The Greening of Detroit and You
By Bill Moore
Thank you for inviting me to spend this time with you. I hope that you'll find what I have to say of value. I've entitled this brief talk, "The Greening of Detroit and What It Means to You and Me".
In 2007, General Motors will begin manufacturing a "dual-mode" hybrid vehicle transmission at its plant in Baltimore. Jointly developed with DaimlerChrysler and several other European carmakers, it is hoped that it will be the breakthrough that will reassert American leadership in fuel efficient vehicle technology. But when they do, it will be 10 years AFTER Toyota introduced the Prius; and during that decade, the Japanese company has sold more than a quarter million gasoline-electric hybrids and now appears on track to replace General Motors as the world's largest car company.
The obvious question is, why did it take so long for GM to get a clue?
I will give you my perspective of why it has taken GM and Chrysler and Ford so long to understand the significance of the hybrid car. It begins on December 12, 1997 at a conference in Orlando, Florida, twelve days after the launch of the Prius in Japan. It was my first EVAA Symposium and Exhibition. EVAA was the Electric Vehicle Association of the Americas. It has been holding events like this since the late 1960s. This particular event was the 14th in the series, which are held in a rotating cycle between North America, Asia and Europe.
This event would prove historic because it signaled a seismic shift in the direction of automotive technology, though it would take nearly a decade for Detroit to respond. I clearly remember asking a GM representative who was dusting an EV1 electric car on display in the exhibit hall what he thought of Toyota's Prius. He responded, "The really lifted their kimono to us on that one." I'll let you decide what he meant by that.
Within a few weeks of EVS 14, California's Zero Emission Vehicle mandate took affect requiring the largest carmakers to begin selling "zero emission" vehicles in the state, which at the time meant battery-powered cars.
The story of how the ZEV mandate came about is an interesting one. It began with a slip of the tongue.
In 1987, Paul MacGready, who built the world's first human-powered and solar-powered aircraft, approached GM with the idea of building a solar-powered car to participate in the bi-annual solar car race across Australia's outback from Darwin to Adelaide. Called the Sunraycer, the car not only smashed the competition, but demonstrated the potential of new, high-powered electronics just then emerging.
Buoyed by the positive worldwide publicity the Sunraycer garnered them, GM funded MacGready to build a battery-powered sports car originally dubbed the Santana. Renamed the Impact for the 1990 Los Angeles Auto Show, it was a working concept car that excited a lot of people and led to a fateful comment by Jack Smith, GM's president who in a moment of unguarded optimism suggested that GM might be willing to put the car into production.
Later that year, California legislators eager to find a way to reduce the state's serious air pollution problem, passed the ZEV mandate in large measure because of the little electric car that would eventually become the EV1. The mandate required that starting in 1998, 10 percent of all cars sold in the state had to be electric-powered. That got Detroit's attention.
In 1997, General Motors was the talk of industry and Hollywood. Numerous celebrities ordered the car, the first 500 of which would be powered by Delphi lead-acid batteries. Future production runs would be powered by GM-Ovonic NiMH batteries, doubling the car's range from 60 to 120 miles.
Incidentally, the Impact set the electric vehicle land speed record at nearly 184 mph. The street version did zero to sixty in 8 seconds.
So, it came as a surprise to everyone when Toyota unveiled the Prius at the Tokyo Auto Show in 1997. It was a risky move on their part, but one that would prove prescient. The scuttlebutt in the industry said the company was losing as much as $15,000 on each car, which sold for $20,000. In contrast, American car companies were said to be making a profit of $15,000 on each SUV they sold.
Quarterly profit reports aren't that predictive, it would seem.
By January 12, 1997, twelve days after its launch in Japan, Toyota had 10,000 orders for the Prius, which wouldn't find its way to North America until 2001.
I actually had a Japanese version of the Prius for four months the fall and winter of 1998 here in Omaha as part of an extended test drive. And yes, it was right-hand drive, which took a little getting used to.
