Newsletter Archive Index

~~~ Hybrid Cars Newsletter: Issue No. 0019 ~~~
Moderator: Bradley Berman [brad@hybridcars.com]

In This Issue:

Updates
What’s Selling | Legislation Briefs | Hybrid Investment Opportunities

The Writing on the Wall
Which auto industry leaders are reading the writing on the wall and which ones can’t see past the noses on their faces? I argue that one key indicator is the consistency of their message on hybrid cars. Let’s hear directly from Katsuaki Watanabe, Chung Mong-koo, Takeo Fukui, Bill Ford, Bob Lutz, Deiter Zetsche, Bernd Pischetsrieder, Carlos Ghosn, and Helmut Panke.

Saving the World from Under the Hood
The laws of thermodynamics won’t get in the way of these intrepid inventors. Their machines will get you where you’re going on nothing but water, air, and dreams.

Greetings, Hybrid Car Enthusiasts,
In the past few weeks, hybrid fever has dashed around the world. First, it hit Europe. On Sept. 7, BMW joined the G.M.-DaimlerChrysler collaboration on the development of a full-hybrid system. On the next day, Volkswagen said they would start making hybrid vans with a Chinese partner, and go it alone on the development of hybrids for European and American markets. On Sept. 13, Toyota released statements that they would move quickly toward producing hybrid options for all their popular models, and their executives restated their commitment to slashing the cost of their hybrids. Finally, Bill Ford made his big push for hybrids on Sept. 21, announcing that all his models would be hybrids by 2010. A lot of talk, but talk is cheap. In this issue of our newsletter, we’ll look back at what car company executives have said about hybrids in the past, and question if they are only temporarily intoxicated by the fumes of $3 per gallon gas. We’ll also take a glimpse at three inventors promising to solve all of the world’s energy needs. Enjoy.

UPDATES
What’s Selling?
We’re in a holding pattern on the number of available hybrids. There are 10 on the market, and number 11 is not expected for several months. Here’s a "cheat sheet" to help you decide from the current list:

• Maximize mileage – Honda Insight
• Make a political statement – Toyota Prius
• Luxury is essential – Lexus RX 400h
• Built for speed – Honda Accord Hybrid
• Need to haul 7 people – Toyota Highlander Hybrid
• Pure practicality – Civic Hybrid
• Most efficient SUV – Ford Escape Hybrid or Mercury Mariner Hybrid
• Fuel efficiency in V8 pickup – Chevrolet Silverado or GMC Sierra
• Sorry, no minivans or convertibles.

Legislation Briefs
The Environmental Protection Agency said Sept. 18 that it would propose by the end of the year significant changes to the way it determines the miles-per-gallon numbers shoppers see on window labels. Changes include testing for more aggressive driving habits, accounting for vehicles driven in cold climates, and calculating for the use of air conditioners.

After the post-Katrina gas spike, members of the House of Representatives reintroduced a proposal to raise Corporate Average Fuel Economy (CAFE) standards for cars and light trucks to a combined 33 mpg over a decade. Senator Pete Domenici, R-N.M., chairman of the Senate Energy and Natural Resources Committee, said he favors revisiting the issue. Senate Minority Whip Richard Durbin, D-Ill., reintroduced another measure that would raise the car standard to 40 mpg by 2017.

Automotive News reported on the effectiveness of Washington lobbying efforts by General Motors, Ford, and DaimlerChrysler. The Sept. 12 article gushed with praise for the Big 3′s production and distribution of a glossy brochure that "touted the importance of the U.S. auto industry to the nation’s economy." It specifically cited "wins" for Detroit in the recently passed energy and transportation bills, including credits for vehicles that can use ethanol even if those vehicles actually never use anything but gasoline, and a cap on hybrid tax credits for any one company, punishing Japanese hybrid leaders. All of the so-called "wins" undermine efforts for greater fuel efficiency.

