Has Obama saved Detroit from itself — or is that simply impossible?

You’re all gonna own a part of GM, so please, fellow owners, let me know what you think!


Readers of Climate Progress understand two inescapable realities that the overwhelming majority of policymakers, the status quo media, and the car companies (with one exception) do not:

  1. Peak oil is inevitably going to drive up gasoline prices to record levels within a few years, driving an inevitable switch to much more fuel-efficient vehicles and non-oil-based alternative fuels, of which by far the cheapest per mile is electricity.
  2. Avoiding catastrophic global warming requires sharp increases in fuel economy and a switch to low carbon fuels — of which there is only one available in quantity:  electricity (as explained here).

Reality #1 is a more imminent day of reckoning for the car companies.  After all, the only way to stop oil demand from outstripping the peaking of oil production is massive demand destruction, which is itself possible in only two ways.  The first way, pursued by the Bush administration, albeit (mostly) unintentionally, is to destroy the global economy.  Let’s call that the short-term “non-optimal” approach.

But in the medium and long term, for oil to be significantly below $200 a barrel and gasoline to be significantly below $5 a gallon in 2020 would take a miracle “” or rather 6 miracles see “Science/IEA: World oil crunch looming? Not if we can find six Saudi Arabias!” and “IEA says oil will peak in 2020“).  See also “Merrill: Non-OPEC production has likely peaked, oil output could fall by 30 million bpd by 2015,” which noted,

Steep falls in oil production means the world now needed to replace an amount of oil output equivalent to Saudi Arabia’s production every two years, Merrill Lynch said in a research report.

A March McKinsey report concluded, “the potential looms for liquids demand growth to outpace supply creating a new spike in oil prices as soon as 2010 to 2013, depending on the depth of the economic downturn.”

Heck we’ve hit $65 a barrel and we’re still in the middle of the worst global economic collapse since the Great Depression.

Detroit has not only willfully ignored the obvious oil and climate trends as evidenced by the cars they sell (or, rather, used to sell) — but they actually joined with conservatives in blocking every major attempt by progressives to help them develop cleaner cars and to require they build more fuel-efficient cars (see “Why bail out the car companies when they bailed out on us?“)

The Obama administration certainly understands that “the equivalent to Saudia Arabia’s production every two years” can’t be found underground.

It can only be found in our grotesquely inefficient oil consumption.  Hence they have advanced the most aggressive increase in fuel economy standards proposed in decades — Obama to raise new car fuel efficiency standard to 39 mpg by 2016 “” The biggest step the U.S. government has ever taken to cut CO2. Hence the massive push toward plug in hybrid electric vehicles (PHEVs) and pure EVs in the stimulus, the budget, and the climate bill.

Within a decade, the only growth segments in car business will be highly fuel-efficient cars, PHEVs, and EVs.  Indeed, that isn’t true just of the United States, but also of the biggest new car market — China (see “China plans tougher fuel standards than U.S.” and “World’s first mass-market plug-in hybrid is from “¦ China, for $22,000?“).

And by the 2020s, every major country will be engaged in a dire effort to avert catastrophic global warming, which by then will be painfully obvious to even the most blinkered conservative.  And that in turn will drive enormous but difficult-to-forecast levels of behavior change in the purchase and use of major energy-consuming products — cars being perhaps the most obvious.  Post-2030, after the global Ponzi scheme has collapsed for all to see, after our children are done cursing our myopic greed, gas guzzlers will be genuine dinosaurs.

So what the White House is doing is the only hope of saving Detroit — assuming that is possible.  Chrysler is going to be taken over by a company known for making small cars.  Ford put forward the most realistic bailout plan given oil and climate realities (see “Whose bailout plan is best“), and it is spending $550 million to retool SUV/truck factory to make small cars, electric vehicles.

And, of course, you’re going to own GM and will perhaps make better decisions than their executives.  Indeed, it would be difficult for a group of children using a Ouija board and Magic Eight Ball to make worse decisions than GM over the past four decades — and still today.  GM execs have decided to kill off the Saturn, which was better at making small cars than any other of their brands — I owned one for 10 years until I bought my Prius.  But most of the company always wanted Saturn to fail, to prove that the only way to do things was the traditional GM way.

