GM’s Lutz: We’re Late on Hybrids
01 October 2005
Echoing comments that he made in March about Toyota scoring a coup with its hybrids (earlier post), GM Vice Chairman Bob Lutz said that his company is bolstering its efforts to develop hybrid vehicles to improve its public image and to share in the goodwill Asian automakers are enjoying by having hybrids on the market.
Although it expects to be a bigger player in coming years, GM isn’t planning to accelerate the launch of its two-mode hybrid system, to be applied first in the new full-size SUVs (earlier post).
“Right now, we’re not where we ought to be (on hybrids),” said Bob Lutz, GM’s vice chairman and product development chief, acknowledging that it’s hurting consumer perceptions of the company.
“For us to go out with a half-baked system just to get a few months out, I don’t think would be prudent,” Lutz said.
[...] GM didn’t see the importance of having hybrids on the market until two years ago when Toyota began having success with its Prius hybrid, Lutz said. (Detroit News)
Although it may be late to the hybrid market, GM is becoming more sensitive to arguments about fuel economy, and is going to great lengths to make a big deal out of the relative improvement in fuel consumption of its new line of 2007 full-size SUVs, which it introduced in September. (Earlier post.)
The new full-size SUVs, based on the all-new 900 platform, are critical for GM financially. Lutz noted in a podcast interview:
[Full-size SUVs are] highly profitable and have always been so for us. Secondly, it is a very very large market segment. It is 750,000 units a year for the industry in total...we command a 60–62% share of that. We think that with the new full-size sport utilities...most importantly with the fuel economy...we are well positioned not only to maintain but to expand our leadership in that segment.
They’re very important. A few years ago, we would have said...that segment would grow to one million. It will stabilize at 750,000. But again, 750,000 is a gigantic segment of the [overall] market.
(As a sidenote, Lutz took to blogging this year, and is the primary contributor to FastLane, the GM blog.)
By working with the aerodynamics of the vehicle, by incorporating displacement on demand, and by introducing a new 6-speed automatic transmission, GM pushed the fuel economy of the new SUVs, represented first by the Tahoe, just over the 20 mpg mark.
GM even suggested during launch week that the Flex-fuel version of the new Tahoe could be considered a 100-mpg (gasoline) vehicle. The math seems accurate, although the conclusion misleading. Using a standard fuel economy of 20.1 mpg, decreasing that based on the lower energy value of ethanol (i.e., the same engine burns more E85 fuel than conventional gasoline to achieve the same power output), and taking 15% of that to represent the gasoline component yields a gasoline fuel economy figure of 100 mpg.
But drivers are consuming (and buying) total fuel (since that’s what the engine burns, not just the 15% gasoline component) with a fuel economy of about 15 mpg. Furthermore, research has shown that the vast majority of current flex fuel vehicles aren’t using E85, due to a variety of factors (lack of supply and refueling stations, and not even being aware of E85 as an option).
If GM starts to run advertisements touting the 100 mpg Tahoe, you’ll know that the market has shifted decisively toward valuing at least the perception of addressing fuel economy. And that’s what Lutz seems to think hybrids offer—a way to polish up the company image and keep sales of full-size SUVs strong.
(A hat-tip to Jack Rosebro!)
By the time GM's full hybrid system comes out in SUVs, SUV sales will probably look like current hybrid sales...
Posted by: Mikhail Capone | 01 October 2005 at 07:23 AM
Why don't they just import German Opels? That would show a rapid response to changing market conditions.
I bet they could even get, and I'd support, a waiver to accept German safety/emissions standards in the "emergency."
Posted by: odograph | 01 October 2005 at 07:39 AM
Something strange I just noticed; Did lutz say that full size SUVs were selling 750,000 units a year?
Isn't Toyota already selling more than 100,000 Prius a year, and won't it make 400,000 hybrids next year?
I guess that it's not so much volume as high profit margin with these full size monsters...
Posted by: Mikhail Capone | 01 October 2005 at 07:57 AM
Well, if you buy that E85 100-mpg logic then naturally they should move away from gasoline-style engines to diesel so a driver can use B100 (pure biodiesel) and get infinite-mpg.
Posted by: Andrew Plumb | 01 October 2005 at 09:18 AM
By the time GM's full hybrid system comes out in SUVs, SUV sales will probably look like current hybrid sales...