Hybrid Investment Opportunities
HybridCars.com is beginning to track the automobile supplier and technology companies that are positioning themselves for the hybrid revolution. You’ll need to do your own investment research, but our list will give you a head start. Check it out:
http://www.hybridcars.com/hybrid-invest.html

HybridCars.com Price Pulse
If you haven’t checked out our self-service price reporting tool, click over now:
http://www.hybridcars.com/pricepulse

THE WRITING ON THE WALL
The greatest concentration of power to quickly transform the automotive industry rests in the hands of a few men: the executives of the world’s largest car companies. These men–working behind closed doors in the executive offices of General Motors, Ford, DaimlerChrysler, Toyota, Honda, Nissan, Hyundai, Volkswagen, and few other European companies–will lead their companies into directions that not only will determine the fates of their shareholders and employees, but will hold considerable sway over the world’s economy and environment.

Certainly, consumers have some influence. With each vehicle purchased, a message is sent. In the United States this year, more than 200,000 car buyers will choose hybrids, and millions of others will turn away from large SUVs–each purchase casting a message in a bottle that will hopefully wash up on the corporate shores of Detroit, Tokyo, and the European Union.

Consistency on Hybrids as Litmus Test
It’s entirely unclear if these men understand the gravity of their responsibility, or the extent of new consumer sentiment about fuel efficiency. Do they read the same articles that we read? Did they see the New York Times’ front-page story on Sept. 27, where energy forecasters say "the recent spike in energy costs could lead to something of a tipping point for consumers?" Did they see that President Bush–of all people–is calling for Americans to drive less? When the President’s speechwriters start using rhetoric that conjures up images of Jimmy Carter in his cardigan urging us to consume less, then you know a fundamental shift has taken place.

Which auto industry leaders are reading the writing on the wall and which ones can’t see past the noses on their faces? I argue that one key indicator is the consistency of their message on hybrid cars. Mass-produced hydrogen fuel cells are decades away. Diesels face challenges in terms of emissions. And we currently lack the infrastructure for other fuel alternatives, such as ethanol or bio-diesel. We can and should work toward these solutions, as well as plug-in hybrids, but for the next few years of jittery energy supplies and mounting environmental problems, the current generation of gas-electric hybrids is the most compelling consumer option.

Lead by Example?
We don’t expect efficacy, honesty, or consistency from our elected officials (of any party)–especially when it comes to standing up to the oil and auto industry lobbyists who write their campaign checks. For example, on Sept. 26, Bush stammered, "We can all pitch in by using, by being better conservers of energy. If [people] are able maybe not drive on a trip that’s not essential, that would be helpful…If it makes sense for the citizen out there to curtail non-essential travel, it darn sure makes sense for federal employees." The following day, White House press secretary Scott McClellan said, "We’ll be sending out notices to [White House] staff to promote mass transit options, letting them know about Metro stops and encouraging ride sharing." Mr. McClellan made his comments aboard Air Force One on Mr. Bush’s seventh trip to the hurricane region. The Air Force estimates that it costs $40,000 an hour to fly Mr. Bush’s 747. The bulk of the cost is fuel.

Mr. McClellan also said that taking steps to reduce our energy dependence has been "a high priority for the President since day one." Yet, on May 7, 2001, White House spokesperson Ari Fleischer was asked, "Does the President believe we need to correct our lifestyles to address the energy problem?" Fleischer answered, "That’s a big no. The President believes that it’s an American way of life, and that it should be the goal of policy makers to protect the American way of life."

While most of us don’t expect the government to be consistent or yield results in terms of energy conservation or increased efficiency, we might expect top corporate executives to be more effective. The CEOs of major car companies build careers on having a vision, aligning and exploiting the necessary resources, and executing to plan. Let’s take a look at the consistency of hybrid messages from the big guys in the auto world.

Toyota: Katsuaki Watanabe
Toyota sends a disciplined unified message that the company is aggressively and methodically moving toward an affordable hybrid option for all their popular models. In January 2005, former Toyota President Fujio Cho talked about reducing the cost of hybrids. He commented, "I can’t say when a hybrid will reach parity with a conventional vehicle but it’s our objective." Six months later, Katsuaki Watanabe, who replaced Fujio Cho as Toyota president in February, didn’t miss a beat. He said, "My goal is to reduce the cost difference of hybrids to one-half the current levels." Masatami Takimoto, executive vice president in charge of Toyota’s worldwide research and development, said, "My personal desire is to put the hybrid to all the models. But it cannot be done overnight, only step by step."

