The green side of Obama's auto industry speech
by Sebastian Blanco on Mar 30th 2009 at 11:55AM 
The short version of President Obama's speech today regarding the U.S. auto industry is this: there's only a little more time for GM and Chrysler to get their act together. First off, GM CEO Rick Wagoner got booted and was replaced by Fritz Henderson. Michigan governor Jennifer Granholm said Wagoner was a "sacrificial lamb" (it's still unclear why he was forced out while bank CEOs get to stay on, but that's another issue).
GM will be given 60 days of financing to restructure. Chrysler and Fiat have 30 days to come to an agreement, and the U.S. will give Chrysler up to $6 billion to keep operating during that time. If agreeable solutions can't be found by the end of these deadlines, bankruptcy may be the answer. You can read more details on the speech over at Autoblog. Here, we wanted to look at the potential green effects.
- Obama said the U.S. government will back the warranties for GM and Chrysler vehicles. This removes one barrier to people hesitant to buy a car from these companies, but it does raise other questions. Can you imagine a scenario where the Chevy Volt is out, the battery packs don't work as promised and now the U.S. taxpayer gets to buy new packs for them?
- The President also spoke about "fleet modernization programs" and said he wants to work with Congress to find a way to get money from the Recovery Act to put a version of cash-for-clunkers into action. This is good for decreasing the overall fuel use in the U.S., but it's not like there's a whole lot of money for Congress to give out.
- Speaking of cleaner cars, Obama talked positively about the potential that Fiat will give Chrysler technology and will build cars and engines in the U.S. May we suggest these five?
Reader Comments (Page 1 of 1)
Andrew 1:21PM (3/30/2009)
Bank CEOs? The banks are still a going concern, despite their muck-ups. GM? Maybe not. Arguably, Wagoner did a much poorer job. (And you can't spell "Wagoner" without "goner".)
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Carney 2:37PM (3/30/2009)
No announcement of a flex fuel mandate; therefore, the confusion, floundering, failure, and collapse will continue.
Because of the very real possibility of a new run-up in oil prices thanks to OPEC cuts and Mideast terror, buyers will still be scared away from the big profitable SUV's, pickup trucks, minivans, and performance sedans that they really want. Not wanting to be stuffed into the tiny, weak, and/or pricey eco-toys greens and government want to force them into, most will instead just sit on their hands and wait for more promising times.
So, nobody wins except OPEC and the terrorists it funds.
Meanwhile clean-burning, price-stable alcohol fuel, the ONLY realistic and affordable solution (because it costs only $100 per car for automakers to add compatibility for it while keeping backward compatibility with gasoline), remains effectively ignored.
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Chris M 9:54PM (3/30/2009)
GM has been selling and promoting "flex fuel" vehicles for some time, with a substantial portion of their SUVs and trucks being flex fueled - it helped to artificially inflate their CAFE averages. That hasn't really helped sales much, flex fuel gas guzzlers aren't selling any better than other gas guzzlers.
Vast stretches of the country still have no E85 available. California, the largest car market in the US, has just 2 E85 stations.
I fail to see how a "flex fuel mandate" would help, considering the limited supply of E85.
Carney 12:24PM (3/31/2009)
Chris M said, "Vast stretches of the country still have no E85 available. California, the largest car market in the US, has just 2 E85 stations."
Far from being a valid reason to oppose an FFV mandate; in fact that's a MAJOR reason to be FOR an FFV mandate.
FFV's constitute only 3% of the market; you can't expect lots of gas stations owners to set aside one pump out of just six (17%) or four (25%) for a fuel that only 3% of cars can use.
That's the chicken-and-egg dilemma that has inhibited switching from gasoline to alcohol thus far. Auto-buyers don't demand FFV capability from dealers and automakers in part because they don't see alcohol pumps at their local gas stations; there's no point in getting that feature even if they're aware of its existence. Gas station owners, again, don't provide the pumps unless there are enough cars to make it worthwhile.
A flex fuel mandate breaks through that standoff and drastically increases FFV marketshare, making it 100% in all new cars. Within three years, the proportion of FFV's on the road would be around 30%, heck let's be conservative and say 25% and assume a slowdown from the usual rate of 10% of all cars being new that year (and be further conservative and ignore the pre-mandate 3%). At that point or soon thereafter, you have the critical mass for gas stations to begin switching pumps to alcohol.
Having said all that, even now, with no mandate and the small current marketshare of FFV's, the number of E85 stations has exploded from less than 200 in 2003 to 1,900 in 2008.
