by: Michael Hoexter

Now as the Big Three American automakers are teetering on the brink, is the time for the government to provide direction to an industry that has lacked a decisive winning strategy and forward-looking product plans over the past decade, if not decades.

The Renaissance Center, GM's headquarters, has come to symbolize the modern Detroit skyline. Detroit and much of the industrial Midwest has been in decline for four decades (the "Rust Belt") but would experience a dramatic blow with the sudden collapse of one of Detroit's Big Three automakers.

Currently, the Big Three and the UAW are looking for stopgap measures to keep substantial pension and healthcare obligations from upending their business as well as shore up their overall financial picture. If one of these companies were to close its doors, millions of jobs would be lost and the retiree benefits system for tens of thousands would be endangered. We will leave to one side here, the problems of a health care system that links benefits with employment status.

Yet the troubles of the car industry are largely of its own making. For years, engineering and design prowess, whether in creating exciting cars that lead the industry in aesthetic appeal and useful features or leading in alternative fuels and energy efficiency, has taken a backseat in Detroit to playing to a limited set of consumer interests that positioned the Big Three in few narrow market segments. Most troublingly, Detroit has, despite 35 years of experience with them, no workable plan to deal with oil shocks, let alone climate change and sustainability;  the commitment to highly profitable SUVs was a brief party built on the unusually low oil prices of the 1990’s. Wall Street’s expectations for ever growing profits and increased quarterly earnings also combined lethally with Detroit’s scorn for fuel efficiency and less optimistic views of oil supplies.

Now, again, Detroit is seeking respite from the federal government from its lack of foresight and leadership in the automotive industry since the 1973 oil shock. As part of this deal, despite the lamentable example of the bank and Wall Street bailout, Detroit cannot simply be a recipient of aid without a change in strategic direction. Too late for the current immediate crisis, GM’s Volt project and the E-flex platform are future-looking projects with bottom line impacts at the earliest in 2010. So this is a teachable moment for these industrial behemoths, one where deep insight into the future of energy and our civilization can inform the creation of new technologies.

A Bridge between the Present and the Future

President Franklin Delano Roosevelt helped pull the US out of the deepest and longest recession in its history through the New Deal. More and more commentators are calling for a "Green New Deal" to help pull nations affected by the current crisis out of the economic slump via a massive clean energy infrastructure project.

While producing advanced clean-fuel (electric and hybrid) private and commercial vehicles that can compete on the private market is the end goal for every established and emerging vehicle maker, the Detroit Big Three are going to need time to hone their abilities in a changed market. Congress can help give direction to Detroit by tasking the automakers to help build the vehicles and infrastructure for a clean, largely electric transport infrastructure. The below measures will not alone rescue these giants but can provide a revenue stream and keep product development on course as more immediate solutions are found with conventional vehicles.

1) Electric Postal Vehicles

  • A fleet order to switch all local delivery vehicles (less than 100 mile daily duty cycle) to battery electric vehicles can be extended competitively to each of the big Three with a guaranteed minimum order and minimum price floor but competition for 40% of the remaining order.   Included in orders for these vehicles would be a 480 volt charge infrastructure.

2)  Electric Government Service Vehicle Order and Subsidies for Local Goverments

  • Federal government should order battery electric government service vehicles for local use and subsidize the purchase of service vehicles for state and municipal government use

3)  Trolleybus and Dual-mode electric bus subsidies for public transit authorities

  • The most efficient way for public transit agencies and municipalities to transition from imported fossil fuels is on most high traffic routes to electrify those routes and use either dedicated trolleybuses or hybrid dual mode trolley and fossil fuel powered buses on routes where it is not yet economical to build out catenary overhead wires.

4)  Solid-Oxide Fuel Cell Electric Vehicle Program

  • In coordination with the Department of Energy, Detroit manufacturers can develop flex-fuel vehicles with double the efficiency of ordinary internal combustion engines. Current flex fuel technology is cheap and requires little federal support; with the next generation, efficiencies of 55% (as opposed to 25-30%) or greater are possible using fossil, bio-, or synthetic fuels. Solid-Oxide fuel cell technology allows liquid fuels to be converted to electricity within a vehicle without the inefficiencies and infrastructure requirements of the much hyped hydrogen PEM fuel cell option.

5)  Fleet order for PHEVs for 100-400 mile Per Day Federal Vehicles

  • PHEVs are a flexible solution for vehicles with longer range requirements or a smaller form factor than local delivery vans and small trucks. A fleet order for the Volt and other PHEVs could help manufacturers build out these programs. Pre-payment for some orders may help

6) Bridge low-interest loans and support for smaller manufacturers of efficient vehicles

  • The US government can indicate to the big Three that while much of the brand equity and marketing presence of US auto manufacturing is currently associated with them, that vital innovation comes from smaller manufacturers like Tesla and Aptera. Government help should not preserve in stone the privileges of large corporations that may need to make room for upstarts with better ideas and better execution.