And that brings us to the very real possibility that General Motors simply can’t be saved from itself, no matter how much progressives desperately try one last time to preserve that one-time bastion of American manufacturing jobs.

What do you think?  Should we have let Detroit fail?  Is wading into GM like sending more troops to Afghanistan?  Or has Obama chosen the lesser of two evils?

34 Responses to Has Obama saved Detroit from itself — or is that simply impossible?

  1. paulm says:

    GM will fail if it has to. Its the American way.

    What has to happen though is you all have to own the coal utilities too, so that their CO2 emission can be stopped!

    They are bankrupt, not financially but enviromentally. Not in the Green sense, but in the new paradigm of the ‘right way’. The sustainable way.

    There will be a huge switch to electric transport because of fuel prices and moral obligation. If electricity generation is fossil fuel based we will be in a greater dilemma than we are today.

    Final question. Will we be able to use electric cars on the scale necessary as we switch from gas? A. Very unlikely.

  2. John says:

    GM’s massive investments in internal combustion engine factories are a huge part of the mindset that has to change. Management continues to believe they’re an important part of their competitive advantage. The biofuels mafia prop up this myth.

    The much lower cost of electric power per mile driven remains out of reach if EVs are much more expensive and/or don’t have suitable charging infrastructure.

    Battery powered vehicles will be cheaper than conventional cars, if they’re made in the BetterPlace approach, where the battery/charge management system is a service that’s funded by the spread between electric energy cost and fuel cost per mile.

    Whether it’s pure EVs with swappable batteries or pure EVs with advanced fast-charge batteries, we can’t get there fast enough as a nation. We should be on a crash program, war footing to drive deployment of the electric vehicle systems we have NOW, and continue improving them.

    Nothing would be better for our national and global security, not to mention climate security. Even cars driven on coal-powered electricity produce less CO2 per mile than petroleum-powered vehicles; and we can de-carbonize the grid as fast as we choose to.

  3. Jim Beacon says:

    That peak oil graph is why — after screwing around with it for 20 years — GM had finally decided to really truly build a viable electric car. The Chevy Volt is actually a great attempt at an all-electric drivetrain, although naturally GM was planning to price it too high for the average consumer. Still, they really were going to mass-produce and start selling it next year. Now, who knows what will happen? But if the government is going to own most of GM, then obviously the thing to do is take those now-idle factories and spend whatever it takes to convert them to crank out a lot of Volts (and some less luxurious, cheaper versions of it as well).

    Naturally, since it was a GM design, the Volt as it is today needs some tweaking: It doesn’t have plug-in capability which is incredibly stupid but could be easily fixed by the new owners of the company (us). And, yes, the Volt still uses some gasoline to generate more on-board electricity after after 60 miles when the battery is running low, but potentially it would only sip gas as opposed to guzzling it. This aspect needs some work in the current model of the Volt, because GM stupidly decided to use one of its existing 4-cylinder engines to recharge the battery instead of designing a completely new, very small and efficient motor to do the job as they should have.

    Ideally, by 2030, later models of this “Voltswagen” will have evolved into all-electric with no gasoline use at all (and we would have low-CO2-sourced electric outlets in our garages to plug it into).


    GM already has an ideal transition vehicle ready to mass produce which can move us into the all-electric future because unlike other hybrids, the Volt the gas engine never actually turns the wheels, it only turns an alternator to generate more power for the batteries and electric motor which turn the wheels — so eventual transition to no-gasoline use at all is easy when better batteries become available.

    I would think this business plan would be obvious to GM’s new owners, but having watched sausage being made in the Waxman-Markey committee this past month, I have serious doubts.

  4. hapa says:

    GM also makes trucks, buses, and train equipment. over the next decade, those are the growrh opportunity.

  5. Be Smart says:

    Don’t fear peak oil, look forward to it!

    Why? Because you can invest in an ETF that tracks the oil price like USO, OIL, and DBO. Your money will more than double if oil reaches a new record high!

    Buying oil company stock (XOM, CVX, COP, and others) sounds good too.

  6. paulm says:

    Be smart what do you recommend for Gold?

  7. David B. Benson says:

    hpa has the right of it.

    Buses, not cars.

  8. Be Smart says:


    Oil is a better choice than gold. With a weak dollar and rising inflation during the first half of last year, oil went up from the low 90s to over 140 dollars a barrel. Gold, on the other hand, didn’t have that much of a percent increase (it went from $800/ounce to $1000/ounce).