Hyundai: Chung Mong-koo
Despite not having a hybrid car on the market yet, Hyundai’s Chairman Chung Mong-koo is second only to Toyota in his dedication to a hybrid future. In June 2004, Hyundai said it would invest nearly $900 million to set up a production line that could produce 10,000 hybrid cars per year by 2009. Four months later, Reuters reported that Hyundai would spend an additional $260 million in the coming years to build 300,000 units of hybrid vehicles. Mong-koo said that hybrids "would become the next-generation growth engine." By May 2005, Hyundai was ready to announce their plans to enter the hybrid automobile market in 2006. In Sept. 2005, Kim Sang-kwon, research and development executive, said, "Hybrids were considered merely as a transitional form of automobiles in the past, however, the market is growing rapidly with the help of rising fuel prices. We plan to shift our R&D focus from fuel cells to hybrids."

Honda: Takeo Fukui
In January 2005, Honda CEO Takeo Fukui said, "Honda is the first automaker to offer three different hybrid models including two of the industry’s top selling models. And we are advancing this technology for future expansion." But Honda seems more focused on exhibiting its engineering prowess than becoming a major hybrid player. By July 2005, John Mendel, senior vice president of automobile operations of American Honda Motor Co., said, "I don’t think that hybrids are the best solution." In September, with 2005 Honda hybrid sales in the U.S. lagging far behind Toyota, CEO Fukui complained about hybrid costs. He said, "It will be difficult to have full-fledged growth," but set no corporate goals to reduce those costs.

Ford: Bill Ford
Going way back to July 27, 2000, Ford’s chief executive at that time, Jac Nasser, announced plans that Ford would improve the average fuel economy of its SUVs by 25 percent–about 5 miles per gallon–by 2005. Fast-forward to September 2005, when Ford was to deliver on Nasser’s promise. Instead of meeting that goal, Ford swapped it for a new five-year promise to have "the capability" to build 250,000 hybrids by 2010–a capability that Toyota currently has today! Also in September, Phil Martens, Ford’s product development chief, commented on Ford’s inability to secure the necessary components to build its hybrids. He said, "In the longer term, we need to develop technical competency in North America for the whole hybrid system."

General Motors: Bob Lutz
In January 2005, Lutz said, "We business-cased it, took a hard, analytical look and thought the engineering and investment were irresponsible vis-a-vis our shareholders." A few months later, Lutz was delivering a different message. He said, "It would be foolish at a time like this not to be focusing heavily on all kinds of hybrids: mild hybrids, intermediate hybrids, full-massive hybrids." By September, Lutz seemed uncertain that American buyers had been fundamentally changed by $3-plus per gallon. He suggested that consumers wouldn’t switch to smaller cars until "U.S. fuel prices start equaling fuel prices in Europe," which are commonly $6 per gallon.

DaimlerChrysler: Dieter Zetsche
In March 2005, Zetsche was fending off questions about how late DaimlerChrysler was to begin hybrid development and about the quality of hybrids coming out of the G.M. partnership. He quipped, "As my wife often says, ‘If you know you’re going to arrive a bit late to the dinner party, be sure you bring the best wine." Cute but unconvincing. In September 2005, Thomas Weber, chief of technology at DaimlerChrysler, had apparently still not received his invitation to the party. He said "In the United States, we believe that diesels will pass the 10 percent threshold before hybrids do."

Volkswagen: Bernd Pischetsrieder
In January 2005, Pischetsrieder left little doubt about Volkswagen’s position on hybrids. He said, "The best solution is a diesel engine and not a hybrid." In an apparent about-face in September, VW announced that they would develop, assemble–in cooperation with Shanghai Automotive Industry Corporation–and sell a hybrid minivan in China. And that VW would develop hybrid technology on its own for Europe and the United States. Within days, he spun around again. Referring to hybrids, he said, "I can’t afford to spend money on something customers won’t pay for."

