Hybrid Sales Fall Precipitously as Gas Prices Remain Low
Not surprisingly, as gas prices have fallen in recent months, so have sales of hybrid vehicles. In February, only 15,144 hybrids sold in America, down two-thirds from last April, when sales for that segment peaked (and gas was an average of $3.57 a gallon). While auto sales across the board have fallen dramatically as a result of the economic situation, the drop in hybrids has been even more precipitous.
Two main lessons can be learned from this situation, with the most obvious being that the higher gas costs, the more consumers will purchase efficient vehicles. But the second lesson, which is less apparent, is that as Congress forces automakers to build more alternative fuel cars as a condition of the bailouts, it is putting these companies in a new bind– since consumers don’t want to purchase these efficient vehicles while gas is reasonably cheap.
Apparently, the only entity that is more out-of-touch with the American consumer than the domestic automakers is Congress. By forcing automakers to build efficient cars while gas prices hover around $2, Congress could be setting the stage for another domestic auto industry crash in the coming years.
Of course, this could all be solved by just following the number one lesson above– and dramatically increasing the federal gasoline tax so that consumer (and industry) behavior changes permanently. But Congress, like the automakers, rarely makes the right strategic decision.
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
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
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
Friedman to Obama: efficiency incentives and mandates are not enough– we need a carbon tax
President-elect Obama, in an interview conducted earlier this week and aired Sunday on Meet the Press, indicated that while he supports a transformation in our energy and environmental policies, he wants to accomplish this through incentives, rather than a carbon tax.
Tom Friedman, in effect, responds to that position in his op-ed in Sunday’s NYT.
Laying out the enormous importance of how the billions from bailouts and stimulus packages are spent, Friedman quotes Andy Karsner, a former assistant secretary of energy: “Remember, this money will not be neutral. We are talking about directing an unprecedented volume of cash at our housing, energy, transportation and infrastructure industries. This cash will either fortify the incumbent players and calcify the energy status quo, or it will facilitate the economic transformation we seek. The stimulus will either be white blood cells that will heal us or malignant cells that will continue to sap our strength.” [emphasis added]
Similar to our mantra on this site, Karsner (and Friedman) are basically saying that our country has been operating under an unsustainable status quo for a long time, and the billions and billions of dollars that we are about to spend will either act to cement that untenable situation, or transform it into something healthy and viable. READ MORE
Obama discusses the Big Three automakers on Meet the Press
Highlights of Obama on Meet the Press on Dec. 7:
If automakers want to survive they better start building fuel efficient cars. But we need to keep their feet to the fire.
“If taxpayer money is at stake [for a bailout]… we want to make sure it is conditioned on an auto industry emerging at the end of the process that actually works.”
We need to “introduce a new ethic of responsibility [into business].”
And regarding the environment and energy: Focus on incentivizing efficient cars and increasing efficiency in buildings, but opposed to a fuel tax since people are struggling financially right now.
Chrysler commercial sums up Detroit’s failings in 60 seconds
I’m sure the Dodge Ram is a fine pickup truck, but this commercial borders on the ridiculous. With the soldiers and military helicopters, it looks like Chrysler is trying to sell a tank instead of a civilian automobile. Guess none of the MBAs over at Cerberus Capital have done a recent case study of the Hummer brand?
Detroit’s Big Three CEOs return to Washington for a second bite at the apple
On Tuesday, the CEOs of GM, Ford, and Chrysler returned to Washington to continue their attempts to get a taxpayer bailout of their beleaguered companies. Congress punted their requests for assistance last month after an embarrassing performance by the CEOs and a lack of Congressional consensus to help.
As Speaker Pelosi so eloquently stated last month, “Until they show us the plan, we cannot show them the money.” Well, the CEOs are returning to Washington ostensibly with a “plan” to turn their companies around and are now hoping to be shown the money.
Ford says that it hopes to conduct a transformation without tapping into government loans but said a cash infusion may be necessary if the economy continues to decline or one of the other automakers files for bankruptcy. Ford says it should have enough cash on hand to survive through 2009 though. READ MORE
Ford may not need bailout money, but will take efficiency subsidy
Following up on our earlier post about Ford, the NY Times notes today that of the Big Three automakers, Ford is the only one not seeking an immediate cash infusion as a part of any bailout. This is because Ford has a reasonably large cash reserve of $19 billion and a $11 billion line of credit. READ MORE
Ban on lobbying should be a part of any Detroit bailout
If anyone is wondering how the Big Three automakers got themselves into their current predicament, it is illustrative to take a look back to 2004. That year, the state of California was in the process of implementing a law that would permit alternative fuel vehicles that achieved a minimum of 45 miles per gallon to use the state’s carpool lanes regardless of occupants.
However, only foreign cars could meet these objective standards. As a result, William C. Ford, Jr., the chairman of Ford (both then and now), wrote to California Gov. Schwarzenegger complaining that the law was basically a “Buy Japanese” campaign. At the time, Ford was about to release a hybrid SUV (the Escape) that would achieve only 31 miles per gallon. Unintentionally highlighting the fundamental core of Detroit’s problems, Ford, Jr., complained that this law would create a “competitive disadvantage precisely when Ford is entering the hybrid market with a family-oriented, no compromise S.U.V.” (emphasis added). READ MORE
‘Dingell is literally married to GM’
The vote on whether to replace Rep. Dingell with Rep. Waxman as chairman of the powerful House Energy and Commerce Committee could occur as early as this coming week. We’ve noted before that given Dingell’s role as “protector” of the automakers, and the fact that come February, Dingell at 82, will become the longest-serving member in the history of the House, he is clearly not the right person to be chairing this important committee given the transformative changes that are urgently required.
Not only that, but Dingell’s wife, is actually a senior executive at GM and is a member of the family that founded that company.
Given his deep ties to the auto industry, and his longstanding record of stymieing efficiency regulations, it is time for new leadership. As environmentalist Dan Becker notes in the NYTimes, “Dingell is literally married to General Motors.”
“Loss of Dingell chairmanship would hurt the environment.” Really???
Supporters of current Energy and Commerce Chairman John Dingell, who is facing a tough challenge to his position from Rep. Henry Waxman, have actually claimed that a Dingell loss could hurt the environment. These supporters, including Rep. Stephanie Herseth Sandlin, claim that a change in leadership would cause delays while the new chairman brings in his own staff and resources.
What?? This is same congressman who spent his career “protecting” automakers from efficiency regulations and, according to Tom Friedman, “is more responsible for protecting Detroit to death than any single legislator.” His supporters are now claiming that a few week delay stemming from a change in leadership would cause so much damage to the environment that we must continue with him regardless? READ MORE
