Financial Help for Detroit?

J. D. Power and Associate’s Power Information Network just released more dramatic evidence that the age of the gas guzzling SUV is drawing to a close. The market share of midsize SUVs—once one of the most popular vehicle segments—has fallen from 9.1% to 5.2% (a decline of 43 percent) in ten years. The Ford Explorer was the 3rd most popular car in the late nineties. Now it ranks 46th. This did not happen overnight. The question is: who was minding the store?

The automotive industry is in a period of unprecedented technology development but up to now, domestic automakers have used technology advances to nearly double power and increase weight by twenty-five percent instead of increasing fuel economy. Had they applied these investments in technology to fuel economy, today’s cars and trucks would get 35 miles per gallon instead of the 25 they actually get. So now Congress is seriously considering mandating that they turn their attention to achieving 35 mpg because, as one military expert put it “our continued oil dependence represents a clear and present danger – militarily, economically, diplomatically and environmentally.”

Of course, it will cost money to get there, and while we may dispute the exact dollar amount and reasons why it is unaffordable, we all know the Big Three just doesn’t have that kind of cash. So instead of trying to cobble together weak consensus legislation that promises but doesn’t guarantee a fraction of the oil savings we need, why not create a powerful solution to America’s oil dependency problem and provide Detroit some financial help to achieve it?

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  • Harry Boswell

    If the ‘Big Three’ do their part, then will the 200+ million Americans play their part as well? As probably the fattest people on Earth, they should start to lose weight and increase their own fuel efficiency.

    Harry, (Malaysia.)

  • Ben

    Why do the big three not embrace the fuel mileage issue as a challenge and fight to have a fuel efficient vehicle? They always say they would lose jobs. Hello! If you don’t have a business, you won’t have to worry about jobs. You’ll have to worry about your resume. I would think the big 3 would want to provide fuel efficient vehicles (e.g. like the European ones they make) to fellow Americans. It would save ordinary Americans money while saving themselves. I’m not saying every vehicle has to be a fuel miser. They need to have diversity not one or two market segments (SUV and Trucks). The whole DOE freedom car project was to assist the Big 3 with fuel economy–and they ignored the results and took the money, while Japan took the hybrid results and ran with it. Toyota doesn’t just sell Prius. They are diversified. Sometimes companies need to fail to see what’s wrong. It’s just sad that all three Automakers can’t compete.

  • Daniel

    I say not just no but hell no! why the hell should MY tax dollars pay for some companies stupidy, and lack of vision!! Capitalism ladies and Gentlemen you adapt or die! Okay Okay I’ll come down off my soap box but hay did not joe tax payer do that once before in the 70’s? hhhmmm what company was that, Hmmm what happened to gas price at the time,….not again

  • Craig

    I doesn’t work with my children any better than it works for big business.

  • Gerald F. Shields Jr.

    Helllllllllllllllll Nah! In no way our government should subsidize The Big Three’s stupidity. I would rather give R&D money to Telsa, or A123 or Altair Nano, or Zap than give anything to GM, Chrysler or Ford. At least the four companies I’ve mentioned will do something with the money!

  • Gerald F. Shields Jr.

    To elaborate further: This Administration and previous ones have given The Big Three trillions if not millions of our tax dollars and what has that produced?

    (1). Hydrogen Fuel Cell vehicles that won’t run the highways without a massive investment in a processing/fueling infrastructure.

    (2). Ethanol vehicles that make us go to the gas station more than we are doing now and let’s not forget that Cellulosic ethanol, that fuel they say would make ethanol viable, is years away.

    Meanwhile, companies like Toyota are selling cars like the Prius like hotcakes and other companies like Telsa and Phoenix Motorcars are on the cusp of selling viable electric cars. Also, while The Big Three is selling several diesel vehicles in Europe (Not your father’s Pinto, but clean diesel vehicles) almost none of these have been introduced in the States.

    Hence, to give the Big Three more research money and handouts would be tantamount to using your money as toilet paper! I say hell no!

  • beelzabush666

    I guess the author is just trying to stir up the thread? Big Auto has to solve their own problems. inept greedy management, wages and benefits too high for the market place. Both sides have to come together and get with it if they wish to save the companies. I learned to live with Japanese TVs, right now Japanese autos are the best out there.

