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The American auto industry dies

July 10, 2008

The delightful if somewhat stuffy Knowledge at Wharton newsletter has a good article on the decline and challenges facing the domestic auto companies. See, the title of this blog is a bit of a misnomer. Honda, Toyota and even Hyundai build cars in the US and are doing very fine indeed. No, it is only GM, Ford, and Chrysler that are reeling. In way it makes me happy I left the auto industry and moved to Silicon Valley 20 years ago. But it also makes me very sad because all the technical people in the auto industry have always known what they should be doing. It was the finance-industry management of the auto companies that destroyed them. I guess the whiz-kids are not so whizzy after all. You can imagine my astonishment at this sentence:

GM, which maintains a narrow and shrinking lead over Toyota for the most sales in the U.S. market, has said it may be interested in selling its Hummer division, and is reportedly considering the sale of its Saab, Buick and Pontiac divisions.

Boy, I guess they are implementing their “growth by attrition” strategy. Leave it to the whiz kids to destroy a great bunch of companies. Now the thing I really like about the article was the comments by readers at the end. One that really struck me was from Justin Benson:

Hybrids: I struggle with why hybrids are the short term answer? How many are sold in Europe where gas is much higher? Very few - because Diesel is really the smartest short term solution. Recent changes for VW and Mercedes will see more diesels here. I for one would buy a Diesel over a Hybrid for a number of reasons. My point here though is that the whole "Let’s race to create hybrids in 3 - 5 years" seems odd to me given that 50% + of all cars sold in Europe are Diesel and get 40 - 60 MPG’s etc. Diesel isn’t sexy - "new" technology like Hybrids are. I can’t wait for 10 years when all the articles are written about what we do with all these batteries?

I really agree that everybody seems to think we need some whizzy new technology like electric cars and fuel cells and hybrids when all we have to do is conserve and encourage diesel and natural gas as alternative fuels. Solving the storage and distribution problems of natural gas are trivial compared to the problems of storing and distributing hydrogen. A key technology that should be developed in a few years is the design of supertankers for LNG. Even if we don’t get foreign natural gas our domestic reserves are out 100 years or so. I once saw a statement that there is 1000 years of natural gas still in the ground worldwide.

In another comment in the Wharton article, Jason O’Connell said:

Toyota has achieved one of the greatest PR triumphs of the last 30 years: The Prius and other toyota hybrids are still a small fraction of T’s overall sales. In the last 5-6 years they introduced the new full sized Tundra and other low-MPG gasoline vehicles while using the Prius as a public relations diversion. Has anyone noticed Toyota’s sales being killed (down 12% June 2008) recently along with GM and F?

The previous commenter is correct: Plug in electrics like the Volt are a coin flip, and fuel cell vehicles are are much lower mass-market probability than that.

The most likely scenario for the US are small, common-rail turbocharged diesels, i.e., what we see en masse in Europe where diesel prices are still much higher than the US. These engines are highly fuel efficient while turbocharging provides the performance that consumers desire.

I couldn’t agree more. I have already mentioned a Ward’s Auto World article that pointed out that Americans drive too many highway miles for hybrids to work out. The added weight of the batteries and motor hurts your highway mileage more than the braking regeneration helps your city mileage. Even plug-in hybrids don’t make a lot of sense. I know everyone will rail about how new technology will change everything and high-volume manufacturing will bring the costs so far down everything will be OK. Don’t bet on it. Battery technology has improved at about 8% a year. In that means in 9 years battery capacity will double. But we need a decade improvement, not an octave. So in maybe in 40 years we will see all-electric cars. This is based on today’s oil prices, but we know oil is going through the roof, so expect the practical family-sedan electric car in about 20 years.

Posted by Paul Rako on July 10, 2008 | Comments (34)

April 30, 2009
In response to: The American auto industry dies
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April 30, 2009
In response to: The American auto industry dies
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April 3, 2009
In response to: The American auto industry dies
AST commented:

They say that car commercials are mostly to reassure those who have already bought that car. I bought a Toyota HiHy last year after extensive research on road noise, safety, expected reliability. Efficiency was not the most important consideration. And sc**w GM, Ford and the rest


November 18, 2008
In response to: The American auto industry dies
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In response to: The American auto industry dies
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In response to: The American auto industry dies
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In response to: The American auto industry dies
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In response to: The American auto industry dies
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In response to: The American auto industry dies
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In response to: The American auto industry dies
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October 30, 2008
In response to: The American auto industry dies
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July 28, 2008
In response to: The American auto industry dies
Darren Holdstock, UK commented:

Diesel update (1) - The Citroen Cactus, due out in 2010, will do 100 mpg. No hybrid nonsense, just good design. (2) Don't stir your home-made biodiesel with an electric drill, like some unfortunate did recently, giving himself 20% burns when a spark ignited vapours and blew up him and his garage.


