University of Michigan study: fuel-efficiency equals profits
It's no secret that the Big 3 are collectively suffering due short-sightedness in fuel-efficiency. However, a new study by the University of Michigan's Transportation Research Institute (UMTRI) attempts to quantify near-future gains and losses if the domestic auto makers were to make proactive efforts to maximize fuel-efficiency fleet-wide.
The study focuses on the 2010 model year using 3 fuel price scenarios, $3.10, $2.30 and $2 per gallon. At $3.10, Ford could increase its profits by $1.4 billion, $500 million at GM and $100 million at DaimlerChrysler. While the Japanese manufacturers stand to lose up to $600 million. The gains for the Big 3 remain true even at $2 per gallon with a total of $1.3 billion in increased profits with Japanese loses at $300 million.
The study also took a look at the impact on auto industry employment in the U.S. At $3.10 per gallon, progressive fuel-efficiency efforts by the domestics could save 35,000 jobs at their own plants while costing 19,000 jobs at plants of foreign manufacturers in North America.
The fact that it can take 3 to 4 years to develop a new vehicle highlights the immediate significance of the 2010 model year. Walter McManus, head of UMTRI's auto analysis division sums up the study's implications by saying, "Deploying new technologies takes time and money to accomplish, and time and money are in short supply in Detroit. While management is currently focused on cutting capacity through massive layoffs, they need to undertake a deep transformation to much more fuel-efficient fleets to avoid going under. The dilemma the Detroit automakers face is that while they may believe that they cannot afford to make fuel economy a high priority, in actuality, it turns out that they cannot afford not to."
[Source: Auto Industry]
Reader Comments (Page 1 of 1)
Howard Lee Harkness 11:38AM (9/20/2006)
Because fuel prices are high, people want fuel-efficient cars.
If car manufacturers make what people want, they might sell more of them.
DOH! This study is what one of my Brit friends calls a SATBO, for "Seeking after the bloody obvious."
Ford seems to think that concentrating on flashy, stylish muscle cars is the path to success. Maybe, but only as a much smaller niche company. GM has some of the same problem. While I was working at Delco, I got a glimpse of the inner workings of a car manufacturer (I did some of the software for the C.E.L. system in the 1988 Caddy), and I concluded that the reason they aren't doing all that well is that nearly everyone that works on development is a car buff (car nerd might be a more accurate moniker). Car buffs are just attracted to that kind of work, and once in, they hire other car buffs to work with them. The big 3 desparately need engineers and designers who are NOT car buffs, who can make the kind of cognitive connection shown by this study. Otherwise, the next generation Big 3 will not include any domestic names.
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Pete Montero 7:37AM (9/21/2006)
Howard,
With all due respect, your conclusion might seem obvious to you but, frankly, it's based on a myth that enthusiasts and all that they love about the automotive experience are built around a need to use more energy.
I won't bore with the usual litany of how many fuel saving technologies first saw "practical" use in motorsports, or the fact that the most sophisticated of motorsports (those that true car guys really find the most compelling) rely heavily on fuel economy in order to provide the driver an edge.
I will only tell you that, in every company that I have worked, the biggest common factor among the real "car guys" was the disdain for cars and systems that did not live up to potential and that were clearly over-the-top. There are enough examples of enthusiasts (both within companies and without) embracing smaller rather than larger vehicles for the intangible "fun to drive" values that usually go missing in big engine, hyper-powered cars & trucks.
In fact, it would be obvious, if you were so inclined to investigate, that so many of the most egregious product decisions are made by marketing types with no real respect or inclination towards the product, itself. If anything, these decisions are made by the antithesis to the "car guys" that you seem to be seething over.
The bottom-line is that to suggest that enthusiasts or "car nerds" are to blaim for car companies' push towards inefficiency is to make a patently illogical, unwarranted & ignorant claim. You don't back it with any facts, because there are none to support such a blanket statement.
To ignore "fun to drive" and what really makes "car guys" the enthusiasts that they are is to ensure that future generations of efficient motor vehicles are dry, humorless and, ultimately, at disadvantage to the great driving experiences in history (which will push the "great unwashed masses" away from them). My argument is that you need "car guys" to make sure that these great new technologies are relevant and attractive to the least technically literate, most unsophisticated of buyers, otherwise the most simplistic of answers will win out with those that don't know any better. That Tesla sports car has to be a sports car, first, and an EV, second. Otherwise, it's just a fast (albeit a pretty) appliance. And, that will not do when there are other answers out there that don't need to be explained to the mass populace.
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ksmith 11:29AM (9/21/2006)
Well said Pete.
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Andy 9:39AM (9/21/2006)
Pete, i couldn't agree more with you...i'm actually hoping to be one of those 'car guy' engineers
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Pete Montero 7:15AM (9/22/2006)
Thanks...
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