Wednesday, January 07, 2009

General Motors Trying Hard...

Normally, General Motors gets pilloried for their environmental record. Apparently the public notices them primarily as owners of the environmentally anathema Hummer, Escalade and Yukon monikers. GM's marketing department also used to lead with these brands, so why should we give them kudos for trying hard environmentally?

Well, all companies have to be profitable to stay in business. The existing US regulatory scheme, customer demand, and artificially low gasoline prices all force auto manufacturers toward bigger and bigger vehicles. All companies try to sell more of their most profitable products; GM does that too and the big SUVs bring in the highest profits.

Wait?! I hear a heckler shouting that "Toyota and Honda don't sell large trucks; that means they're green!". Not quite; Toyota and Honda would love to sell more into the highly profitable large vehicle segment and Toyota has consistently increased the size of it's trucks over the years to move into that market. Honda introduced the Ridgeline "truck-like" vehicle to compete here as well. They're not succeeding, however, because Ford, GM and Chrysler out compete them. No marketer would say "Our big trucks are losers. Come check out our tiny cars." - instead they simply say "Come check out our environmentally friendly cars!" (and secretly hope you'll buy their "big" trucks).

If folks really want an environmentally friendly auto fleet they can easily make that happen: a) vote with your pocketbook and buy high mileage vehicles to replace SUVs (we're starting to do just that) and b) work to elect politicians that will fix today's broken regulatory system so that the most environmentally friendly cars become the most profitable cars.

Among all of the car makers, GM has the best track record at introducing economically sensible environmental solutions; unfortunately, customers didn't notice those offerings in their stampede to the SUV aisle. For example, in 1989 GM started marketing the GEO Metro (45/50 mpg!) with room for four and fuel economy on par with the Prius without the high tech, high cost hybrid system. GM's EV1 then became the undisputed environmental champion until lobbyists (including GM's) killed the CARB ZEV mandate. Even then, GM kept introducing environmentally sensible vehicles. The 2005 GMC Sierra/Chevy Silverado Hybrid included idle engine shutoff and regenerative braking. They went on to pursue this very economically astute "mild hybrid" (or perhaps "smart hybrid") approach in the 2006 Saturn VUE Green Line and then added it to the Saturn Aura Green Line and Chevy Malibu. Fickle customers, however, choose less viable, higher cost hybrids and so GM added a "full hybrid" option to the 2008 Chevy Tahoe/GMC Yukon and changed the VUE to a 2-mode "full hybrid" for 2008. Big trucks have a lot to gain from a hybrid drive-train, arguably much more than small cars do, and so once again GM technology is moving ahead of the competition.

On the other end of the market where small, unprofitable cars live, the big three have far less incentive (aka profit) to compete. When profit margins get squeezed, smaller costs become magnified and the increased benefits that GM, Ford and Chrysler provide their union workers mean more in low-end cars than they do in the high profit, large vehicles. Interestingly, if the government provides universal healthcare, it will help level the playing field between union and non-union shops.

GM has been trying to get customers to look their way by offering excellent technical choices, but the customers are more interested in buying giant CO2 generating SUVs instead.