July 16, 2008
In response to: The American auto industry dies
bye-bye love commented:

I can.t help but feel that every comment made was to protect a particular industry.So here goes bye-bye detroit and it''s three monkeys one can not see, the other can not hear, and the total can not speak the truth. In 100+ years they screwed us royally and rejected everything that could have been benificial to society and the ecology. May you go down in flames. Are you wearing red shades or is that the red ink reflecting on your glasses.


July 15, 2008
In response to: The American auto industry dies
kurtlin commented:

Get real, electric car not possible?!! That''s the ONLY solution!! The problem is only how does the goverment and the big companies make the money, that''s why they scream. Think about it.... the technology is there. Wht about if everybody has got a solar panel on the roof and charges their own cars a nightmare for the big boys. and eventually the downfall of the western world, because in asia, once they get their hands on it they would not use anything else


July 15, 2008
In response to: The American auto industry dies
CodeWarrior1241 commented:

2 Mik: yu say that you need 5 years to recoup the pious' higher cost to get your money back, as compared to a sentra, crolla, or civic. Fine. That's about 70K miles at least. A small diesel car can be made at the cost of a civic without problems. Diesel can be refined from coal, which is plentiful. And not every highway has HOV lanes... Basically, we can cease importing oil for vehicle fuel for decades with the tech we have now, and make vehicles whose LIFETIME operational cost is way less than any complex auto, like the prius, could ever be. The hybrids are a PR stunt by toyota. PS how often do prius batteries need replacing, and how much is that?


July 15, 2008
In response to: The American auto industry dies
W17053 commented:

So many misconceptions. Someone once told me to "do your homework". Hybrids were originally designed and optimized for city use (pollution), not highway optimization. My understanding is that regenerative braking is used when coasting too fast downhills, so you do get some recovery on the highway, not to mention off ramps or the slow driver(s) in the left lane. Still, hybrids achieve higher MPG than non-hybrids on the highway (although they may achieve greater MPG in-town than highway). The Prius has better mileage than the Echo, which it was built from. Some Hybrids use electric to assist in acceleration or passing, which will decrease fuel useage compared to non-hybrids. Diesel is still dirtier, that is why they have particle catchers and burn-offs. Compare the emissions, Diesel is still higher than Gasoline. The exhaust does looks better than the '80s. Ethanol contains less carbon atoms than Gasoline, and burns cleaner. "Appreciable" is one of those words used to hide the fact that something is better by those who want to maximize their side of the story. Milk, Cheese, Beef, Corn, etc. are higher due to transportation costs (diesel fuel for trucks), only slightly (not "appreciable"), $0.03 - $0.04 due to corn cost from Ethanol useage. Corn useage is regulated by the Government by how much they can use, not the richest can purchase all. I noticed that Biodiesel, which uses (feed) crops, was not mentioned, but is a cleaner 'Diesel' than Diesel. Fuel lines are affected because they were optimized for Petroleum (Gasoline), but you can purchase Ethanol (or Methanol) friendly seals and gaskets (Flex-fuel vehicles use E85 without seal or line problems). Most vehicles since the mid 70 will tolerate a 30% mix of Ethanol (or 5% Methanol). Leaking 'gasoline' "is" bad for the environment, but leaking Ethanol is less harmful. Check the MSDS for Ethanol vs. Gasoline to determine which is "VERY" dangerous.


July 14, 2008
In response to: The American auto industry dies
Jonathon Hanlon commented:

Okay, we need to square this one out: hybrids are not necessarily better versions of the same thing that is not a hybrid. If you took a hybrid on the highway I guarantee you it will be worse because you will RARELY brake on the HWY and you won''t see any of the added benefits of such, yet now you have all the weight of those extra electrical components and the battery weighing your car down and severely reducing your fuel economy. They are GREAT for stop-and-go city driving and that is it. Furthermore, there is more energy in Diesel (38.7 MJ/L) than in gasoline (34.6 MJ/L) and the processes we currently use to turn that mechanical energy into heat and then convert it into either electrical or locomotive power are more efficient for diesel than for gasoline, which means you just get more out of diesel, period. A lot of people still think that diesel is a dirtier fuel than gas because the diesel fuels that existed for decades in America were sulphur-ridden and diesel cars stunk and produced black smoke. In reality diesel burns cleaner than gasoline, even at the same volumetric consumption rate, especially now that our diesel standards are pretty close to Europe''s. As a side note: Ethanol production needs to stop. It does not produce any appreciable cleaner air and it makes everything related to the corn industry more expensive including milk, cheese, beef, corn, etc. Not to mention Ethanol is very harmful to seals and fuel lines... leaking gasoline I suppose is very bad for the environment, worse than the exhaust fumes and it is VERY dangerous to all.


