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Author: HOGridin Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 701  
Subject: 2 of 3 don't like hybids Date: 8/10/2004 12:35 PM
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...Chrysler is run by the Germans of DaimlerChrysler, who don't like hybrids. DaimlerChrysler's top executives think that diesels are a better solution to boosting fuel economy. In the coming year the company plans to sell a few thousand diesel Jeep Liberty models in the U.S.

The problem is that it will be quite difficult for diesel engines to pass upcoming U.S. emission standards. Unless engineers can make diesels cleaner--and in a cost-efficient manner--this technology is unlikely to gain much ground in this country. So I say that Chrysler is making a mistake by ignoring hybrids.

General Motors says that it has a hybrid strategy, but it's more talk than action. This fall GM will offer some big pickups with what it calls hybrid power, but it is a less sophisticated system that doesn't have a super battery and, unlike the Toyota hybrid, it won't run on only electric power. This technology will improve fuel economy on GM's big V-8 engines by just one or two miles per gallon and will sell at a $2,500 premium. That's a big price for a relatively small gain in efficiency.

These hybrids won't even have GM's fuel-saving cylinder cutoff system. GM plans to build 2,500 of these vehicles this year and another 2,500 next year. Then in 2006 and 2007 GM will offer similar mild hybrid systems for the Saturn Vue SUV and Chevy Malibu passenger car. Once again, these hybrids won't save a lot of fuel. It's not until 2007 when GM says it will have a system that improves fuel economy 35% for its Tahoe and Yukon sport utilities.

Just imagine for a moment that GM was serious about hybrids. Given that Toyota is likely to sell 50,000 hybrid Prius cars a year, I think that GM, with its larger dealer force, could sell 100,000 hybrid systems in its Chevy Cobalt (a small car coming this fall).

Detroit insists that the Japanese companies lose money on each Prius, perhaps as much as $10,000 a car. Toyota denies this but let's say that it's true.

This doesn't mean that GM would lose $1 billion on a hybrid Cobalt (100,000 x $10,000). First, GM wouldn't have to pay $5,000 a car in rebates and could boost the price by several thousand dollars (the Prius stickers for between $20,000 and $26,000). Domestic producers often complain that they can't make money on small cars, but GM might be able to make a profit on a hybrid Cobalt.

Another plus: Selling 100,000 hybrids would raise GM's corporate average fuel economy, giving it more room to sell its thirstier, but more profitable, SUVs and pickups.

While giving lip service to hybrids, GM is making an expensive bet on a more advanced technology--the fuel cell, which uses hydrogen and oxygen to generate electricity and power a vehicle. GM says it will be the first automaker to build a million fuel cell vehicles. But fuel cells still face formidable hurdles, such as obtaining sufficient hydrogen, safely storing hydrogen, achieving sufficient storage density of the gas to give a vehicle sufficient range, making the technology affordable and developing the infrastructure to deliver hydrogen to the vehicle. At least hybrids are here now and work.

I think that there are several reasons why GM is behind in hybrids. One thought is that General Motors really doesn't know how to mass-produce such vehicles. Or maybe GM doesn't want to pay Toyota for the right to use its technology. Ford is paying, but I figure GM is carried away by corporate pride.

Hybrids do not make economic sense right now, but we don't know what is going to happen in the future. Fuel prices may sink back to $1.25 a gallon or soar to $5. Terrorists may seize Saudi Arabian oil fields and set them afire. President Kerry (should he be elected) might push through a 35 mpg corporate fuel efficiency standard. So it just makes sense for an auto company to prepare and develop options.

Both GM and Chrysler need an officer of sufficient rank, say vice chairman, whose job ls to develop and implement a fuel conservation strategy. It's that important.

http://www.forbes.com/2004/08/10/cz_jf_0810flint.html
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