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Auto Industry at a Crossroads

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  • Felix Kramer
    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
    Message 1 of 1 , Dec 17, 2008
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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!)

      (Shortly after it goes out on email, this posting will also be
      viewable at http://www.calcars.org/news-archive.html -- there you can
      add CalCars-News to your RSS feed.)

      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 ANYOTHER 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 make 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"
      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
      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"
      www.nytimes.com/2008/12/10/opinion/10friedman.html , lauded Better
      Place's EV solution. And in "Cars, Kabul and Banks"
      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
      www.calcars.org/news-archive , 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 www.calcars.org/ice-conversions/, 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.)

      -- -- -- -- -- -- -- -- -- -- -- --
      Felix Kramer fkramer@...
      Founder California Cars Initiative
      http://www.calcars.org
      http://www.calcars.org/news-archive.html
      -- -- -- -- -- -- -- -- -- -- -- --
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