EDITION: 9.23 | 01 Jun 2009

In This Edition:

What's Good for GM Is Good for American Taxpayers

To Russia With Love: Magna Wins Bid for Opel

And the Winners Are....

Sustainable Mobility Defined

Plug-in CO2 Emissions Compared

Tell Me a Story

What's Good for GM Is Good for American Taxpayers
It's Sunday afternoon and as I start this edition of EV World Insider, every indication is General Motors will electronically file for Chapter 11 bankruptcy sometime tomorrow. When they do, we all witness a critical milestone in automotive history.

Once the world's largest corporation, GM is now valued at just US$1 Billion and goes into court administered reorganization proceedings owing the US government and we taxpayers between US$20-27 Billion. Other debts bring the total to well over $100 Billion.

In effect, when -- not if -- GM files for Chapter 11, the U.S. Treasury will own 70% of the company, effectively making it "Government Motors."

At the close of trade Friday, its share price had sunk to 75¢. The government expects its total investment in GM will reach $50 Billion by the time the company is back in the black -- optimistically in five years time -- at which point, the government hopes to sell-out and recoup its investment.

There's a couple of curious parallels here with history. Accounting for stock splits in its more vibrant days when it controlled 50% of automotive market share in America (now down to less than 20%), the last time its stock price was this low was in 1932, the year Franklin Roosevelt beat Herbert Hoover, during the Great Depression. During his acceptance speech, FDR reminded voters why they elected him by a margin of 57% over his Republican opponent. (Co-incidentally, Barack Obama won by 53%).

"Throughout the nation men and women, forgotten in the political philosophy of the Government, look to us here for guidance and for more equitable opportunity to share in the distribution of national wealth... I pledge you, I pledge myself to a new deal for the American people... This is more than a political campaign. It is a call to arms."

When I asked EV World readers last month, "Should General Motors go into court-administrated Chapter 11 bankruptcy, would you be willing to buy its fuel efficient vehicles?", 415 of responded, and of those 55% said they would. 33 percent answered "No" and 12 percent weren't sure. Of course, this survey, like others we conduct on EV World are not considered scientific by any stretch of the imagination, but I found it illuminating, none-the-less, especially in the context of the company now being owned by U.S. taxpayers and the United Auto Workers labor union.

If effect, if we want our money back, we have a vested interest in wanting to see GM succeed. In a curious turn of events, the oft-misquoted remarks of GM Chairman Charles Wilson in 1953 has new relevance. What's good to GM will be good for American taxpayers, and with no small sense of irony, the fate of the company hinges on an electric car: the Chevrolet Volt.

ADDENDUM
Monday, June 1, 4:45PM -- As expected, GM CEO Fritz Henderson announced at GM's New York City headquarters its filing a Section 363 Chapter 11 reorganization. The intention is to re-emerge in 60-90 days as a "New GM" with majority ownership vested in the U.S. Treasury, the Governments of Canada and Ontario, the UAW and CAW, as well as most previous bond holders. The company will have four major car lines: Chevrolet, Buick, GMC, Cadillac. Its operations outside of the United States and Canada are not impacted by today's filing.

In explaining what a Section 363 is, Crain's Detroit Business states:

It's the section of bankruptcy code used, but not often cited in news reports, to sell assets free of liens and other claims. It's used in virtually every Chapter 11 case that involves a sale of property or other assets.

The most typical outcome would be selling off chunks of business to multiple buyers. In GM's case, the goal would be selling healthy assets to a "new GM" that could be financed by the federal government or a consortium of investors.

The remaining unprofitable or outdated parts of the company could be sold to other buyers or liquidated.

Henderson notes that the company remains in business today servicing its customers and dealers. The new plan sees additional employee cuts, both hourly and salaried. You can watch the announcement on EV World's home page.

To Russia With Love: Magna Wins Bid for Opel
The year Wall Street crashed in 1929, General Motors bought an 80% interest in Adam Opel, the Germany carmaker. It bought the remaining 20% in 1931. It lost control of the company to the Nazi's in 1938. In 1945, Soviet Red Army troops seized Opel's Kadett auto plant as war reparations and sent the entire plant back to Russia, where the pre-war Kadett re-emerged as the post-war Moskvitch 400, both pictured below.

1936 Opel Kadett

Post-war Moskvitch 400

General Motors regained control of what was left of the company in 1948.