    Of course, you can short gold, but that would be risky as Obama and the Fed’s policies would probably increase the inflation rate within a few years.

  9. Ronald says:

    interesting questions.

    I remember 3 years ago and some economists and business writers were predicting just the scenario that has happened to our economy, that housing would be a bubble and the economy would come crashing down.

    Those authors of those articles were maybe hoping that the bad stuff wasn’t going to happen, but how do you tell enough people to make a difference? Or maybe they bet that way in the markets and made out very well for themselves.

    but building all those batteries! already countries with supplies of Lithium are trying to figure out ways of marketing the stuff for the most profit for themselves. Sort of a Lithium OPEC. Which only makes sense for them.

    And then to build all those transmission/engine systems differently from companies with very little and no excess money. Lotsa luck.

  10. Neil Howes says:

    Naturally, since it was a GM design, the Volt as it is today needs some tweaking: It doesn’t have plug-in capability which is incredibly stupid,

    This is wrong, of course the Volt has a plug-in capability that’s why it’s called a plug-in hybrid electric vehicle. The engine is not very important if the Volt is used mainly in EV mode, a sensible decision considering time rush to go into production.

  11. Brewster says:

    IMHO, the Volt is the only reasonable answer until batteries take at least one more quantum leap – even with 40 mi range, the cost is still noticeably higher than present vehicles.

    To move to total electric, we’d need batteries that can take a car at least 350 mi, and be charged in less than 5 minutes, at about 1/20 the cost.

    That’s a few years away…

  12. hapa says:

    “be smart” is helping everyone understand why commodities will spike well before real demand recovers, as “crafty” people chase “sure things” in an ugly situation.

    but it is not to worry, implies the anonymous finance advisor. the fortunes of ordinary households are safe, the stimulus is useless and inflationary, the economy is already recovering.

  13. Erik Schimek says:

    The other major issue is economic pain — we’re sending a lot of money overseas, most of which doesn’t cycle back through the domestic economy.

    As to the question on batteries, the cheaper solution is to standardize battery sizes and then have battery-swapping cages at every gas station. You don’t need high-capacity lithium ion batteries if you can just swap out the battery.

  14. Thomas Wooding says:

    hapa said “GM also makes trucks, buses, and train equipment. over the next decade, those are the growrh opportunity.”
    hapa, I’m afraid train equipment is not an exciting growth opportunity for GM – about 44% of train ton-miles go to carrying coal.
    ’nuff said?

  15. David B. Benson says:

    I’m awake already!

    It doesn’t help.

  16. hapa says:

    thomas wooding: i guess i’m thinking of equipment upgrades in the near term. after that, so far nobody’s said anything more convincing than “long-haul freight moves significantly to electrified rail” unless freight is dead (not!) or diesel has a wider range of replacements than gas or kerosene do. GM would be right in the middle of that.

  17. Yes, we do need plug-in hybrids, and they will inevitably take over when oil prices soar.

    But we also need to drive less. The average American drives twice as much now as in the 1960s, and we are no better off for spending that extra time and money on the freeways.

    California’s SB375 has mandated smart growth as one strategy for fighting global warming. It not only reduces emissions by reduce the distances people drive. It also makes our lives more convenient and less expensive, and it makes our cities more livable.

    It is time to move beyond the technological fix and to also look at changes in our consumerist way of life that both reduce global warming and increase our well being.

  18. Bob Wright says:

    The Big 3 successfully fought back the Japanese quality challenge of the 1970-80s by applying tools such as vendor certification and audits, robust engineering, SPC… They were fortunate that they could still build a car cost competitve with the imports.

    Since that time, how many states and communities have given tax shelters and other financial inducements to bring in Japanese, German and now Korean assembly plants. How did we expect the Big 3 to not lose market share to these SUBSIDIZED state-of-the-art facilities building proven designs in non-union shops with no pension overhead?

    The paradigm has shifted. No more room for bloated overpriced white collar bureaucracies, overpaid semiskilled workers, premium health care and pensions, and making do with outdated styling, fit and finish dictated by legacy technology. Even with pounding supplier after supplier into banruptcy, and especially without selling millions of high markup SUVs and small trucks.

