Economic downturn and the auto industry

I haven’t written here in ages, but I’m finally getting interested enough to spend my time at it again. The topic that captured my attention is the economic downturn. I’m struggling to make sense of it and the solutions that have been posed to resolve it.

It’s a worldwide problem, and I’m not contemplating the solutions in any particular scale or geography. But first, there is the 700 billion dollar bailout package. It seems like America dodged a bullet here. The news had me almost convinced it was a good idea, until I actually started to contemplate how it would work. How do you decide who benefits? I mean, you can’t pick everyone. If you did, the markets would go up exactly 700 billion dollars worth… meaning exactly nothing. All companies would be approximately where they were before, bad banks would still be bad banks. And now the US would have an additional 700 billion dollar loan. Competition has to exist for the money or else we won’t get rid of the chaff. Bad business has to be allowed to fail.

How about the automotive industry? Manufacturing is crucial for the American economy. They are importers of natural resources, not exporters. So they have to be sending a product out to the rest of the world to compensate for their expenditures. The auto industry is responsible for tons of jobs which America can’t afford to lose. However, it’s cheaper to build cars almost everywhere else. Clearly, if they’re going to keep this industry alive, they need to reduce the average rate of pay (and maybe bust up some unions). But that’s not the only problem. The CEOs of these companies just don’t get it. They eroded the reputation of their brands to the point where comparable Japanese and European cars can sell for thousands more for nearly identical products. They’re losing out on this free money because shoppers don’t trust them anymore.

They don’t seem to bother thinking about the future either. They’re happy to stick a “hybrid” or “flex fuel” badge on their trunks so the car can qualify for federal tax exemptions, but none of the big three has any practical solutions in the works to “reduce reliance on foreign oil”. They’re out for the band-aid solution, and everyone else is leaving them behind.

It’s not all their fault though. It’s also indicative of an on-going problem with the legislature surrounding cars and “alternate energy fuels”. The rules currently are designed to reward apparent ingenuity… but the rewards are ignorant regarding results. Cars qualify as hybrids because they have some sort of alternate propulsion to fossil fuels. But just having an alternate does not mean they burn less fuel. The Toyota Prius, for example, one of the biggest selling and most popular hybrids, can only get 8 miles out of its electric engine -which also provides less than half the power output of its measly 90hp gas engine. Fine, 8 extra miles. Weak sauce solution, but still something. Sounds good right? But you have to remember that that’s 8 miles if you can manage to drive using less than 45hp. Think it’s easy? It’s not. I can’t think of any normal cars (maybe tube-framed, hand-built, carbon-bodied cars) that make do with so little and can reach 100kph in less than ½ a minute. Seriously, no one drives that slow. Top gear tested the Prius vs. the new, 420hp BMW M3 round their track. Guess what? 19mpg for the M3, and 17mpg for the Prius.


The rules reward this kind of cheating, because they aren’t based on efficiency. Just hybridity (yeah, I made that up). If you’re a hybrid, you get tax cuts -but not necessarily because you’re efficient. So we miss out on a ton of great fuel-saving ideas that the Europeans and Japanese have. Like passive alternators, shift indicators, re-generative braking…

Furthermore, many of these fuel-saving measures that work are not reflected in the EPA ratings everyone relies on to judge efficiency. Cars that shut off at traffic lights (part of BMWs “efficient dynamics” program) save fuel, but aren’t good for a single mpg according to the EPA.

Since I’ve blamed politicians, the automotive industry and its workers, I might as well comment on consumers too. A $30,000 hybrid is not a solution to climate change -especially when it doesn’t get particularly good mileage. A better solution is to buy a $10,000 Kia Rio. Yes it’s slow and small. But it is an efficient way to get around.

$25,000 smart cars aren’t good solutions either. They have the right idea: simple technology, light weight, small ultra-efficient diesel engines. But I don’t think its right to reward an expensive solution to a problem someone has already solved for a lot less.

I thought I close with my comment on the worst idea ever: the new hybrid Cadillac SUV. This is just one final demonstration about how “hybrid” has become a buzz word, instead of a real solution to fuel efficiency.