NYT Columnist: Detroit Aid Should Hinge on Hybridizing Everything
December 08, 2008

By Bill Visnic

With a pending vote Congressional vote on a bailout package to extend so-called "bridge loans" to Chrysler LLC, Ford Motor Co. and General Motors Corp. by perhaps as soon as this week, New York Times columnist Thomas L. Friedman -- often prominent for his provocative views on the auto industry -- is calling for one unique "string" to be attached to federal bailout funds: forcing the domestic automakers to present plans to hybridize their entire model ranges in three years.

Friedman has been a vocal advocate for hybrid-electric technology and has been criticized for a view of the industry that typically is unkind to the Detroit auto-industry establishment. Friedman often argues in favor of the management style and operational practices of Detroit's chief competitors, the Japan-based automakers -- and caused fireworks when he once suggested GM should go out of business and let Toyota assume GM's longstanding role.

"You want my tax dollars?" asks Friedman in his latest NYT column. "Then I want to see precise production plans and timetables for the hybridization of all your cars and trucks. I want every bailed-out car company to move to hybrid-electric drivetrains, because nothing would improve mileage and emissions more -- and also stimulate a whole new 21st-century, job-creating industry: batteries."

Friedman may be correct about stimulating the battery industry, but he might do well to consider what his hybrids-uber-alles call to arms might actually do for the auto industry itself -- being it's far from established that production of hybrid vehicles is a profit-making venture. And profitability is the kind of "sustainability" more paramount to a Congress preparing to commit billions in taxpayer-backed funding.

Friedman cites comments by former U.S. assistant secretary of energy Andy Karsner that a full-scale shift to electrified vehicle drivetrains would bring about "explosive" growth and investment in a domestic battery business.

That might be true, but battery-intensive vehicles are no good if people don't want them -- or if automakers cannot sell them at a profitable price.

Yes, increasing "electrification" of vehicle architectures is inevitable. Practically every major automaker insists it is so -- and is moving future-product plans in that direction. But to say converting entire model ranges (in GM's case, currently some 60 nameplates) to hybrid-electric propulsion is anything but a viable or sustainable business model without numerous other market and societal inducements outside the manipulation of the auto industry.

Take, for example, U.S. auto sales in November, the industry's worst single month in more than a quarter century. As gasoline prices dipped toward five-year lows and the nations' economy continued a grinding slowdown, trucks outsold cars at GM. The only two vehicles in the entire lineup of Toyota -- often Friedman's go-to example of hybrid sales and marketing genius -- to post positive sales results were its largest SUVs, the Sequoia and Lexus LX 570.

Sales for Toyota's Prius, long the best-selling hybrid in the nation -- were down more than 48 percent compared to last November and are down 10 percent for the year -- even after a summer of $4 gasoline.

November, in fact, was Prius' worst sales month in nearly two years, and in several markets Toyota has resorted to heavily incentivized leases to move its seminal hybrid.

It is difficult to effectively delineate the effect on Prius (or other hybrid-vehicle) sales of the overall auto-sales environment, which obviously has been severely beaten down. But it could be supposed that if hybrids are perceived by the public as such a panacea, sales for hybrids would be better than for conventionally powered vehicles, even in a singularly awful overall market.

Moreover, many industry analysts continue to question whether Toyota has ever made money on the Prius, or whether competing automakers have made profitable ventures of their hybrid-electric models. Toyota, for example, has been famously reticent to provide insight regarding the Prius' historic contribution to the company's bottom line.

And regardless of how hybrids fit into prognosticators such as Friedman's Utopian view of an auto market as it could be, hybrids made up a scnt 2.1 percent of all sales in November -- and are running at 2.4 percent for the year so far, according data from Edmunds.com, the parent of AutoObserver  -- and the collective share of the Detroit Three is something on the order of 50 percent.

To suggest that Chrysler, Ford and GM design hybrid drivetrains for all of their models simply ignores business reality. While hybrid-drive vehicles surely would reduce the nation's oil appetite and cut emissions, a wholesale move to hybrids clearly would be no guarantee of reignited business success, either for automakers or the as-yet-nonexistent advanced-battery industry -- not in a nation with no singular energy policy and gasoline prices once again less than bottled water.

Posted by Michelle Krebs at 1:32 PM under Business , Chrysler , Commentary , Companies , Ford , GM , In the Media , Toyota | Comments (8) | digg this | Seed Newsvine

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