European industry deflecting climate hysteria, for now.
Neil Winton - Detroit News - Mar. 14, 2007
Although not the hybrid, General Motors Chairman and CEO Rick Wagoner introduced the Saab BioPower 100 Concept at the Geneva Motor Show Tuesday, March 6, 2007 in Geneva, Switzerland. The BioPower 100 has the first production-based turbo engine optimized for pure eco-friendly bioethanol (E100) fuel.
GENEVA, Switzerland -- Climate change hysteria has erupted across Europe and although experts believe the automotive industry can ride out the storm, structural changes can't be held at bay for long.
The industry's hope is that while politicians and environmental lobbyists demand ever tighter fuel economy that could undermine the viability of the German premium car makers, any regulatory regime that finally emerges next year in the European Union might allow some semblance of normality to remain.
But you can forget business as usual.
The media sessions before this year's Geneva International Motor Show underlined the fact that an industry in denial had finally got the message. Major car shows usually echo to bragging about speed, acceleration, sex, torque, excitement and emotion. This year, the talk at the Geneva car show was of fuel economy, responsibility, and using technology to go the extra mile on a litre of fuel.
General Motors chairman and CEO Rick Wagoner led the way with his keynote speech, saying a major element of his strategy was environmental and technology leadership. The Geneva Car Show closes March 18.
Examples of practical vehicles that will lead any green revolution were thin on the ground though. Hybrid concepts were ubiquitous, but the only firm evidence of change shortly to be available at European dealerships was BMW's introduction of regenerative braking and Stop-Start on the 1-series and 5-series, while GM subsidiary Saab boasted about offering biofuel engines on all its cars. Regenerative braking puts energy generated by using the brakes, back into the car's systems, while Stop-Start automatically cuts out the engine when the vehicle stops in traffic, and reignites it when the accelerator is depressed again.
Politicians in the European Union have global warming in general and the automotive industry in particular, in their sights. Cars are seen by Europe's political leaders as major contributors to global warming because of their emissions of carbon dioxide (CO2), and there is likely to be a much tougher regime to regulate the CO2 emissions of European cars next year.
Automotive manufacturers are uniquely vulnerable to any CO2 threat, according to Professor Karel Williams of Manchester University's Business School.
"The amount of energy required to make a car move is so transparent, so obvious, and its "green" performance so easily measured, this single measure makes the industry peculiarly transparent," said Williams.
"Oil companies and other huge corporations are also implicated, but its enemies can't sum up their business in terms of CO2 or miles per gallon," said Williams.
In Brussels on March 9, European Union leaders agreed on a plan they said would combat global warming. This would cut greenhouse gas emissions by 20 percent from their 1990 levels by 2020, and raise to 20 percent the share of energy produced from renewable sources like wind or solar power, also by 2020.
In Britain the main political parties are fighting each other to produce the most aggressive set of policies they say will combat climate change. The opposition Conservative party proposes a severe cut in air travel, which would restore some kind of World War II ration book mentality, only allowing one flight a year per person, with all subsequent flights attracting ever more penal levels of tax.
Are humans warming the planet?
And yet while the hysteria produces more eye-watering suggestions to penalize European pocket-books and raise petrol prices to the level of a luxury product, questions are being asked about the science which suggests human activity is warming the planet.
In Britain on March 8, Channel 4 Television, a nationally networked TV station, broadcast a 1-1/2 hour long documentary called "The Great Global Warming Swindle," which questioned the conventional wisdom on climate change science, and quoted climate scientists saying that, far from instigating climate warming, increased levels of CO2 are in fact generated by a warming climate. Any warming was probably caused by the sun, these scientists said. The program also criticized former Vice-President Al Gore's Oscar winning film, "An Inconvenient Truth".
The scientists included Richard Lindzen, Professor of Meteorology at the Massachusetts Institute of Technology, Timothy Ball, a former climatology professor at the University of Winnipeg in Canada, and Philip Stott, emeritus professor of biogeography at the University of London.
"Swindle" inspired much heated debate on radio phone in shows on subsequent days. Even the state-funded BBC, which rarely gives air-time to views suggesting climate change science is open to question, was forced to give air-time to the debate on its news analysis programs.
Huge scientific argument
Professor Garel Rhys of the Cardiff University Centre for Automotive Research was quick to jump on this chink in the armor of those who say the link between humans and climate change is undisputed.