It was in the fall of 2000 that I bought my Honda Insight hybrid. Mine is the 984th production vehicle manufactured. I have gotten better than 70 mpg and my average over the 38,000 miles on my odometer is better than 58 mpg. So, the technology works, though there is a lot of room for improvement, especially in battery cost and durability. While early adapters are willing to risk the high cost and shortcomings of the first generation of any new technology, most car buyers are not. That is understandable. But it is the direction we have to go and why Detroit is belatedly "going green."
To understand why the president said America is addicted to oil in his State of the Union address and why he called for funding to develop cellulosic ethanol, plug-in hybrids and better electric car batteries, let me share with you some conversations I've had over the last six months with Matthew Simmons.
Matt Simmons advised the Bush campaign in 2000 on energy issues and policy. He is a successful investment banker from Houston and until 2002, was largely oblivious to the concept of peak oil. It was on a trip home from an oil industry conference in Saudi Arabia that he began to wonder about comments he'd heard during the conference, in particular the state of Saudi oil fields. When he returned home he started reading engineering reports available on the American Petroleum Institute's web site. After wading twice through some 200 reports, which formed a knee-high stack of papers, he reached the conclusion that the kingdom's fields were dangerously close to being over-produced. He concluded that the maximum rate at which they could be produced was less than 9 million barrels a day, nowhere near the 15 million the Saudis were promising to produce to meet growing world demand.
Simmons would go on to write "Twilight in the Desert", stirring up a political hornet's nest in the petroleum industry, especially in Saudi Arabia, who reacted as if he had just challenged their manhood.
But America isn't alone in its addiction.
The world is currently consuming nearly every drop of oil it can produce. In fact, it is consuming four barrels of oil for every new one it is discovering. Every one of the 1,400 oil exploration rigs in the world are contracted, yet the cost of exploration is beginning to exceed the value of new discoveries, even at $55-65 a barrel.
The world is expected to consume 40% more oil by 2025 than it does today. China, itself, is forecast to use some 98 million barrels a day by 2030. That's more than all the world produces today.
Yet virtually every oil company executive and most analysts admit the major fields of the world are passing maturity. All but one of Saudi Arabia's major fields are more than half a century old. The water cut in the super-giant Ghawar field is now rumored to be 35 percent. America's once vast oil fields have been in decline since 1970.
Where does all that oil go? Two-thirds of the oil America uses powers our cars and trucks. Only about 3 percent is used to generate electricity. What this means is that if we are to end our addiction to oil, it will have to be by using less of it in our motor vehicles.
Now this is where you might expect hybrids like the Prius or Insight to play a significant role, but you would be wrong. Studies looking at the impact of the current generation of hybrids on oil consumption indicates that they will make only a modest reduction in oil use.
America uses 20 million barrels of oil a day. Imagine that.. 20 million barrels.
To give this some kind of perspective, at its peak, any oil that might flow from the Arctic National Wildlife Refuge would supply just 1.5 million barrels a day. Or put another way, it is estimated that the tar sands in Alberta, Canada can yield, at most, some 5 million barrels a day of a synthetic crude, but at a huge environmental cost in water, waste and CO2 emissions. If all of America's agriculture and forestry waste were converted into ethanol using cellulosic processes mentioned in the president's State of the Union address, it would still only replace just one-third of the gasoline this nation consumes 24/7.
So, now we come to the "greening" of Detroit.
While General Motors was quietly trying to bury its EV1 program, a process that began secretly in 1998, the very year it was to begin complying with the California mandate, Toyota and Honda were busy building relatively small numbers of gasoline-electric hybrid cars and polishing their green public relations images.
Considered an amusing anachronism from Detroit's perspective, the Prius would become a factor with which to reckon in 2004 when the new model debuted and began winning awards and media acclaim. Sales took off and quickly Toyota passed the 100,000 vehicle mark it had set in 1997 as its financial break-even point for the product line.
While Toyota was rolling out its fifth and sixth hybrid vehicles -- two additional models are only available in Japan -- Ford and General Motor's SUV sales were plummeting in the wake of $2 and $3 a gallon gasoline. In 2004, Ford lost its number two place in the hierarchy of carmakers to Toyota. Coincidentally, this was the same year it would finally roll out its own hybrid car, the Escape Hybrid, a year behind schedule.