    Good luck to Mr. Obama and our auto industry.

  19. Phil Eisner says:

    When GM gets out of this bankruptcy, it will find itself in a competitive cauldron. Asian countries are pouring massive amounts of money and R&D into batteries, hybrids, and electric cars. They already have a production head start in Li-ion batteries and small cars, How do we think GM can survive the next few years? By selling their present line of cars and SUV’s? The only way is for us, the taxpayers, to continue to give tens of billions of dollars over the next 5 years to GM while GM tries to both catch up and go ahead of a fiercely aggressive world car industry that will not stand still! I am not prepared to do that.

  20. Ken says:

    The new federal vehicle standards, which are patterned after California’s, will reportedly add $1300 to the average car price, but fuel savings will make up that cost in only 3 years. The California Air Resources Board estimates that more stringent emission standards for passenger vehicles would provide net savings of $262/ton-CO2. Is that the best we can do? The regulations are clearly cost-effective, but the California law specifically required “regulations that achieve the MAXIMUM feasible and cost-effective reduction of greenhouse gas emissions from motor vehicles” (emphasis added).

  21. Brent says:

    I thought Bob Lutz’s quip about CAFE standards on David Letterman was pretty funny (here, paraphrased):

    Trying to get people to reduce fuel consumption by mandating efficiency requirements is like fighting obesity by mandating smaller dress sizes.

    I think the blame ultimately rests with us — we, the people — who have collectively decided to drive larger cars. And our decision, in turn, rests on the fact that gasoline is cheap at the pump. (We subsidize it otherwise, but that’s a different story.) If we really are serious about all these problems, we should tax gasoline up the wazoo, thus raising the price to the point that it hurts to drive stupidly inefficient cars.

    When gasoline is expensive, the government won’t need to mandate any sort of fuel efficiency. The demand for efficient cars will be SO HUGE that Detroit will produce them willingly, obligingly, and with great alacrity.

  22. Ronald says:


    You’re so right, that is the real failure, it’s so hard to make a political and economic system that is smarter than it is stupid.

    If the United States now owns a car company, can we decide how it is taxed? States have municipal bonds that are exempt from state taxes in that state. The state I am in has a sales tax on motor vehicles of 6 ½ percent. Would it be possible to exempt state sales tax from a car company owned by the United States Government? I’m only kidding, the world trade organizations would be quick to jump on that one.

    But to make a better tax system, we would remove the sales tax on motor vehicles at the same time we increased fuel efficiency standards. We can make up the loss in government revenue with an increase in the gasoline/ diesel fuel tax. If we eliminated the sales tax on motor vehicles, that would go a long way into paying for the increased costs of Prius like hybrids on every vehicle. That would be a better tax system.

  23. ecostew says:

    From the May 22, 2009 issue of Science: “Bioelectricity produces an average of 81% more transportation kilometers and 108% more emission offsets per unit acre of cropland than does cellulosic ethanol.” The advantages are even greater when it comes to corn-grain ethanol. And, in terms of EROEI and GHG emission reductions, wind and concentrated solar are significantly better than bioelectricity.

  24. James Newberry says:

    Patterning industrial transportation decisions on the model of last century will present numerous issues. For example, will concentrating on a pervasive personal car culture just shift one type of unsustainable consumption of resources to another, what about clogged highways across the nation and what about the billions of people in 191 other nations who would emulate this pattern. We might want to consider other or complementary options, such as:

    1) Gasoline, which is associated with so many unaccounted public and national security costs, should have a bottom price in the market sufficient to encourage shifting travel and public planning options.
    2) Auto workers should consider manufacturing the most efficient powered car ever – the streetcar, today’s light rail. Hundreds of municipal rail systems could be fostered in this country alone. These have already proven to encourage economic redevelopment along with “smart growth” solutions.
    3) Economic transformation and employment in clean energy, get coal off the railroads and employ truckers in transport of freight on roadbeds of steel, and passengers on a rebuilt national rail system.

    Good luck to all American auto workers and others who have been dismissed during this time of turmoil.

  25. hapa says:

    the real estate biz likes car-based planning for how it helps sell disparate property, the econ wonks like the RE people well enough that “new housing starts” is a “leading indicator” (and the planned basis of the new magic economy) — this is a bind

  26. hapa says:

    hmm, “disparate,” that’s the wrong word. the right word is… far-flung.