"The TV program showed that there is a huge scientific argument going on with the claim that the CO2 comes after the warming and not before. If global warming is caused not by human activity but the sun, the more this side of the argument gets an airing, the more reluctant governments will be to get involved," said Rhys.
"(The automotive) Industry won't want to squander huge amounts of money to cut CO2 if the science isn't right," Rhys said.
The European Union has said average fuel economy must be cut to 130 grams per kilometre by 2012, although it has yet to detail how this will be levied on the automotive companies.
The European Car Manufacturers Association said this would add about $5,260 to the cost of a car. Others say this it too high an estimate, and that $2,000 would be more accurate. Europe's car makers agreed, voluntarily, to limit the average output of cars to 140 g/km by 2008, the equivalent of about 39 miles per U.S. gallon. But although this represents a big improvement on the average figure of 185 g/km in 1995 and 161 g/km in 2004, the industry is expected to fail to reach the 2008 target. In 2006, the average was about 160 g/km.
Germany cries foul
Meanwhile Germany's car makers have been crying foul, with BMW's executives calling the CO2 debate "extremely emotional" and "hysterical", while luxury sports car manufacturer Porsche has talked about a looming "business war" in Europe over the issue. Germany's luxury car manufacturers like BMW, Mercedes, VW's Audi and especially Porsche, have become rich selling high-powered cars which gulp down fuel, and are in the eye of the storm of any move to curb CO2 emissions.
Stephen Cheetham, auto analyst at stockbroker Sanford C Bernstein says the German premium manufacturers shouldn't worry too much.
"European legislation aimed at reducing automotive CO2 emissions is inconclusive, and in our view unlikely to significantly crimp automotive premium brand growth or earnings power. German manufacturers have lobbying muscle, technology leadership and a proven ability to create smaller, more fuel efficient concepts," Cheetham said in a report.
"In short, we do not believe that the shift towards lower carbon emissions will in practice represent a serious threat to the business model of the German premium brands," he said.
Professor David Bailey of Birmingham University's Business School agrees.
Get out of jail
"I can't imagine Germany allowing a proposal to go through if it would damage the cause of their big, powerful car manufacturers. They will try and mould the regulations; there will be some kind of get-out-of-jail card and deals to be done. And the British government, it's got (VW's) Bentley and (BMW's) Rolls Royce, I can't imagine the U.K. allowing it either. There will be an average, across the fleet average (like the U.S. Corporate Average Fuel Economy-CAFΙ rules)," said Bailey.
Bailey also pointed to the great progress already achieved by European manufacturers.
"Average CO2 (from cars) is much less in Europe, they've already done a great deal. OK, they've not made the voluntary targets, but they've still done a lot," said Bailey.
Industry sources say in the U.S. light vehicles manage an average of the equivalent of 230 g/km. This means that U.S. cars and light trucks have fuel economy roughly 44 percent worse than the Europeans.
In more general terms, the impact of CO2 regulation is very different in the U.S. than in Europe, according to Manchester University's Williams, who says it is consumer led in the U.S. and driven by government in Europe.
In the U.S. higher fuel prices have already changed what he calls the "competitive dynamic" - with Ford, GM and now Chrysler gas-guzzling capacity being taken out by market forces, and being replaced by Asian fuel efficient cars.
"U.S. change is led by consumers; that's straightforward because they are getting what they want. In Europe it's ambiguous because it is led by government. The key question is: Will regulation change European's attitudes. Will people change their minds and accept cars with modest engine sizes with turbos and superchargers to deliver reasonable performance and moderate pollution. That's uncertain. The cult of performance has been the auto culture for 25 years," said Williams.
"My feeling is that they will change," he said.
Williams says the industry is now at a crossroads, with cars likely to become more practical, and consumer choices reflecting simple things like basic transportation needs rather than some ego driven desire to buy a car which supposedly might enhance a buyer's image.
Car as a commodity
Williams says this means the advent of the car as a commodity.
"What we need to do is reinvent the car and make it less of a status symbol, more of a utility object. When do you buy a new refrigerator? When it breaks down of course. In the future you will want a car that lasts 10, 15 years."
"I suspect the competition around the greening of the motor car will clear some of the manufacturers out of a substantial role in the business and will leave some in a much stronger position. It won't necessarily be the ones that are strong now that are left standing. Now Toyota, Honda, BMW are the leaders, but in the future if you reinvent the car around a more durable paradigm, more like bicycles or fridges. I wonder where BMW would stand in that order," Williams said.