Special Coverage
Management Briefing Seminars
In his more than 40 years observing the ups and downs of the U.S. auto industry, David Cole has never seen the outlook for the Big Three more “tense” than it is now, he tells Ward’s.
Cole, chairman of the Center for Automotive Research (CAR) and founder and chairman of the Traverse City Management Briefing Seminars, says the combination of a sagging economy and soaring fuel prices has put U.S. auto makers “in a very precarious, dangerous predicament. How it’s going to pan out, we don’t know.”
Whether any or all of the Big Three eventually may face bankruptcy can’t be forecast, but more supplier bankruptcies are likely to surface, he predicts.
Focusing on General Motors Corp., where his father Edward Cole served as president in the 1970s, Cole says it’s possible GM could be split into two parts with its high-value and profitable international operations sold to generate cash to make a stronger stand in North America. “The trick is, do you really want to do that?” he asks.
GM is not alone in feeling the pain, Cole underscores. “The traditional (U.S.) industry is in a very tough spot,” he says. “Market share is eroding and you have to ask how long the cash is going to last. But the good news is health and labor costs have been taken out, so that (the auto makers) can be profitable with cars and not just trucks” if and when a sales recovery takes place.
Each of Detroit’s three auto makers came to rely heavily on trucks and SUVs when fuel was cheap, and each has paid the price as buyers shun the lower-mileage vehicles and switch to more fuel-efficient smaller cars.
After oil-price surges in the 1970s and early 1980s ended and fuel became inexpensive, “trucks took off like a rabbit,” while demand for smaller cars eased off, Cole says.
Meanwhile, the early push for alternative fuels languished, and Cole blames Congress for that.
“We’ve got some real foul balls in Congress,” he says. “There’s no strategic plan and they don’t understand science (or technology). The invention was pretty much in place,” but Washington was taking a nap. “It’s not a surprise what’s happening now – it was expected. The only question was when?”
While everyone now is scurrying to develop a variety of cellulosic biofuels, government policies and corporate investments are focused almost entirely on ethanol from corn, Cole says. “That was the stupidest thing in the world. It resulted from the ‘green’ (campaign contributions) influence in Congress. Now they’ll (politicians) have to run for their lives.”
Cole sees a bright future for hybrid-electric vehicles using lithium-ion batteries, such as the Chevrolet Volt scheduled for production in 2010.
Although managing heat from the batteries to assure safety remains an engineering challenge, Cole predicts Li-ion batteries will come on strong over the next five years.
“The big thing is commercializing the batteries,” he says. “The only questions are cost and manufacturing scale. There aren’t any exotic materials involved. But no one yet has high-volume capacity” for automotive applications.
