Corp. Vice Chairman Bob Lutz caused a stir last month by doing something very controversial: He used the truth to point out the obvious.
In an email interview with Wardâs Automotive Group editors that was published on WardsAuto.com and in the December issue of Wardâs AutoWorld, Lutz suggests that consumers, with the help of government incentives, have to become part of the solution in switching Americaâs product fleet to more fuel-efficient vehicles.
âThe worst case scenario is for fuel prices to remain low, because that means customer demand will remain high for larger vehicles,â he says. Very few people will want to change what has been their ânationally-givenâ right to drive big and bigger if the price of gas is $1.50 or $2.00 or even $2.50,â Lutz says.
âThose prices will put the CAFE (corporate average fuel economy) mandated manufacturers at war with their consumers â and no one will win that battle,â Lutz adds.
With sales of hybrid-electric vehicles falling precipitously, along with gas prices, and deliveries of even Americaâs most popular HEV, thePrius, off almost 50%, you would think America would be nodding its collective head in agreement.
But no, the quote was picked up in the general media and the blogosphere, and critics on both the right and left are choosing to kill the messenger. One editorial latched onto Lutzâs comments to argue GM andshould not be given bridge loans because bad government policies such as tough CAFE will kill them anyway by forcing them to build unprofitable fuel sippers.
Ignored in this debate is the fact if Californiaâs defacto fuel-economy rules are allowed to take hold, all auto makers will suffer. Thatâs why, and others also are opposing Californiaâs rules.
In his prescient book âThe End of Oilâ author Paul Roberts points out that every major fuel shift in history â from wood to coal to oil â was driven primarily by market forces, specifically by competitive advantages of the new fuel over the old.
âThis is not happening today,â he writes. âThe hydrocarbon economy suffers from no direct competitive disadvantage that wind turbines, solar arrays, fuel cells or some other noncarbon energy technology can easily exploit.â
Roberts adds that every advance in our energy evolution has been centered on a new machine or process, such as the steam engine, oil lamp or internal combustion that ensured the new fuelâs success, but the machine ultimately had to be successful economically on its own.
âFactors like oil depletion or climate change or energy security may push us to champion new fuels or different emission policies, but the fundamental question remains the same. Does the innovation help turn a profit?â
In the absence of real-market incentives for new technology, such as a return to $4 per gallon gas, the U.S. government will have to create inducements or the entire U.S. auto industry, not just Detroit, will fail to earn a profit.
That means the U.S. must act like every other major industrialized nation in the world and use special incentives to encourage consumers to buy new technology. That also means it likely will have to fund those incentives with hefty gas taxes.
All Lutz did was speak the truth. Unfortunately, it seems no one can handle it.