While realtors are burying statues of Saint Joseph in the hope of making a house sell and the stock market and hedge funds are hanging on the hope that the Fed will drop the interest rate by a quarter of a point let’s look at how the world is changing under the influence of motor vehicles.
Green is the color most talked about these days and we don’t mean paint. It is like an evangelistic fervor has swept across the car manufacturers like a pandemic. Will it be hybrids? How about all electric? Will Ethanol replace the need for tortias? How about bio diesel? What happens when oil reaches (or exceeds) $100 a barrel?
The unions have settled with GM and Chrysler with Ford not far behind. It appears that population growth and peoples ability to live beyond what the actuarial tables predicted a couple of decades ago (albeit with the help of the medical industrial complex) has forced them to adjust to the financial liability and the realities of their own business future and reduce if not eliminate pension and medical obligations that once were deemed as irrefutable as the U.S. Constitution.
In Japan Hummers are a big thing. They spend more than $100,000 for the H1 civilian version of the military IED magnet. The governor of California made them popular as a “my car is way bigger than yours” vehicle in the early 1990’s but lately with the reality of fuel costs and the new “green” image the governor must adopt, the sales of these vehicles have slacked of considerably in the U.S. Not so in Japan. With most streets barely able to handle motorcycle traffic attempting to navigate the beamy H1 is more than a challenge. Most parking garages don’t have the headroom to park an H1 either. Filling up the fuel tank of an H1 takes about $115 in Japan compared to about $90 in the U.S. Owners have a yearly gas guzzler tax burden of $1000 on top of everything else. GM no longer sells the H1 so H2 and H3 models are proliferating. At least they are easier to park.
Hundai has been making quite an impression on these shores by vastly improving their product and warranty. KIA, on the other hand is struggling. This is something that concerns Hundai since they own 38% of KIA. I always wondered if someone ever explained to KIA just what that means as a three letter acronym in American English.
The multi-national oil companies are now focusing on Asian nations as the traditional large consuming nations of European and the United States demand moderates. India and China will be growth areas for the next few years. At least until the “Green Technology” religion spreads over the world and it won’t be long in happening. It will not take China long to wake up to the fact that petroleum as a commodity is limited and getting more expensive with every passing month.
Back to Japan. Toyota is bipolar in its leadership’s stated goal of cleaner and safer cars, while lobbying the government of Japan to build and expand the highway system so Toyota can sell more cars. It seems that consumers are fed up with the congestion and are either opting for micro cars for urban travel or giving up on personal transportation all together. Of course everyone is waiting for the availability of Nissan’s GT-R 500 hp super car. Meanwhile GM is investing heavily in green technology for the China market. China’s light vehicle sales are expected to grow from less than 6 million this year to about 11 million over the next seven years. You won’t see that kind of growth in the U.S. market.
GM has been revamping its IT systems to cope with world wide manufacturing and fulfillment demands. Eliminating waste in its design and manufacturing processes has been the goal of GM’s CIO and it looks like he has achieved that lofty goal by reducing the number of systems from 7000 to 2500. GM no longer designs cars based on brand or geography. Mid sized vehicles are all designed in Germany while they are manufactured in facilities across the globe. Compact cars are designed in Korea and similarly manufactured and sold world wide. As a result, GM design engineers move 150,000 data files across these global systems daily.
Did you know that horns on cars in India must be louder than those sold in the United States? What does that tell you about the infrastructure and transportation systems in that country?
SAP, Inc. lost an executive to the green technology revolution. Shai Agassi has a new view on electric cars and how to make them viable competitors with traditional petroleum fed transportation. He looked at the battery and decided that it should no longer be viewed as part of the car. He said that his company would buy and own the batteries and charge a monthly fee to recharge the batteries. Much like fueling up with gasoline an electric car user would pull up with nearly depleted batteries and get a new set rather than waiting to have them recharged. This perspective removes the cost of the battery from the purchase price resulting in a very cost attractive alternative.
What do I think about all this green technology evangelism? I think that petroleum will continue to be a valuable commodity that, once it reaches $100 a barrel, will have severe impact on the world economy.
I think diesel fuel is the ideal bridge to more efficient and “greener” technologies yet to come. It immediately provides a 30% boost in fuel economy and can take advantage of biodiesel as it becomes more available. Biodiesel has the advantages of reducing emission while providing enhanced lubrication properties. It has a competitor called Renewable Diesel that is a derivative of animal fats and hydrocarbons. While it can be transported via pipelines and shows improved ignition properties, it has somewhat higher emissions than biodiesel.
Hydrogen power is a dead end solution. As a gas it is difficult to have a distribution infrastructure built at reasonable cost and presents problems in terms of containerization in vehicles. Maybe fuel cells make it a little more practical, but I doubt it.
Ethanol is alcohol produced from corn in the U.S. I am told that sugar cane would provide a better grade of ethanol, but since we decided that Cuba was our worst neighbor back in the 1960’s corn has taken over as this nation’s sweetener. The problem with ethanol is that while it is a high-octane fuel with low emissions, it produces at least 30% less energy than gasoline per volume. It is difficult to transport via pipelines and competes with a food crop. Keep in mind that corn is used as feed grain, a source of high fructose corn syrup (Americas replacement for cane sugar), as well as basic food for humans. Do you want to eat or drive?
Electric powered vehicles would be a way to provide fun and exciting transportation since the distribution infrastructure is already there. Electric motors provide maximum torque right from the get go and braking can be used to regenerate the electrical energy. Battery technology is constantly improving, almost as quickly as computer technology does. We just have to find something to make the neat power noises that gasoline engines do. Maybe they can use wire wheels and we can clip baseball cards on to make zoomy noise.