Can't Anyone Handle the Truth?

General Motors 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 Ward's editors that was published on WardsAuto.com and in the December issue of Ward's AutoWorld, Lutz suggests consumers, with the help of government incentives, have to become part of the solution in switching America's product fleet to more fuel-efficient vehicles.

“The worst case scenario is for fuel prices to remain low, because that means customer demand will remain high for larger vehicles,” he says. “Very few people will want to change what has been their ‘nationally-given’ right to drive big and bigger if the price of gas is $1.50 or $2.00 or even $2.50.

“Those prices will put the CAFE (corporate average fuel economy) mandated manufacturers at war with their consumers — and no one will win that battle,” Lutz adds.

With sales of hybrid-electric vehicles falling precipitously, along with gas prices, and deliveries of even America's most popular HEV, the Toyota Prius, 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 Lutz's comments to argue GM and Chrysler should 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 California's defacto fuel-economy rules are allowed to take hold, all auto makers will suffer. That's why Toyota, Honda and others also are opposing California's rules.

In his prescient book “The End of Oil” author Paul Roberts points out that every major fuel shift in history — from wood to coal to oil — was driven primarily by market forces, specifically by competitive advantages of the new fuel over the old.

“This is not happening today,” he writes. “The hydrocarbon economy suffers from no direct competitive disadvantage that wind turbines, solar arrays, fuel cells or some other noncarbon energy technology can easily exploit.”

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 engine that ensured the new fuel's success, but the machine ultimately had to succeed economically on its own.

“Factors 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?”

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.

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