JEREMY CATO
LOS ANGELES — From Thursday's Globe and Mail Published on Thursday, Nov. 27, 2008 12:00AM EST Last updated on Tuesday, Mar. 31, 2009 9:16PM EDT
So what now? What's next?
Is it a fleet of eco-friendly vehicles, like the 18 on hand for test drives around the Los Angeles Convention Center, home to the Los Angeles Auto Show?
"These are the future of the auto industry," said Ron Cogan, a former Motor Trend magazine gearhead who more than a decade ago became an early adopter and true believer of environmentally friendly vehicles. With Green Car Journal, he's made them a business.
But not so fast. It is not easy to build and sell "green" cars that also meet government regulations and mainstream consumer demands. That's because there are no comprehensive government regulations that reconcile energy policy and safety and consumer concerns with marketplace realities.
And which government or governments? Federal governments? Provincial governments? State governments? Municipal governments?
The developed world is a patchwork of laws and regulations regarding auto emissions and safety standards, recyclability and consumer protection.
The lack of a coherent, comprehensive, globally co-ordinated energy policy in the United States, Canada and other developed countries has the established auto industry scrambling, guessing and hoping for some sort of consensus to emerge.
More pressing for the short term is the global credit crisis. It is forcing auto makers large and small to hoard cash and scramble for the financing required to develop vehicles that big numbers of consumers will buy — even though electric cars, for instance, require some changes in driving and everyday behaviour that most of the public has shown no willingness to make — and meet government standards that do not yet exist in a clear, co-ordinated, comprehensive way.
True believers of electric cars and the like — especially those that swamp the blogosphere with ill-informed and simplistic points of view that invariably also attack car companies as evil, incompetent and irresponsible — argue the switch to green cars is easy. It's just a matter of getting the foot-dragging, antiquated car companies — the ones that support millions of good paying jobs around the world — out of the way. Instead, they say, clear a path for young, nimble upstarts like Tesla and Zenn.
Perhaps they are right. Perhaps the old-guard car companies are in their last throes.
But whatever replaces them will still need capital to develop technologies that meet consumer expectations for performance, functionality and reliability, while also adhering to a global mess of government standards.
They'll also need capital, billions and billions of dollars of it, to develop a manufacturing, supply and distribution infrastructure to get these new green cars into the hands of millions of demanding consumers every year.
And if the old dinosaur car companies are on their way out, then who will support and service these new green cars produced by these Apple-like upstarts? How will the new car companies achieve the breakthroughs that established, creaky, old-guard car companies have been unable to manage despite spending $79-billion (U.S.) last year alone on research and development? Warranties? Will the new clean cars have warranties? For how long and for which parts?
A walk through this year's L.A. show sparked these questions and more. These are, in fact, some of the thoughts on the minds of anyone thinking about the future of the car business. What's clear is that this industry is at the end of its beginning.
Telling sign No. 1
The lights, literally, were out at Chrysler. Despite having a massive space on the convention floor, the shiny sheet metal lay quiet, in darkness. No spotlights, no overhead lighting, no dazzling turntables with flashing bulbs.
And no Chrysler officials. They didn't bother to show up to the L.A. press days; their only news was bad news and why make a show of that?
Telling sign No. 2
General Motors sent a skeleton crew to preach the gospel according to Volt, the extended-range electric car that is the company's last great hope for survival and respect.
There are certainly questions about GM's ability to remain viable to the late 2010 launch date of the Volt. If GM does survive to 2010, the Volt will tell the story of whether GM can make it to 2110.
Telling sign No. 3
Nissan-Renault CEO Carlos Ghosn, who knows from personal experience how to orchestrate the turnaround of a desperate and bankrupt car company — he did it when he set in motion Nissan's ultimately successful remake in 1999 — said the current crisis is like nothing anyone has ever seen in the auto industry.
"It's uncharted territory," said Ghosn of the current economic crisis and its impact on the auto industry that exists today. "This is completely different" from Nissan's 1999 crisis, which unfolded at a time when the car industry as a whole was relatively healthy.
Now the survival of the industry is threatened, just at a time when there is an emerging demand for new, cleaner vehicles. That's why car makers are asking for billions in loans and subsidies not just to develop tomorrow's technologies, but to make them viable in the marketplace.
"We are reinventing mobility," Ghosn said. "There is no substitute for the automobile, and as soon as the economy stabilizes and people regain purchasing power, the first thing they will want to do is buy a car."
Ghosn, in fact, predicted that by 2020, worldwide electric vehicle sales would grow to seven million a year (from about 50,000 today), or about 10 per cent of what he expects total annual vehicle production to be a dozen years from now.
"We're very glad to see that the U.S. government is helping financially," he said, referring to the $25-billion loan package from the U.S. government that is designed to help car makers retool plants to make more fuel-efficient vehicles. Canada, too, has put some money on the table, a paltry $250-million for innovation in the auto sector. Much of that money had not yet been tapped.
Ghosn said the worldwide financial crisis can cripple car makers. They need access to financing for short-term obligations and long-term investments and right now that money is not there.
"No one could have predicted this crisis. The key to surviving these times is to avoid burning cash. We have to hang on to our cash," he said.
Telling sign No. 4
Consumer Reports magazine, long considered by Detroit auto makers as a biased enemy of the domestics, offered a warning of its own: "Consumer Reports has concerns about letting domestic auto makers fail," the magazine's publisher, Consumers Union, said in a written statement.
"The loss of any major auto manufacturer would leave consumers with fewer choices and the industry with less competition and innovation, particularly at a transitional time when the industry is pursuing alternative energy technology."
So what's next is a new automotive world order, one in which the Detroit auto makers have been humbled, capital is used wisely and innovation is paramount on the part of car companies who are prepared to take advantage of a reinvented industry.
But the details in all this, which of the established companies will survive and thrive and which new ones will emerge, are unknown — just as clear agreement about what exactly we'll be driving and when, and how much these new, cleaner cars will actually cost all are questions yet to be answered.
At least the L.A. auto show offered some useful clues.
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