Is there enough political support for electric transport?

My prefered climate and energy solution is the Renewable Electron Economy, a sustainable solution that depends largely on existing or emerging technology to replace exhaustible and climate-altering transport and energy systems. In the renewable electron economy, most on-land transport vehicles use electric motors as traction and store energy in a battery, tap into the grid directly, or use a variety of range-extenders to match our current 400 mile driving range expectations. While some politicians and technology analysts share my vision or the broad outlines of my analysis, there are powerful interests which support liquid fuel options, in particular biofuels. While a sustainable biofuel solution may be on the way, vehicle manufacturers do not need much help in converting vehicles to run on biofuels, which by their nature are similar in many regards to liquid fossil fuels. Building a flex fuel vehicle adds at most a few hundred dollars to the cost of a vehicle. Within this proposal, solid oxide fuel cell electric vehicles provide a way that a, future, sustainable biofuel solution can provide more utility to vehicle users by extending the number of miles traveled on biofuels by doubling fuel system/powertrain efficiency. So, this Green New Deal for Detroit will position American automakers to be competitive in, if not lead in a transportation world where energy storage takes the form of either advanced batteries or liquid bio- or syn-fuels.

Solid-oxide fuel cell vehicles and PHEVs can also run on fossil fuels which will be around for a while, despite even very vigorous efforts to build a electric transport infrastructure.

When can the first of these vehicles be delivered?

 Postal delivery vehicles with their bulky form factor and limited range requirements are perfect for introducing battery electric vehicle technology on a mass scale. In the late 1990's Baker Electromotive cooperated with Ford on this electric postal delivery van.

Automakers will not make money if they cannot deliver vehicles. Short and medium-range battery electric vehicles for the post office and other fleets can be built very rapidly as conversions of existing vehicles. If Detroit were to retool quickly, the first of these vehicles, using lead acid batteries, could be ready for delivery within a year.

How can Industry “outsiders” know better than industry “insiders”?

How can government officials and analysts tell the leaders of private companies what to do? Well, since 1973, in between the profitable years, the Detroit automakers have returned to Washington again and again for special consideration from “outsiders” as well as to defeat reasonable laws to increase the fuel efficiency of vehicles. Now they must regret at least some of their actions, especially with the sudden collapse of demand for large, fuel-inefficient vehicles. “Insiders” can often lose sight of the big picture, especially in an industry in which large commitments of time and money are made with very long product cycles (group think can take over as a form of self-justification). Aesthetic decisions are melded with technological decisions leading to difficulties in disambiguating problems with one or the other aspect of a product or product line. Furthermore, the auto industry’s power center in Michigan is at some remove from other centers of power, requiring steady infusions of creativity from outside. Of course, insiders will have a more granular knowledge of their industry but, it seems with the American car manufacturers, seeing the forest for the trees is a major challenge.

Will Detroit and the automakers listen?

Detroit once led the world in industrial assembly technology and industrial relations. Ford's Model T Assembly Plant was notable not only for the techniques it used to make autos but also for the high wages paid its workers.

The US automakers have been largely beaten at their own game by foreign manufacturers with the financial crisis providing the final push. Given their current position, they now should take seriously input from any well-intentioned and well-informed party. They have in the last few years taken some small strides towards improving the quality of their products and GM has, with the Volt, come up with a genuinely good idea with an interesting design and promise for the 2nd decade of the 21st century. More importantly now they are asking the American people and the government for support despite having largely failed as profit-making businesses. In exchange for that support, they should take the interests of the American people to heart and move beyond their traditional point of view to one that sees the shape of things to come. Just because the TARP plan has in its initial form been a giveaway program doesn’t mean that a stimulus package for Detroit, nor future stimuli for banking, not come with strings attached.

Furthermore, in this plan, the federal government and state and city governments will be the industry’s paying customers for new technologies and vehicles. The Big Three would be foolish not to listen to their customers because, as these plans should be structured, the resulting products will need to fulfill functional and quality requirements, even with the guarantee that eventually the government agencies will take delivery of these products. These orders are not acts of charity but a commitment to America’s and, we hope, the American auto industry’s, future.

Beyond Detroit…(how about San Jose?)

While a bailout of Detroit is a form of special consideration for the three still-giant American automakers, they should be reminded that beyond this crisis that other companies may well take their places in the pantheon of great American companies. Tesla Motors, for instance, has laid off workers and is delaying the production timeline for its second model (to be built in San Jose) because of the credit crisis. In a bailout of Detroit, other American vehicle makers impacted by the financial crisis should recieve consideration as they may well represent the future of the American auto industry. So with aid, the Big Three automakers should also receive a message that this may very well be the last time that they receive special consideration from government, as newer kids on the block may be able to do the job better in the future.

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