Now, in 2009, a new chapter in the company's history is being written with its presumed acquisition by Canadian-owned Magna International, which beat out a competing take-over bid from Italy's Fiat.

While not a household name, Magna is well known within the automotive industry as both a parts supplier and specialty auto assembler. If you drive a Chrysler Town & Country minivan in Europe, a Magna subsidiary -- Magna Steyr -- built it.

While the logic and financial underpinnings of Fiat's bid eludes me -- and the German government, apparently -- Magna, on the other hand, had a plan. And what is that plan you ask? Would you believe expanding Opel's presence in Russia. That seems to be the deal clincher. Notes Bloomberg News:

Opel could leverage manufacturing in St. Petersburg and in Uzbekistan with a Russian partner and Magna.

OAO GAZ, the Russian carmaker controlled by billionaire Oleg Deripaska, said May 12 that it wants to start producing Opel cars in its home market in cooperation with Magna if the Canadian parts maker acquires the GM brand.

So, here's my second question: "Is this the European equivalent to moving U.S. car production to Mexico or did the Kadett make such a big hit in Stalinist Russia that now they want more?"

And the Winners Are....
The fortunes of many ride on the choices made by a team of U.S. Department of Energy employees and consultants over the next few weeks. It is their job to vet and merit rate the applications of 365 companies, all seeking a piece of the $2 billion in federal matching grant funds that are part of President Obama's economic revitalization and industry reforming efforts. A comment I can across recently prompted me to call the department for clarification. A blogger stated that 35 companies would be selected to receive federal funding, which led me to assume that DoE had selected said firms. That ran contrary to official announcements from the department.

Here's what I learned. DoE received 365 applications: 200 were from electric vehicle component makers and car companies, while 165 came from advanced automotive battery purveyors. Those applications are being vetted for completeness right now, to be followed by merit views of those that get past the "crossed-all-their-tees-and-dotted-all-their-eyes" gauntlet.

Presumably, the "35 companies" comment was arrived at by adding up the anticipated awards in each of grant program's areas of interest. The most number of awards could go to as many as 14 manufacturers of advanced battery components, while the highest dollar awards per grantee being $1.2 Billion to cell and battery pack manufacturing and a maximum of 7-8 awards. Here my guess would be GM, EnerDel, Valence, Johnson Controls Saft, Compact Power/LG Chem, Kokam and A123, with a couple dark horses thrown in.

DoE says it will announce the winners in July and the money will begin to flow in September.

Sustainable Mobility Defined
In researching my book on the EVs of the last and the next decade, I came across some fascinating reports written early in the last century that showed the economic value of roads, especially what became known as "farm-to-market" roads. The study showed the cost in time and effort to move goods to and from the farm by mule. In one example, the report showed that trip to town by mule-pulled wagon to deliver produce and buy fencing could often took days, instead of hours. Other reports highlighted the connection between undeveloped roads and lack of education among rural youth.

Where America was in 1910 is where 900 million rural poor are in the world today. According to a recent report issued by World Business Council on Sustainable Development, access to mobility is defined as having an all-weather road within 2 km. In Tanzania's case, the figure is 54 km.

As pressing as the needs of the rural poor are, WBCSD's 100-page Mobility for Development report inevitably found itself focusing on the challenges of the urban poor in four of the world's fastest growing cities: Shanghai, Sao Paulo, Bangalore and Dar es Salaam. I skimmed through it to get a sense of what it sees are the problems facing these sprawling metropolises and how they are coping... or not.

First, before you can talk about the problems, you need to establish a baseline and in WBCSD's case, it was defining what is "sustainable mobility". Here is their definition:

"The ability to meet society's desires and needs to move freely, gain access, communicate, trade and establish relationships without sacrificing other essential human or ecological values, today or in the future."

By their own admission, "Today's system of mobility is not sustainable. Nor is it likely to become so if present trends continue." In analyzing the mobility situations in these four cities, they came up with seven goals to aim for as benchmarks of sustainable mobility:

1. Ensure that the emissions of transport-related conventional pollutants do not constitute a significant public health concern anywhere in the world.


2. Limit transport-related greenhouse gas (GHG) emissions to sustainable levels.


3. Significantly reduce the total number of road vehicle related deaths and serious injuries from current levels in both the developed and the developing worlds.