July 14, 2008
In response to: The American auto industry dies
DMW commented:

I am not sure why you made this statement: "A key technology that should be developed in a few years is the design of supertankers for LNG" when LNG tankers have been around for some years. LNG terminals are being built in the US, such as the one in Freeport, Texas. It''s heat exchanger looks large enough to air condition the entire city of Freeport.


July 14, 2008
In response to: The American auto industry dies
W17053 commented:

To mlhm5, GM already builds an adapter for automobiles to use CNG. I saw both cars and Pick-ups. One drives in to Chicago everyday (you can see the sticker on the rear bumper). The problem is refueling. you can buy a compressor to use at home. It uses about 1.2 Therms to equal a gallon of gas. I believe you can also get it adapted for LPN, which is available at most RV Resorts.


July 12, 2008
In response to: The American auto industry dies
Darren Holdstock, UK commented:

An unmodified diesel engine will run quite happily on mildly-processed used cooking oil, with the added bonus of the exhaust smoke smelling of whatever restaurant the oil came from. Raw used cooking oil won't damage the engine, but will clog the fuel filter. Home processing plant for making biodiesel from waste cooking oil are now available from a number of companies, or those with an engineering bent can make their own.


July 11, 2008
In response to: The American auto industry dies
Meredith Poor commented:

Anyone interested in alternative fuels could go through a whole list of novel fuel generating technologies: Acetylene from calcium carbide, methane from lithium carbide, hydrogen from an aluminum/gallium mixture, methods for synthesizing ammonia (other than Haber-Bosch), FT Synthesis, effects of hydrogen iodide on cellulose, and so on. These are all 'green' processes, most of which can be done on a back-yard scale. Not cheaply, necessarily, but if the 10% or 20% of the wealthiest people installed these the price of gas would abate quite a bit.


July 11, 2008
In response to: The American auto industry dies
Policebox commented:

What I don't understand in this conversation is why nobody is accounting for carbon footprint. Most of the comments trade one fossil fuel (oil/gas) for another (natural gas, coal) and diesel isn't even a different fossil fuel (it is a petroleum derivative, just like gasoline). Global Warming aside, all the fossil fuels together won't meet our rapidly growing energy needs for more than a handful of decades. We need to get into something else BIG TIME!


July 11, 2008
In response to: The American auto industry dies
JackC commented:

In the end it all has to be about incremental change and lowering implementation costs for the vehicles we drive. My bet would be on electric motor and drive research to improve efficiency and diesel or petrol generators as a good starting point. If you make the electric drive train and electronics available you enable battery, hybrid, solar augmentation and diesel or petrol generators. The manufacturers need to stop looking for single configuration solutions, there can?t be a single solution that ?wins? we need to use all available resources in the medium term.


July 11, 2008
In response to: The American auto industry dies
Hardtruth commented:

Lot of scenic chat. Did anyone countenance the fundamentals that the US economy is in scarily serious trouble and that the GM and indigenous US cars are garbage? The perfect storm is forming...


July 11, 2008
In response to: The American auto industry dies
W17053 commented:

There is a shortsightedness in believing there is 1000 or even 100 years of Natural Gas. That would be using current consumption, not using it to displace petroleum. You could then say we have 1000 years before oil runs now out, and then we could switch back, etc. We should be attacking energy on all fronts, because none can ramp-up fast enough, or be the end all - Breeder Reactor + Nuclear, coal gasification + bio-fuels, wind + PV. Everything helps, and reduces foreign dependence. How about all the oil we export??? Alaskan oil to Japan or China? As long as the Oil Companies can profit, it won't stay internal. My commute is now 44 miles 1 way. I took a lower paying job closer because 74 miles would bankrupt me, even though the further company had better benefits and growth path. It is too expensive to move closer to the big city, and not enough jobs in my field at home. I need an electric with a boost (Volt), or extended range. I thought of a generator in the 'city car' back in the mid 70's. OPEC or Big oil killed PV, conservation, and dropping the cost so low most companies bankrupted or stopped research. Not a conspiracy theory, just healthy suspicion.