  • Manticore (Europe)

    So, almost all of you said that the big 3 sell efficient diesels in Europe. Why the big 3 dont want to import the tehnology in their american cars and factories for the short term sollution? because there are stupid people that run this companies, people that are interested in making a proffit no matter what the cost, people that have “lost the car development train”, for example in Europe about 95% of the cars are 4 valves (more than 20% mpgthan 2 valve) per cilinder since 1997, including diesels, in America even the Corvette has 2 valve per cilinder, come on this is not new tehnology it was used in WW II in the fighter planes, so why give Detroit money for development when they are so blind and do not use present tehnology in their cars.

  • CLD

    I will reiterate for everyone: European diesels cannot be sold in the United States because they do not meet U.S. emission standards. In order to get them to do so they will have to add catalytic converter systems to lower NOX and particulate emissions to those mandated by U.S. EPA Tier 2 Bin 5. Or they can take the approach of Honda and lean the engine out periodically to generate enough ammonia to feed back into the exhaust stream and reduce produced NOX.

    With regard to engine technology; take GM, for example. The Ecotec and Northstar engine ranges are all four-valve per cylinder, VVT engines. These are the engines used predominantly in GM’s road car applications (Chevy Cobalt, Malibu, and Monte Carlo; Pontiac G5, G6, and Solstice; Saturn Sky and Aura; the Cadillac range, etc…) Yes, the Corvette still uses ‘old’ technology in the LS7 engine, albeit with a cast-aluminum block. But it’s a high-performance engine intended to deliver the torque needed for racing applications. If it were so outdated, why do Mosler, Marcos, Ultima, and other European sport scar makers source this engine? Because it generates a lot of power for minimal cost. It is not a road car engine, and for the most part it isn’t used as such in the U.S.

    The problem is not that the Big 3 don’t have modern engine technology. It’s–as Walter stated–that they’ve used the technology to crank out more and more horsepower instead of applying it to fuel economy. If there is one difference between European and U.S. engines that remains, it’s displacement. Some of that is mandated by legislation (punitive insurance premiums for cars with engines greater than 2.0 L in displacement, for example). But most of it is because Europeans have demanded fuel economy longer due to higher fuel taxes.

  • Van

    One of the biggest lies of the left is that the Cafe standards actually improved gas mileage. Actually emission standards drove the introduction of fuel injection which resulted in cars that are high in driveablity and relatively high in efficient which relates to improved gas mileage.

    But after the technology was phased in, circa 1986, no further fuel economy gains occurred, demonstrating that the CAFE standards were a joke. The lefts also mandated technology, remember the electric car mandate in Californa, but regulations do not advance technology, only research, with funding for research possibly helping the process.

    We should be spending money to manufacture lithium batteries suitable for plug-in hybrids with an AER of 40 miles.

  • Don

    The big three could put their considerable lobbying energies to rolling back the diesel emmission standards. My guess is they supported the standards as a way to shut out the European cars. These emmision don’t apply to trucks. Which provides a perfect opportunity for American auto union (the big three are actually only one company represented by a single union and three very stupid managements):Make diesel/electric hybrid pickups and SUV’s for the NA market. All would be four wheel drive with small electric (or large)motor/generators up front and the diesel engine push the rear. Such a vehicle would get 25 MPG rather than 12-15 MPG and would act a electric generator for home emergency use, construction worksite use, and RVing.

  • John Graber

    The Big 3 are sinking fast and the answer is to give them tax dollars to help them re-fit?
    Wish that worked for my business!
    It is called STUPID! Did they not see this coming? Unbelievable is all I can say…
    I have never and will never buy domestic unless a serious change is made that convinces me %110.
    The future is already here people and it is called TOYOTA.

  • Jared

    Nationalized health care would significantly improve the competitive stance of American auto makers and many other labor intensive industries. They certainly have other problems to solve, but not having to pay employee health care is a major reason why Japan and Germany, both high labor cost markets, are more competitive.

  • Gerald Shields

    No it won’t. Health care wouldn’t have anything to do with The Big Three’s fortune’s (Though I support a single payer system like in Canada). Pure and simple: The Big Three aren’t interested in making fuel-efficient vehicles because they feel they can’t make money off of them.

  • Steve

    Everyone here has the right idea pretty much. How many years have the big three produced vehicles?! They have had the luxury of being able to mass produce and everyone bought it. Now there is variety and people can choose much more so from a much larger auto market. Instead of really competing and being smart with technology and what the public wants/needs they continue to produce vehicles that are not nearly as fuel efficient as similar vehicles from foreign brands. I am not sure how long it takes for these fools to get a clue. Cut jobs?!…how about they cut the CEO’s pay and keep some jobs for honest Americans and start doing smart business…they are screwing Americans by selling their crap and they are screwing their workers by not managing their companies and products like they should. It was all fun and games back when the Japanese entered the car market…who’s laughing now?