4. Reduce transport-related noise.


5. Mitigate congestion.


6. Narrow the "mobility opportunity divides" that inhibit the inhabitants of the poorest countries and members of economically and socially disadvantaged groups within nearly all countries from achieving better lives for themselves and their families.


7. Preserve and enhance mobility opportunities for the general population of both developed and developing world countries.

The report also identified the importance of integrated public transit systems with strong intermodal planning that takes into consideration the needs of the urban poor who often live in unplanned (shanty towns) communities with little or no access to transit. As the author's acknowledge, "There are no easy answers. As the experience of the four cities highlights, it is much easier to assess the problem than it is to implement effective solutions."

Plug-In CO2 Emissions Compared
GM recognizes that it needs to create not only world-class vehicles, but also ground-breaking technology and towards that it end, it will continue development of the Voltec E-REV drive system, which I am now going to have the opportunity to test drive early next week in Detroit.

Extended-Range Electric Vehicles (E-REVs) have to accomplish two interrelated goals: offer superior performance in terms of overall energy efficiency while reducing CO2 emissions.

Clearly, Volt-type vehicles driven by their owners less than 40 miles a day will dramatically cut fuel costs for that family, but how much of a reduction in carbon dioxide emissions can be achieved remains open to debate. Two GM engineers, Ed Tate and Peter Savagian have looked more closely at this issue in their SAE paper entitled: The CO2 Benefits of Electrification: E-REVs, PHEVs and Charging Scenarios.

According to Jack Rosebo, writing on the Green Car Congress web site...

Within any given driving profile, reductions in fuel consumption and CO2 production are primarily influenced by battery size, powertrain architecture, and charging scenario. If a relatively modest battery pack capacity is employed and combined with a restrictive charging scenario, PHEV and E-REV fuel consumption and CO2 reduction potential (as compared to a conventional hybrid) are roughly equal to one another.

An aggressive battery pack size coupled with an aggressive charging scenario can, however, reduce either plug-in vehicle architecture’s fuel consumption by as much as half. As battery size and charging opportunities increase, the rate of reduction of fuel consumption and CO2 production begins to favor an E-REV architecture.

Of course, for PHEVs (read "Prius") and E-REVs (read "Volt") to offer really meaningful reductions in CO2, we need to see more of the grid shift to renewables and smart grid technology. Gratefully, both the Obama Administration and the head of FERC, as do many members of Congress, grasp the importance of both from an environmental and economic (keeping buck$ here at home, while exporting green tech overseas) reasons.

Tell Me a Story
This past week, I had the opportunity to interview two pioneers in what I am calling the new frontier of electric runabouts; or what we today know as "neighborhood electric vehicles" -- NEVs for short. The first person I spoke with is Dan Sturges, one of the principle driving forces-behind the Trans2; what eventually became the GEM, the world's most widely sold low-speed electric vehicle. I wanted to get his perspective on the history of the Trans2, which I'll be sharing with readers in my book.

The second pioneer is Jan Petter Skram, the Norwegian business man who rescued yet another bankrupt car company, this one Kewet International in Denmark. Skram has the unique claim to fame as being the only modern car company in Europe to actually make a profit manufacturing and selling electric cars; in his case the ElBil Norge Buddy. Since buying the company and moving tools, jigs and parts to Oslo in 1999, the company has manufactured about 800 Buddies, by his estimate. The company started with 3 employees and today still has only 25 full-time workers. But Skram has achieved what has so far eluded his Norwegian compatriot, Think: he turns a profit.

Now he has bigger plans, a factory in Portugal that will produce 5,000 electric METROBuddy EVs -- a newly redesigned and engineered version that still retains its cheese wedge shape and Scandinavian minimalism. How does he plan to cope with the growing competition galloping from behind? You'll have to read the chapter I am tentatively calling "Revenge of the Runabout."

But in the meantime, I am looking for other great EV stories either from pioneers like Sturges and Skram or entrepreneurs looking to carve out their own niche in our EV World. If you think you've a compelling story to tell, one that can be documented with quality, high resolution images, then I want to hear from you. At the moment, I am particularly interested in hearing from people with captivating narratives about their NEVs: GEMs, Neighbors, ZENNs and Zaps, as well as G-Wiz and Mega EVs in Europe, the Middle East and India. Send me email at the editor@evworld.com.

Until next time, stay plugged into EVWorld...

---

Current Views: 1067

---