July 11, 2008
In response to: The American auto industry dies
jb commented:

the real reason the US auto makers can make money is because they have too many models and too many options. manufacturing and cost control 101.


July 11, 2008
In response to: The American auto industry dies
Quincy commented:

I don't understand the hate on hybrids. Hybrid technology can be applied to diesel cars to make them even better, allowing them to recover energy that would otherwise be wasted by friction braking and enabling them to idle with the engine off to save even more fuel. VW is set to introduce hybrid diesels. Mercedes is coming out with Bluetec Diesel Hybrids including an S300 luxury sedan. As far as all the misinformation on the batteries go, THEY ARE RECYCLABLE. Toyota will actually pay you a $200 bounty to return a hybrid battery if you are going to junk your Prius at the end of its service life. Hybrids are here to stay, like it or not.


July 11, 2008
In response to: The American auto industry dies
slap_the_pony commented:

I'm not sure, but I don't think the diesel proposition in the US is all that simple. Diesel isn't as widely available, and I believe the US still has tougher emissions requirements than Europe (at least for passenger cars). Having driven turbo-diesels in Europe, I'd be happy to see them offered side-by-side in the US, provided they'd meet US emissions standards. Also, Detroit did experiment with diesel in the '70s, but IIRC, they were just warmed-over gas designs which didn't last very long.


July 11, 2008
In response to: The American auto industry dies
mlhm5 commented:

Most people drive less than 65 miles a day so you are dead wrong when you say a PHEV or BEV will not work. In a PHEV the engine could be either diesel or LNG. Don't hold your breath for Detroit to market either a diesel or an LNG passenger car or PHEV. They don't have to, others will.


July 10, 2008
In response to: The American auto industry dies
PHIL commented:

WALLSTREET NEEDS TO DIE AND WE NEED BANK FAILURES NOW..... TO CORRECT THE BANKING INSTUTIONS ENOUGH WITH THE BIG THREE .... THEY HAVE MORE MONEY THAN WALLSTREET BANKS ??? SO I SAY TO THE SO CALLED ANALYST ... THE FIRST FOUR LETTERS OF ANAL-YST SAYS IT ALL....SO LOOK IN YOUR OWN BACK YARD CLEAN UP YOUR MESS !!! THEN TALK ABOUT THE BIG THREE..


July 10, 2008
In response to: The American auto industry dies
PHIL commented:

AND THE WELFARE BAILOUT OF WALLSTREET WAS USELESS.. ALL IT DID WAS DEVALUE THE U.S. DOLLAR AND INCREASE THE PRICE OF OIL AND INFLATION THANKS BEN YOU IDIOT YOUR JOB IS TO CONTROL INFLATION NOT BAILOUT WALLSTREET!WHAT AN IDIOT...MAIN STREET AMERICA THANKS YOU YOU IDIOT !!!


July 10, 2008
In response to: The American auto industry dies
PHIL commented:

SCREW THE SHAREHOLDERS ENOUGH ON THE BIG THREE WHAT ABOUT THEM BROKE WALLSTREET BANKS PULLING DOWN THE DOW .. THE FINANICALS HAVE LOST OVER ONE TRILLION DOLLARS SINCE OCTOBER OF LAST YEAR...AND HAS LAID OFF OVER 300,000 PEOPLE SINCE OCT OF LAST YEAR... AND THE ANALYST TALK ABOUT THE BIG THREE ?? THE ANAL-YST BETTER START LOOKING IN THEIR OWN BACK YARD!!!!!


July 10, 2008
In response to: The American auto industry dies
Joel Sassalee commented:

All corporations have a responsibility to maximize shareholder equity. GM needs to do this by cutting payroll as well as cutting all expenses. That means GM needs to cut upper level management jobs - especially those that duplicate one another. GM also needs to cut lobbying spending, advertising and public relation agency fees, paying for contractor salaries, and cutting offices throughout the country. Also, everyone who makes $100,000 or more at GM should be required to take a 20% pay cut.


July 10, 2008
In response to: The American auto industry dies
PHIL commented:

LOL WHAT ABOUT THE BROKE AND BANKRUPT WALLSTREET BANKS ?? ONE TRILLION LOSS IN A QTR LOL LOL AND YOU IDIOTS TALK ABOUT THE BIG THREE?? lol lol lol

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