  27. Hendo says:

    First my heart goes out to all the workers affected by the car industry circumstances – workers in many countries are grossly affected.

    Second, great work USA! You finally have a commander who can see the need for serious change and the ‘nads to make it happen. ‘Sorry if I sound patronising, but our government (Aussie) is not yet showing sufficient fibre, so I envy you.

    Third I believe that because GM has had the conch in the US car industry for a time approaching 100 years, there is some kind of culture/corporate DNA that has led it to the sorry state of affairs that now prevail. If you agree with me on that, then a change of fortune for GM must include a change in corporate culture. From where I sit miles away, I have yet to see any sign of that, but hopefully I am uninformed. It seems to me that the creative spark that I believe is lurking all through GM has been stifled for too long. Witness the EV of the 90’s, and the overly subdued Volt. IMHO if GM is to be saved, it needs a new, vital and creative mindset.

    Fourth (and lastly) I like electric cars. I don’t need to go over their merits. Our government here is dithering over carbon trading and a heap of measures that might make a difference. Even if they do get their carbon trading boots on it will take many years for the benefits to start showing.

    Bring on the electric cars; in 5-10 years they will make a difference. So it is the timeline of electrics that make them so attractive to me, they can be on the ground fast. Electrics are a largely bottom-up solution, that can be driven (no pun intended) by market forces. Not perfect yet? True, but they are making great strides in battery technology and power applications. Viable electrics are so close now…

  28. John Mashey says:

    The standard Peak Oil chart is ~Huubert oil production curve, and it’s probably a good approximation for the last 150 years, but the nice symmetric curve can be very misleading to the casual observer.

    It looks like: we’ve used half the oil, now half is left, not too bad …. but:

    1) We’ve used the *easy* half, that is the half with the highest EROEI (Energy Return on Energy Invested), and what’s left is the other half of the oil, but nowhere near half of the *net* energy. Drilling deep sea wells costs more in money and energy than sticking pipes into East Texas did.

    That curve *counts* on finding more oil, and it isn’t the easy kind. Consider what offshore drilling the Arctic might be like…

    2) As the UK got rich by using coal and industrializing early, the US did the same with oil, but now imports more than half our us. Many oil *exporting* countries subsidize gasoline for their internal use, for various reasons. As their oil production turns down, their *exports* can and likely will turn down faster than the overall production curve, which means *importing* countries can face a faster downturn.

    On the left side of the curve, a relatively small fraction of the world was actually set up to use a lot of oil, and we did. Now, there are at least a few more billion people competing for the use of the second half.

    3) And, of course, if you overpump oil fields to try to keep production up, you can actually damage them, and get less oil out overall.

    Sometimes this gets called a “net energy cliff”, where the downslope might be much steeper than the upslope was.
    this, over TheOilDrum is a sketch of the comparison.

    All this just *reinforces* Joe’s point.

  29. “And by the 2020s, every major country will be engaged in a dire effort to avert catastrophic global warming, which by then will be painfully obvious to even the most blinkered conservative.”

    Meaning it will be too late. That is what I have been trying to tell you. Once the climate flips, it isn’t going to flop back for 1000 years. Civilization will have collapsed. You don’t have enough ammunition to survive a collapse of civilization unless you live in a US Army ammo plant. Otherwise, you are long pork.

    [JR: You have been trying to tell me??? That’s funny. But in any case, it won’t be too late in the 2020s, especially if we get started now.]

  30. Seth Masia says:


    Do CAFE standards matter? Yes, but not for the reasons you may think.

    Mainstream political thinking seems fixed on climate change, tailpipe pollution and the big issue of reducing foreign oil imports.

    In fact, rising oil prices may fix those issues long before the 2016 target for the new EPA CAFE rules do.

    Tony Eriksen, who writes for The Oil Drum, attended the Offshore Technology Conference in Houston early in May and came back convinced of what he already suspected: Planet Earth passed peak oil around July, 2008. Gasoline prices, depressed by the the current recession, have begun inching back toward the historic $4-per-gallon high and will probably hit $2.50 during the summer driving season.

