GM-Chrysler Merger and Hybrid Cars
On Friday, media organizations started running stories about a possible merger of General Motors and Chrysler. We wondered what such a merger would mean for the future of domestic hybrid and plug-in cars—so we asked a panel of auto industry analysts. Here’s what they had to say.
How much can Detroit’s financial woes be blamed on a reliance on gas-guzzlers and dragging heels on hybrids?
“More than half. I predicted $11 billion in losses per year from having wrong products.”
- Walter McManus, auto economist, University of Michigan
“A lot. In 2005, GM began seeing its first quarterly losses, and the company’s response was to ‘pull forward’ the launch of its new full-sized SUVs. Since then, full-sized light-trucks have become less relevant in the auto market. GM’s response should have been to figure out how to offer a set of fuel-efficient vehicles that consumers wanted to buy and that would make money for the company.”
- Reid Heffner, associate, transportation practice, Booz Allen Hamilton
“The bigger issue that adds to their burden is the enormous health care and retirement costs which they own. This indirectly impedes them from quicker investments into new product ideas, including alternative fuels and powertrain technology.”
- Lonnie Miller, director, industry analysis, R.L. Polk & Co.
“Detroit’s over reliance and gas guzzlers is perhaps best viewed as a ‘straw that broke the camel’s back’ when the camel was already weakened by many other financial factors unrelated to fuel economy. And now the crippled camel is getting trampled by an elephant in the form of a car market and world economy that is in major recession as far as auto sales are concerned.”
- John DeCicco, senior fellow, Environmental Defense
Could a merger of Detroit companies mean sharing resources to build a more competitive domestic program for hybrids and plug-in vehicles?
“I don’t think mergers between automakers are the answer for faster hybrid-electric and plug-in hybrid electric vehicle development. Now, if one (or more) of the Detroit Three starts shopping for battery companies and brings the development of critical hybrid components in-house, then things could get really interesting. That would be a signal that they are serious about electric-drive vehicles.”
- Reid Heffner
“A merger of Detroit companies will certainly offer intellectual capital for alternative powertrain development efforts, but you’d hope they wouldn’t be thwarted by “merger red tape” should an actual marriage occur. In 2006, GM, Daimler and BMW opened a Hybrid Development Center in Troy, Michigan. While the collaborative focus was developing a two-mode hybrid system, it’s unclear how aggressive their research objectives were since we’ve not heard much about subsequent efforts.”
- Lonnie Miller
“I can’t see how it would help. Mergers of failing companies produce one big failing company.”
- Walter McManus
Asian car companies already own more than 85 percent of hybrid market (and just about all of global hybrid battery production). Are Detroit’s woes all that relevant to growth of hybrid market?
“No, I don’t think Detroit’s woes are really that relevant to the development of the hybrid market per se. They will need to offer more hybrid products just to stay competitive as that market unfolds. However, they’ve not been leading it and if they continue to lag, others will be there with hybrid products, such as Hyundai, Nissan and VW, and before long Chinese and Indian automakers.”
- John DeCicco
“John Q. Public still has a lot of education coming their way from the industry and that is where it’s anybody’s guess to see who dominates in alternative powertrain, including hybrid, technologies. The real measure is who sells the most for a profit.”
- Lonnie Miller
“I wouldn’t count Detroit out yet. So far, GM and Ford have been leaders in the development of plug-in hybrids. I guess the question that remains is how big a bet Detroit is willing to make on advanced vehicles. If they bet big, they could lead the transformation of an industry, and make it happen quickly. Given their financial condition, they may have no choice but to place some big bets.”
- Reid Heffner