he notes:
“Of course, it’s a blessing that people who have been hammered by the economy are getting a break at the pump. But for our long-term health, getting re-addicted to oil and gas guzzlers is one of the dumbest things we could do.” READ MORE
New York Times Editorial Board in-Favor of a Gas Tax
The NY Times editorial board on Saturday followed the lead of co-worker Tom Friedman and endorsed the concept of a gas tax. Here are the highlights:
“…for all the conditions attached to it, the multibillion-dollar aid package for Detroit’s carmakers approved by the White House (with Mr. Obama’s support) fails to address one crucial question: Who will buy all the fuel-efficient cars that Detroit carmakers are supposed to make?
“The danger is that too few will, especially if gasoline prices remain low. Therefore, it might be time for the president-elect and Congress to think seriously about imposing a gas tax or similar levy to keep gas prices up after the economy recovers from recession. READ MORE
Ford’s Hybrid Fusion a Bright Light Coming Out of Detroit
Lately, the most progressive product to come out of Detroit is the marketing campaign for the planned electric Chevy Volt that may or may not eventually be built, and may or may not eventually work.
Fortunately, it appears that Ford may actually deliver a modern, efficient (and real) car next year. The new Ford Fusion hybrid, is slated to go on sale in the spring of 2009. The car has been certified by the EPA to get 41 mpg/city and 36 mpg/highway, with a combined rating of 39 mpg.
This will make the Fusion hybrid the third most efficient widely owned car on the road, after the Toyota Prius (46 mpg combined) and Honda Civic hybrid (42 mpg combined). READ MORE
Against the bailout: ‘An old man dies, a little girl lives; fair trade’
NYT columnist Roger Cohen had a great analysis of the Detroit bailout this week. Although President Bush did approve a $17 billion bailout on Friday, it is useful to look at Cohen’s points, since this is surely not the last time we will have to contemplate bailing out the Big Three.
Cohen’s op-ed, “Pan Am Dies, America Lives,” which reminds us of the classic line from Sin City, argues that the strength of the American system is derived from the natural rise and fall of companies. He uses the death of Pan Am, once a terrific airline, as an example:
“[F]acts are facts. Pan Am, which had been a leading U.S. international airline since the 1930s, collapsed in 1991. Like other great U.S. companies, it died in the marketplace because it blundered. Churn – of people and businesses – has always defined America. Nobody subsidized U.S. Steel or the automaker Packard in the belief that the world without them was unthinkable.” READ MORE
Friedman on ‘making cars the people want’
“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.”
Automaker bailout dies in Senate
Unfortunately for Detroit, they’re not in the coal mining business– otherwise, they may have received the necessary support from Senate Republican leader, Mitch McConnell of Kentucky, who basically doomed the bailout proposal by speaking out strongly against it on Thursday.
As we’ve indicated before, our position is that comprehensive bailouts should really be reserved to threats of systemic collapse, which may not be the case here.
As it now appears, the bailout bill, passed by the House on Wednesday, will die in the Senate. McConnell indicated that he did support a Republican proposal for a bailout, offered by Sen. Corker of Tennessee. That alternative plan would give company bondholders 30 cents on the dollar to reduce the automakers’ debt burden, would bring workers’ wages in-line with foreign competition, and force the UAW to eliminate payments to workers after their jobs have been eliminated.
Nonetheless, it seems unlikely that any compromise between the two competing proposals will be possible this year. GM has indicated that it may not make it to 2009 without a bailout, and Chrysler retained bankruptcy council earlier this month.
GM Vice Chairman Bob Lutz: At $1.50 gas, the American public wants SUVs
This is a FoxNews interview with climate change denier and GM Vice Chairman Bob Lutz. Lutz and Fox host and apparent GM apologist, Gretchen Carlson, both seem to attribute GM’s crisis to external events rather than internal failures: READ MORE
Some more thoughts on the proposed Detroit bailout
On the bright side, at least if the Detroit bailout doesn’t lead to viability for the Big Three, their eventual successors are hard at work. Whether the next G.M. is EV infrastructure company Better Place, or some other group of entrepreneurs hard at work somewhere, or maybe Toyota, innovation will ultimately triumph.
But as Tom Friedman notes, “Do not expect this innovation to come out of Detroit. Remember, in 1908, the Ford Model-T got better mileage – 25 miles per gallon – than many Ford, G.M. and Chrysler models made in 2008.” It’s just too bad that the taxpayers have to be on the losing team in this race.
Bailouts put the US on a slippery slope
Beyond the public’s moral outrage and protests of unfairness relating to the Wall Street and Detroit bailouts, there is a systemic hazard that is very real and often overlooked in these objections. That hazard is that once the government steps away from its traditionally passive role, and steps into the role of picking and choosing which companies will be subsidized and saved, and which will not, a huge can of worms is irreversibly opened.
Historically, this was one of the biggest problems with communism– that is– governments are notoriously bad at making centralized decisions. The market is amoral– it picks winners and losers based upon events and merit. But government is biased– it picks winners and losers based upon personal biases and prejudices.
Now that our government is in the business of picking and choosing which companies succeed and which fail, there will be increasing attempts by the government to tell those companies how to run their businesses. And why shouldn’t they? Once these companies failed to survive on their own, it only seems fair that they should forfeit the right to make their own business decisions.
Yet it is this righteous position that is so dangerous and could amplify the problems we already face. Although we personally don’t think a bailout is a good idea unless the actual viability of our entire system is at-risk, if we are going to bail out these companies, we need to resist the urge to micro-manage their businesses. READ MORE