    Worldwide oil production once more lags behind worldwide demand, and demand continues to rise in China and India while production can’t keep up. Eriksen now forecasts $100-a-barrel oil by the summer of 2010, $150 by summer 2012, and possibly $200 by the following winter. In recent years, the price of a gallon of gasoline has bounced around between 2.5 and 3.5% of the price of barrel of oil (today it’s about 3.6%). $150 per barrel implies gasoline at $4.50 a gallon.

    At that gas price, the SUV is a dead duck regardless of CAFE standards. The plug-in hybrid will sell briskly, assuming $150 oil doesn’t kick us back into recession.

    What Obama’s new CAFE standard will do is to ensure the survival of the Detroit auto industry. It will force the U.S. auto companies to have efficient cars available when demand spikes in two years, and if the cars are cool enough they might even be exportable. Wouldn’t that be a shift? Some similar mechanism should be developed to kick consumers off home heating oil before its price hits $4.50.

    The U.S. car industry missed a big chance around 1975. That was when baby boomers (I am one) loved small fast cars. We liked V8 Mustangs and Camaros, but we also liked MGs, Triumphs, Fiats, Corvettes, early Thunderbirds, Porsches and BMWs. Even Karmann Ghias were selling. If Detroit had focused its considerable marketing power on making small cars sexy and profitable, instead of cheap, ugly and shoddy (Gremlin? Pinto? Vega?), the world would be a much better place today. GM’s Opel GT was a spectacular mini-Corvette and it might have become a cult car. Ford’s Cortina GT was an agile little sedan that might have knocked the socks off BMW. Detroit had the technology, but not a single clue. Instead, the Big Three decided that monster V8s were more profitable.

    In ’73-74 I worked briefly for High Performance Cars Magazine, and got to drive my share of muscle cars. I always preferred cars that handled decently, like my TR4 and, later, a Saab 99. Detroit didn’t seem interested in marketing to my generation. So we bought Volkswagens, BMWs, Toyotas, Hondas and Nissans.

    The U.S. auto industry, thanks to Barack Obama, now has a shot at a do-over. If the factories don’t take it, there’s no hope for them. Oil prices will stomp them dead.

  31. Yet another reason why automakers need to focus on alternative modes of fuel and transportation.

  32. hapa says:

    holy high beams, batman!

    mike moore’s out ahead of joe romm on the vision thing!

    go “green belt” go!

  33. Bob Shanbrom says:

    Asserting that electricity is the cheapest fuel is misleading.
    First, while it’s true that wind-generated electricity from the Plains costs about 2 cents a mile wholesale, it’s also true that PV-generated electricity from the SW costs about 11 cents a mile at rooftop.
    Far more significant in terms of cost is battery wear/expenditure. It’s hard to get a bead on this as it’s a fast-changing technology but I think 10 cents/mile is the current state of technology.
    Then there is the added cost of the electric drive for plug-ins (which are the most likely next step due to range issues).
    Don’t get me wrong, plug-ins are inevitable and even desirable when coupled with carpooling, but battery tech is still a big hurdle and gasoline price will be a trade-off.
    Because electricity is soon to become a substitute good for gasoline the price of gasoline will level off at no higher than $7.50/gallon for a decade or more as it is forced to compete with electricity. I think “peak oil” will prove itself to be an hysterical term (life without cars, egad!) even while “global warming” will prove itself to be a cataclysmic threat.
    BTW, one of the top battery researchers is Venkat Srinivasan at the Lawrence Berkeley National Lab, We spoke about a year ago and he figured the lithium battery expense to be about 12-14 cents per mile.

  34. Ed says:

    If we would like to power our economy and our current lifestyle on renewables we would need huge amounts of PV, wind and wavepower installations. There are limits to how much we can build (gallium for instance is running out allready) and harvesting wind is also slowing down wind.

    We would be able to run our domestic lives on clean power (0 emissions homes are state of the art and commercially sound investments allready) but including cars is really problematic. For now for some people it would be possible but I seriously doubt that goes for all the cars around. The 4 stroke democratised private transport, the electric car will not be able to sustain the democratisation and will turn itself into a luxury product. I would suggest a timeshare concept were a car is own by the community and rented by the user. Cars can then be swapped if batteries run out, and no more cars ar produced then are needed to serve the needs of the cummunity (public transport should be improved of course even in The Netherlands and especially in regions like LA this could keep everybody mobile).

    Greetings, Ed Kuipers