And even in CA it's gone up severalfold from your outdated "only 2" stat.
http://e85vehicles.com/e85-california.htm
Yes, yes it's still far from enough, which is why the mandate is so indispensable. We have to drastically speed up even this meteoric growth.
"I fail to see how a "flex fuel mandate" would help, considering the limited supply of E85."
E85 production has gone up severalfold in just the last few years. With a dramatically bigger FFV market to sell to that a mandate would provide, it will go up still further.
We can and should also drop our tariffs on foreign ethanol of which there is plenty.
Also if the mandate, as it should, includes not just ethanol but also methanol we can use our own vast amounts of waste biomass to make methanol.
michael Hippenhammer 10:49PM (3/30/2009)
The yellow cap flex-fuel campaign was just a scape goat for meeting mpg standards and emission standards. GM and the other two companies spent billions on litigations to fight the new standards. Well, in the mean time Europe and Japan took the new standards seriously and invested in making it work. Now they have higher mpg and better emissions cars to sell while GM is sinking because they don't. Bob Lutz should go too!! Over the last decade I always complained about Bob Lutz and everything that came out of his mouth. GM employees are not to blame and shouldn't lose their jobs because some people at the top lead the company to disaster.
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Carney 12:43PM (3/31/2009)
"The yellow cap flex-fuel campaign was just a scape goat for meeting mpg standards and emission standards."
So what?
"Well, in the mean time Europe and Japan took the new standards seriously and invested in making it work. Now they have higher mpg and better emissions cars to sell while GM is sinking because they don't."
Myth. Quality is comparable and class for class efficiency is too. GM just got dependent on SUV and light truck profits, while losing money on smaller cars thanks to costs imposed by their dinosaur unions.
And European automakers are also in dire straits, while Toyota lost money last year.
The real problem was high gas prices, which auto buyers and the economy as a whole are still spooked about.
"GM employees are not to blame and shouldn't lose their jobs because some people at the top lead the company to disaster."
Actually they, and specifically their union are a big part of the problem. It has saddled the Big 3 with around $2,000 in extra costs per car.
Ben 12:58AM (3/31/2009)
When a friend heard the news Wagoner was gone they broke out singing, "Ding Dong the Witch is Dead!" I reminded him that there still could be another witch out there... True Wagoner was a part of the team that blocked major battery technology... "Chevron had inherited control of the worldwide patent rights for the NiMH EV-95 battery when it merged with Texaco, which had purchased them from General Motors."** ...this has prevented the large NiMH batteries for electric cars from being built worldwide and required us to reinvent the wheel from scratch using a completely different technology. The only NiMH batteries allowed in an electric car are tiny ones wired together. Thanks Rick for selling a workable platform to an OIL COMPANY!!! Ding Dong indeed!!.. Still, I don't doubt their are other challenges out there. We've lost too much time in making practical electrics and I'm not sure we have the time to reinvent the wheel.
**Source: Wikipedia discussing Toyota RAV4 EV
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Vince 3:52AM (3/31/2009)
This is a wonderful post Sebastian. I think Barack is doing a pretty decent job and has taken many steps to show that he is serious about eliciting change in the Executive Office. As far as his environmental policies I am still unsure. I think that there are still a lot of challenges, and you can expect that it will not always be easy and that he ill have to make many tough and unpopular decisions. People might enjoy this list of the top ten signs the president’s gig is harder than you thought: http://www.toptentopten.com/topten/signs+president+gig+is+harder+than+you+thought
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LM 8:04AM (3/31/2009)
Um, the Fed forced out AIG CEO and replaced him with Liddy 6 months ago. "It's true that the Treasury Department and Federal Reserve asked Robert Willumstad to resign after three months in AIG's top spot, and that Fannie and Freddie's CEOs were also asked to resign last year."
Now, Citi and B of A need a shake-up, to be sure, and there has already been some (B of A's Board), and some lessers at Citi. So it's probably due. But you can't make a blanket statement like the above.
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bebop 10:18AM (4/02/2009)
A version of "cash for clunkers" in Germany caused new car sales to be boosted around 20% last month which possibly represents the only positive uptick in car sales around the world. According to reports most buyers who obtained cash for their clunkers purchased compact and medium sized new cars.
http://blogs.wsj.com/environmentalcapital/2009/03/31/german-lessons-is-cash-for-clunkers-the-answer-to-us-auto-woes/
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