Issue: Feb 2007


CAN DETROIT’S BIG 3 CAR MAKERS COPE WITH NEW CONDITIONS?



by Bob Brooks

Detroit’s Big 3 car maker huge losses of money and jobs due to high costs, hold over quality issues and emphasis on larger vehicles have been devastating. All 3; GM, Ford and Chrysler, are cutting back US operations to an uncertain level.

The Big 3 are now in high gear seeking ways to solve both product and cost problems. `If that were not enough, the target has escalated thanks to the Intergovernmental Panel on Climate Change (IPCC) which has concluded [reported by the Financial Times 02/03/07)] that, “Only urgent international action to cut emissions can prevent climate related catastrophe” and that “We are looking for an unequivocal commitment [to emissions reductions] from policy makers, business leaders, and civic society leaders”

The IPCC is calling for CO2 emissions reductions. This impacts the simultaneous need to cut transportation carbon based energy use, notably US oil imports from unstable regions.

Whether or not the IPCC findings translate into US public policy for action, the question remains whether the Big 3 can cope with competition from financially stronger, lower cost auto makers already further along with reduced CO2 emissions and energy use vehicles. The leading question is about the competitive strength of emerging US automotive technology.

GM (with partners DaimlerChrysler and BMW) has promised to begin production soon of 2-mode (electrically controlled dual planetary) transmission systems with hybrid capabilities heavily targeted at larger vehicles. Fuel economy gains of 45% are claimed compared with “base” models that do not have fuel efficiency enhancements such as direct gasoline injection, higher compression ratios and other current CO2/energy reduction technologies.

GM and Ford have announced they will not tool for US production of diesel cars due to high cost. The stated Ford position (similar to GM)is that the lower cost of forthcoming high efficiency downsized, direct injected, high compression, turbocharged gasoline engines [likely] with automatic start/stop systems make more sense. Many auto makers are following this path to achieve engine thermal efficiencies comparable to diesels particularly important in the US where gasoline availability and quality have fuel advantages for light duty vehicles... High efficiency gasoline cars are already on the market with many more in the pipeline.

GM and other auto makers are optimistic about the future of plug hybrid technology that permits a certain level of urban driving range on battery power alone by plugging into utility power for charging. . The battery technology needed is still in the development stage, however, and when the overall efficiency of utility power generation with carbon fuel, electric
distribution losses and battery plus electric motor losses are added up, total plug hybrid CO2 advantages are less than first appear... Needless to say, if electric power is obtained from nuclear, wind, solar or hydro and/or utility carbon sequestration becomes economic, IPCC objectives for CO2 reduction will be favorable when plug hybrid vehicle IC engines are not running.

Today’s hybrid cars offer some degree of CO2 emissions reduction in city driving, but their cost effectiveness has proved to be less attractive than earlier forecasts particularly if motorists do not practice economy driving practices.

Among the widely promoted ways to cut tailpipe CO2 but with questionable results, is the energetically lobbied use of US ethanol fuel. Ethanol’s negatives, such as high energy use to make it, high cost of animal and human food resulting from diversion of corn into fuel and over use of soil and water are gaining attention. Also, vehicle mpg cuts of nearly one third with E85 fuel(85% ethanol, 15% gasoline) combined with flex fuel credits that effectively subsidize less efficient vehicles and diversion of highway funds to pay for ethanol production subsidies, are also more in the news lately.. The high cost of ethanol from cellulose and new calculations of agricultural problems related to all bio fuels are coming into greater public view.

While Powertrains and fuels will be important issues, other CO2 related questions are entering the debate:

If US public policy targets significant reductions in vehicle CO2 and energy use and if less publicity is given to personal injury risk for motorists in crashes involving small vs. big vehicles, consumer acceptance of lighter vehicles that produce less CO2 could improve. Spacious, multiple air bag, high efficiency, and compact cars are a category with strong growth potential as the bigger vehicles with ever more technology become less affordable and perhaps less socially correct. The new Toyota Auris, said to be the US Corolla replacement, is a category of car to be watched.

Indicating the long road US car makers have to travel, a northern Illinois combined full line Chevrolet & Toyota dealership’s spokesman tells AI that recent unit sales volume has been about 25% Chevrolet and 75% Toyota prior to introduction of Toyota’s new full size pickup truck. Adding to this picture, the Chevrolet side of this dealer’s business now obtains its financing from Toyota instead of GM’s finance arm, GMAC that was recently sold to help pay for GM’s survival efforts. GMAC was a significant source of profit for GM.

Another aspect is branding. Experts in this field see frequent changes in car brands, widely practiced by the Big 3 more as a way to hype sales while masking quality and product acceptance problems...
.
Ford’s new CEO, Alan Mulally, turned Boeing around by leapfrogging its principal competitor with a new technology airplane major components of which are made by off-shore suppliers. Can something equally dramatic be done at Ford as its “way forward?”

Business strategy planning has become extraordinarily difficult for Detroit’s Big 3 seeking to integrate what it can afford to do with what the market and society want. For now, the emphasis seems to be on what the market and society want leaving the auto makers to make do the best they can with what they have. Business downsizing is under way. Product downsizing and new technology are also under way but with uncertain competitive futures. .

About the author: Bob Brooks is a member of the Society of Automotive Engineers and long time automotive technology journalist specializing in powertrains and fuels.


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