  • Serg G

    All technological development just got stuck, I think because of literally mans brain monitoring and controlling process. Yes, I think we all under somebodies control via telepathy. Target is, seems like, US industrial and technological dynamics, and as result delivering ridership to Europe.
    Just watch euro incredible success in really short period of time. It’s just viewable indicator. How much we do not see that easy?

  • domboy

    Instead of bailing them out financially, give them a waiver to bring all their European models here without modification. Then they’ll have a whole lineup of fuel efficient cars without having to spend any money. But will that ever happen?? Nooooo… the greenies wouldn’t dream of lettings us get our hands on so many wonderful diesel cars… and the joes in charge of safety requirements would have a hissy fit…

  • DaveM

    It is not like the big 3 lack good engineers or development.

    The failure and trouble of the big 3 are purely matters of strategic direction, and without those changes any investment in a bailout is a BAD investment.

    It is not labor’s fault, other carmakers have found great success with US labor in US factories.

    It is not tech development – US carmakers have put plenty of money and had some success in developing alternatives. (but then the leadership chooses not to use these developments)

    It is the management and leadership.

  • Manticore (Europe)

    I beg to differ in your comment CLD, because in Europe we already have clean diesels that meet the US emmision standards, see the bluetech tehnology from Mercedes, the FAP (developed by peugeot and Citroen)and also see the big 20 tones truks that meet EURO 5 standards that use ammonia (the common fertilizer) for cleaning the exaust fumes. The problem is that in the US are no efficient diesel fuels like in Europe that the euro 5 cars can use (to mutch sulfur in the diesel fuel). And also some europeen producers have diesel-electric hybrids that can go easyli 100 MPG (see Citron)and that hybrids even if they are sold in small numbers to test customers will hit the market pretty soon, so bye bye Toyota Prius toy hibrid. We already have for a few years now diesels cars that are far more efficient than the Toyota prius, and cost less to buy by half.
    We should look at the big 3 like we looked to Enron. The big 3 still produce cars that were good to sell in europe in the 90, and amazingly they find customers that do not care for the enviroment and for theyr own poket to sell that rubbish.
    I say no money for Detroit better that they go out of bussines and their factories be bought by more efficient manufacturers than to continue making the planet a trash can. I think that would be a wake up call for the entire american industry, may be for the global economy a sign to change something, maybe now in the 12 our.

  • gmw

    The bail-out is completely unnecessary because GM has the Volt, right? Just a little snag with respect to battery lifespan and capabilities is all that stands in the way of good health for GM. Im sure GM doesnt see it that way since they are as blind as a bat. Lets see what they do with the Volt, kill it or sell it like pancakes…

  • bobajoul

    Capitalism is about creative destruction, the business model of the big three is broken because thye broke it, not healthcare, santa claus or the roadrunner. The last thing these companies need is subsidies, they need to adapt or go away. We have friends who live in Detroit, understand the depth of the pain this is causing, but there will be no change until one of the companies goes out of business, unfortunately. They made SUV’s for years because they were immensely profitable. And what was their plan for the future- the HUMMER. They have made mistake after mistake and management continues to move forward while the consumers and employees of the companies get shafted everytime there is a problem. NO GOVERNMENT HANDOUTS!!! (and I am a liberal greenie!)

  • Hal Howell

    I think all of you have forgotten what happened with Chrysler. There was no government handout. There WAS a government loan, which Chrysler paid back in full. I have no problem with that happening again provided the big three learn their lesson and recycle the gas guzzlers into vehicles that are affordable, reliable and economically feasable for our times. The time has come for them to start making the future happen. Cars like the Volt will work even without hydrogen. The current gasoline hybrids are proof of that. What we need is to grow the hybrid market until the hydrogen infrastructure is in place side by side with gasoline. That could be subsidized by a small gas tax and gradually ween us off of gasoline entirely. Then conversions of the gas hybrid to run on hydrogen could be subsidized by tax credits or grants to jumpstart the switch to HFC. However, in the mean time we need to face reality and drill in the Gulf and Alaska to further reduce our dependence on foreign oil as we switch to cleaner fuels and vehicles like the Prius, Volt and others. Tesla could use some help to make their cars better and affordable for the average driver. It needs to get down in the $20,000 range for most drivers and even less. We recently bought a Toyota Yaris for under $14,000 which gets 35mpg in the city and 39 on the highway and it burns very clean with some pep! Its a blast to drive and my wife loves it. So, if Toyota can do thatm why can’t the rest???
    However, letting three big industry leaders go by the wayside and losing all those jobs is NOT and option. That would be stupid and needless.

