The car companies have come back to DC begging for money. But this time they have put on the table serious restructuring plans. At first glance, Ford’s (here) appears to me sounder than GM’s (here). I’m interested in your opinions.
Assuming we believe they will do what they say, the reports reveal a fair amount about the company’s plans for cleaner car. Interestingly, Ford does not use the word “hydrogen” or “fuel cell” at all — a huge shift from even a year ago when briefings that I received from the car company suggested they were still enamored of “The car of the perpetual future.” For Ford, the future now seems to be electrons:
The next major step in Ford’s plan is to increase over time the volume of electrified vehicles, as battery costs improve and as the transition from Hybrids to Plug-in Hybrids to Battery Electric Vehicles occurs.
If Ford follows through with this vision, then they are likely to survive and thrive in the coming years, since electricity is the winning fuel (see “Why electricity is the only alternative fuel that can lead to energy independence“).
GM’s plan is not as sharp. First off, GM is still pushing its corn ethanol yellow-washing:
General Motors is also the world leader in flex fuel technologies, with over 3 million flex fuel-equipped vehicles on U.S. roads today. Flex fuels represent the fastest way for the United States to reduce its dependence on imported oil.
Uhh, no. Corn ethanol remains the worst energy policy idea of the past two decades with very limited potential to replace significantly more imported oil (see “The Fuel on the Hill — The Corn Supremacy” and “About those two studies dissing biofuels“). Meanwhile, scalable, affordable cellulosic ethanol is not right around the corner (see “Are biofuels a core climate solution?“).
GM continues to waste money on and brag about hydrogen cars:
General Motors will also continue to invest in hydrogen fuel cell technology, which –when commercially deployed — will reduce automobile emissions to non-polluting water vapor. Already, General Motors has deployed 90 Equinox compact SUVs in U.S. customer hands, in what constitutes the world’s largest demonstration fleet of hydrogen fuel cell vehicles.
As a result, it is difficult to know just how excited to get about this statement: “During the 2009-2012 Plan window, General Motors will invest approximately $2.9 billion in alternative fuel and advanced propulsion technologies.” How much is going to be flushed down the toilet on hydrogen cars aka “The Last Car You Would Ever Buy — Literally“?
GM will launch the ground-breaking Chevrolet Volt in 2010. As indicated in Table 8, GM is investing over $750 million in the Volt and its propulsion system, prototypes of which are currently on test at GM’s Milford Proving Grounds. An extended-range electric vehicle, the Volt will deliver up to 40 miles on a single electric charge, well within the daily commute of approximately 80% of Americans. Volt represents a fundamental reinvention of the American automobile industry, creating new growth and environmentally-friendly/sustainable industries, and represents a giant step toward energy independence. No other car company has made such a commitment to the American people. It involves the development of advanced batteries, power electronics, systems integration and manufacturing methods. The company’s product plan includes additional vehicles utilizing Volt’s extended-range electric vehicle system and potentially, the assembly of battery packs in the United States.
And GM is starting to embrace the efficiency, even if all car companies should be forbidden from touting a cars mileage based on its highway performance:
General Motors today offers 20 models with 30 miles per gallon or more on the highway–more than any other manufacturer….
By 2012, GM will offer 15 hybrid models.
Ford has perhaps even shrewder plans:
Our plan also includes building on our competence in hybrid vehicles, as demonstrated by the industry-leading fuel economy of the Ford Escape and Ford Fusion hybrids. We are now developing our next generation full hybrid technology, which includes plug-in capability, for vehicles in 2012 and beyond. We are targeting a substantial increase in hybrid volume through a greater than 30% reduction in cost, installation of hybrid capability in global platforms and hybrid vehicles that are uniquely styled.
Cutting the cost of hybrids is crucial because that’s what Toyota and Honda plan (see “Hybrid production costs may drop two-thirds within 10 years“).
And Ford has advanced another essential strategy for medium-term survival:
Small Car Profitability. As part of our Plan, we will reverse the decades-long trend of losing money on the production of small cars in the United States. In order to accomplish this improvement in profitability, and secure our ability to continue to produce all types of vehicles in the U.S., we are taking the following actions:
• Increase global platform volume of Focus sized vehicles to over 2 million units
• Increase volume of Ford Focus cars to over 1 million units per year;
• Improve margins by:
- improving revenues by making vehicles that are exciting in design, both exterior and interior, with class-leading fuel economy, safety performance, craftsmanship, and technology. The improvements across all Ford vehicles are improving customer perception of the Ford brand;
- improving costs to competitive levels through reduced complexity and global purchasing scale; and
• Improve fixed costs through increased manufacturing and supply base capacity
utilization and sharing of engineering and tooling costs globally.
This is an especially important strategy because a return to high oil prices is inevitable — sooner rather than later. Detroit must figure out how to make money on smaller cars because we are certainly headed back toward $5 gasoline and higher over the next decade (see “Science/IEA: World oil crunch looming? Not if we can find six Saudi Arabias!“).
Bottom Line: Ford Motor company goes into bailout negotiations with a much healthier balance sheet. And based on their restructuring plans, I wouldn’t be surprised if Ford ends up more successful in the long term.