Nissan: Carlos Ghosn
Chief Executive Carlos Ghosn was clearly pessimistic about hybrids in January 2005. He said, "They’re not a good business story yet because the value is lower than their cost." In June, Nissan announced that they would invest $10.4 million for equipment and minor modifications at the Smyrna, Tenn., plant to accommodate production of the Altima hybrid. Did Mr. Ghosn see the purchase order? Perhaps not, considering his comments in September. He said, "For now, [hybrids are] a terrible business prospect."

BMW: Helmut Panke
BMW is a newcomer to the hybrid club. In September, the makers of the "ultimate driving machine" joined the G.M.-DaimlerChrysler hybrid development project. Panke’s endorsement of hybrids was not exactly enthusiastic. He said: "We’ll all have a hybrid within five years, but this is not the big be-all and end-all of technology."

Opportunities and Legacies
At first, it may seem surprising that only two of the nine companies discussed here demonstrate a consistent commitment to hybrids. But as others have pointed out, innovation is much more likely to come from a small band of individuals than from a large corporation. In this light, it’s surprising that companies the size of Toyota and Hyundai have managed the flexibility and vision to reconsider the direction of their technology. When we look back at this period of hybrids and other alternative automotive technology, we will see it as a time of tremendous opportunity. The men running the largest auto companies in 2005 will either be remembered as visionaries ushering in a new age of sustainable mobility–or as an elite group of fools.

> See what the major car companies are saying about plug-in hybrids

SAVING THE WORLD FROM UNDER THE HOOD
Hybrid gas-electric vehicles have been around for over 100 years. For most of the 20th century, the use of electric motors and batteries was discarded as impractical or unnecessary. Then, out of nowhere, electric cars and hybrids re-emerged–and perhaps may come to dominate the automotive landscape of the 21st century. Nobody knows where the next major innovation will be found. Maybe from Guy Negre, Joe Williams, or Joseph Newman?

Guy Negre of France has invented a "zero pollution" car that involves no combustion. The source of power for the car is compressed air stored in tanks. The expansion of this air pushes the pistons and creates movement. In 1992, investors formed a company, Moteur Development International (MDI), to support development of the air car. MDI claims the car can reach a speed of 68 mph, with a range exceeding 125 miles or 8 hours of travel. The tank can be recharged when attached to an air pump in a gas station for only two minutes.
www.theaircar.com

Joe Williams of Canada has developed a machine the size of a small DVD player that he claims will eliminate nearly 100 percent of a vehicle’s emissions. Dubbed the "Hydrogen Generating Module," the device contains a small reservoir of distilled water and other chemicals such as potassium hydroxide. A current is run from the car battery through the liquid. The process of electrolysis creates hydrogen and oxygen gases which are then fed into the engine’s intake manifold where they are mixed with gasoline vapors. By adding hydrogen to the combustion chamber, Williams claims that burning the fuel becomes "97 percent efficient."

For decades, Joseph Newman of Mississippi has been promising to demonstrate a device that produces more energy than it consumes. Mr. Newman claims there is a way with magnets, wheels and wire to turn parts of copper atoms directly into energy. His most recent revolutionary device was shown at the Washington Press Club in March 2005. The 100-pound "Newman Energy Machine" is an electromagnetic motor, containing a 70-pound coil with a rotor operating at high rpms that "harnesses the elemental forces of the universe in complete accord with the first law of thermodynamics." According the Newman, the technology will provide access to virtually unlimited energy that is abundant, inexpensive, and environmentally friendly.
www.josephnewman.com

More power to the inventors of the world!

WRAP-UP
That’s all, folks. See you out there on the hybrid highway. If you like what you read, please forward a copy of our newsletter to family and friends–and visit HybridCars.com for the latest blogs, stories, and news.

Happy Driving,
Bradley Berman
brad@hybridcars.com

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