  • AP

    Point 1: Japanese and European get better fuel economy because their consumers demand it: they pay $6/gallon or so, most of which is taxes. Their government created the market for fuel-efficient cars, the opposite of here.

    Point 2: The Japanese can build small cars profitably in the US because they have no retirees to support and few older workers to provide medical care for. They can import small cars cheaply into the US because of the weak yen. The Japanese government may not hand money to their automakers, but they have taxed their citizens more heavily to buy our Treasury bills and drive down the yen. Europeans have trouble here because of the strong Euro (VW makes much of its US product in Mexico).

    Other major industrial countries actively support their auto industries and create demand for fuel-efficiency. We try to provide temporary tax incentives that are selective and quick fixes, with no long-lasting push to conserve.

    Many American cars leads their class in fuel economy. If American fuel were $6/gallon, I don’t think American car companies would question the value of fuel-efficient vehicles.

  • Max Reid

    Of late, Gasolene have become more expensive than Diesel since Light Crude which yields more Gasolene is running out.

    Atleast the Trucks can switchover to Diesel, even Accord & Altima are coming with Diesel version in 2009.

    GM & Ford do have good Diesel tech, but in Europe. They can bring it here.

  • sean

    I can’t believe the excuses put up by the big three defending not to increase CAFE standard: losing jobs, losing safety, losing competitiveness. And now it’s clear that thsoe are what they are losing when sticking with the out-of-date CAFE stds. Look, even the humble toilet cistern has improved over time. It used to use roughly 20 litres of water for a flush (no dual flush in the past), then 6/12 litre, then 4.5/9 litre and even 3/6 litre dual flush. What are the guys from the big three are thinking? *sign*

  • Max Reid

    Sean “Its a meaningful post on the Toilets”

    Seems 67 million vehicles were sold last year Worldwide. Thats probably 4 % compared to previous year, whereas Oil production increased only 0.4 %. No wonder, gas prices will continue to go up.

    Parallely, the Sales of Vehicles thru YTD-2007 have taken a knock in USA.
    Pickups -4 %
    Vans -17 %
    Truck based SUVs -7%

    and this trend will continue.
    So Big-3 should be better prepared to make smaller vehicles.

  • eeee

    Daniel has it all wrong. NO tax money was ever given to Chrysler in the 70’s. Guarantees were extended to Chrysler in obtaining loans and ALL of the loaned funds were paid back IN FULL at NO cost to the tax payers. Funny how some ignorance goes on and never dies.

  • Old Man Crowder

    “Efficiency or Bust!”

    Looks like they’re choosing “bust”.

    How sad.

  • jay

    It’s the tortoise and hare all over again.In this case,a stitch in time could have saved ” the big three” instead of nine.The big three knew what was coming along in the 1960’s and especially in 1973.They sought a quick buck and got it.So,too, did the U.A.W.You can only transfuse so much blood into a cadaver before you realise it’s time to quit.Toyota won.Honda will be in the race.So will Korea adn Europe.The big three blew it.Let ’em land in their golden parachutes!

  • Doug Kozlay

    During the Clinton/Gore administration in 1993, about $1B was divided among the “big three” automakers to fund the “Partnership for a New Generation of Vehicles” (PNGV) to develop and productize cars in the 100 mpg range. Three hybrids resulted — slated for 2004 production: GM built the Precept, Ford built the Prodigy, and Chrysler built the ESX. The GM Precept, building on EV1 technology, was the most spectacular diesel-electric hybrid design that got 105 mpg in concept-vehicle tests and was to become an 80 mpg production vehicle in 2004. It proved that GM, and by example American engineering, could take the lead. Unfortunately, CEO Smith was bumped aside and G. Richard Wagoner, Jr. took over and in 2001 appointed Robert Lutz as vice-chairman of product development. Lutz did not believe in hybrids and killed the program, after presenting one to the government to fulfill the contract. The company re-committed to short-term profitable SUV’s and missed the opportunity to lead the hybrid and plug automotive market into the 21st century. The funding came a little too early on the cusp of an administration change in Washington that initially saw hybrid and electric cars as a threat to the oil industry. The Precept is described at:

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