To date, only Ford Motor Company offers two hybrid models compared to the nine now offered by Honda and Toyota. Nissan is slated to add their Altima hybrid sometime this year, while GM announced it would begin selling a mild hybrid version of the Saturn VUE this year. The Chevy Tahoe/Yukon line will be the first GM model to make use of the dual mode hybrid to be built in Baltimore.
J.D. Powers and Associates projects that by 2010 there could be as many as 40 different hybrid models available to U.S. consumers, with sales in excess of 1 million vehicles annually.
But even at this remarkable rate of technological adaptation, which some analysts question can be sustained, America will still be on track to import enormous quantities of petroleum from outside our borders. In fact, at least two studies with which I am familiar -- one done by the Department of Energy and the other done by a technology firm on the West Coast -- suggests that mass adoption of present hybrid technology will barely slow the growth in petroleum demand.
Because of population growth and changing driving patterns. We continue to add more people and vehicles to the road and because of ongoing suburban sprawl, we drive those vehicles further. We also sit longer in traffic than we used to and the growth of the sport utility vehicle market means that our roads can't accommodate as many cars as they once did. The typical SUV uses 50% more road space than a comparable sedan.
These are just some of the factors that are driving a change of direction in the automobile industry. Traffic congestion and higher fuel prices are rekindling interest in smaller cars. Concerns about the future price and availability of petroleum are spurring investments in alternative fuels including biodiesel and ethanol.
Perhaps most encouraging of all, the president mentioned in his State of the Union address a technology that I want to take my last couple minutes to explain why it's important we support this initiative.
When the California legislature passed the original ZEV mandate, few people had ever heard of a hybrid car, even though the first one was built by Ferdinand Porsche nearly a century ago. Carmakers begrudgingly responded to the measure with battery-powered cars, which their owners loved for their quiet power and the freedom from gasoline it gave them. Still, there was no getting round the very real and natural concerns about running out of "juice" on the road, far from home or a public charging station.
But what if you could have a car that was part battery electric and part hybrid; a car that could travel 30-40 miles on electric power only and then use its hybrid-electric engine the rest of the time? A lot of people, perhaps even you, could travel all week, recharging at home at night using inexpensive, off-peak electric power, and never have the hybrid-engine turn on. And if the engine burned E85 ethanol, it could get as much as 250 miles per gasoline gallon at the cost equivalent to between 50 and 75 cents a gallon. When you wanted to run to Kansas City or Denver or the Black Hills, you could do it burning either gasoline or ethanol while getting 40-50 miles per gallon.
That kind of a vehicle would make a serious dent in America's oil addiction. Think about it. Conceivably, you may have to refuel your car, van or SUV once a month, if that.
Is this pie-in-the-sky talk? No. It's very real. A year ago, on a trip to Southern California, I saw the first Prius to be converted to run on lithium-ion batteries as a plug-in hybrid . In May, I rode in the second iteration of that car. As we drove around Palm Springs on electric power only, we were getting the equivalent of 164 mpg.
Yes, the technology is still in its infancy and yes, it is expensive, but it works and it can make a HUGE difference in addressing the nation's oil addiction. Dozens of cities and scores of public utilities, including OPPD and NPPD, have joined the newly formed Plug-In Partners coalition to help foster the development of this exciting technology.
The big carmakers haven't quite bought into the idea publicly yet, but you can bet they are investigating it behind locked doors. Combine plug-in hybrids powered by American-generated electricity and fueled by American-grown biofuels and you have an unbeatable one-two punch technologically, economically and environmentally.
Before I conclude, I want to ask you to do Nebraska and America a huge favor. I want you to write down two numbers: S2025 and HR 4409. These are nearly identical bills in Congress that are receiving extraordinarily wide bi-partisan support for the technologies I've just talked about. Senator's Hagel and Nelson have yet to sign on. Please urge them to do so.
Bill Ford, Jr. pledged not long ago that where his great-grandfather, Henry, had sold his Model T in any color as long as it was black, that someday, his grand-grandson pledged you will be able to buy a Ford in any color you want as long as it's green.
When that happens, America will finally be serious about ending its oil addiction. .
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