I wish that were true, but I just don't think it is. The folks driving SUV are the same ones who consider the cable bill a necessary utility. So, GM advertises 20% more MPG (from 15 to 18, for example) and the same group of buyers are even happier to buy an SUV because they're getting what they want cheaper than it used to be.
I'm no GM fanboy to be sure, but I think GM is pretty well positioned. Not great, but I think they'll do well in the long run if they maintain their SUV marketshare and work in the hybrids slowly (a la Ford with their Escape Hybrid).
Posted by: stomv | 01 October 2005 at 11:02 AM
Keep 'em honest, ask "How many kilometers to the megajoule does that flex-fuel Tahoe get?"
Posted by: jcwinnie | 01 October 2005 at 11:21 AM
"The folks driving SUV are the same ones who consider the cable bill a necessary utility."
True. I think that gas prices are only on aspect.
SUVs are a big image and prestige thing. The faster they become uncool ("SUVs are squared-out minivans"), the faster their decline. That's the other thing that has to be worked on, and a lot of progress has been made IMHO.
Posted by: Mikhail Capone | 01 October 2005 at 11:40 AM
I was doing the math, based on the average 22K miles per family, and $3/gal ... at the various mpgs, thats:
10 mpg = $6600/yr
20 mpg = $3300/yr
30 mpg = $2200/yr
40 mpg = $1650/yr
50 mpg = $1320/yr
I think obviously we are going to drop the more middle clas folks driving < 20 mpg for more than 22 K miles. They are going to hurt, and they are probably the ones we hear about turning in $40K SUVs on $15K Corollas. The numbers are killing them.
Sure, there are some affluent folks out there .. but how affluent and how much do they like buying gas? Even at $100K salaries a $6-7K fuel bill is a bite - there might be cheaper ways to buy status and position.
Posted by: odograph | 01 October 2005 at 11:57 AM
Substitute fuels such as biodiesel-- made from vegetable oil are a nifty addition to the mix. But even if America's entire soybean crop were converted to biodiesel, it would supply less than a quarter of a million barrels per day, under 2 percent of America's appetite for fill-ups. That's a drop in the bucket.
Sorry, I did't save the reference but I believe it was a reliable source. Next, we will hear the argument that biofuel yields zero net carbon emissions. Possibly, but only if one assumes that Pimental is totally full of crap regarding all the petroleum inputs necessary to grow soybeans. If Pimental is correct, I think one needs to reduce the 20mpg, not increase to get a mp gas equivalent.
I hope gas goes to at least five dollars a gallon. And what did GM do with those billions vis a vis the Government project to develop a hybrid. They don't want to rush to market. Well, that's clear and thanks for pissing away our tax dollars.
Posted by: t | 01 October 2005 at 12:47 PM
Well, one universal truth is that looking like a chump is never cool, and 6K$/yr isn't chump change. You could pay for a damned nice vacation with the savings.
Eventually the sales volumes for the things will be so small that it will no longer pay to mass manufacture them. There might be a few niche players in the market, but eventually Ford and GM will be forced to give up on the things.
Posted by: eric | 01 October 2005 at 03:54 PM
Eric, that's exactly what I've been hoping for. As the number of models collapses, the value of a monster truck as a statement of individuality disappears.
People still buy into that. Someone I know casually won't consider driving something other than her Jeep Cherokee because they "aren't cool", despite the fact that she's paying close to a quarter a mile for fuel. The sooner people lose this attitude, the better.
Posted by: Engineer-Poet | 01 October 2005 at 04:16 PM
For 46 Billion per year we could grow and process enough algae around the Salton Sea to replace all of the 100-150 billions of dollars we spend importing oil.
This would not only meet all our transportation needs but also heating oil.
Google Salton Sea and see what you come up with. Then ask yourself why it's not being done.
Posted by: Lucas | 02 October 2005 at 12:40 PM
I was looking at Mikhail's numbers on a family driving about 22k miles a year which sounds reasonable and the conclusion I reached, unfortunately, is that people will feel the benefit of moving up from a 10 mpg SUV to a 20 mpg car much more than they would moving up from a 20 mpg car to a 30 mpg car. The return on investment declines dramatically. I drive a Taurus, it is boring but reliable, and since I only drive 12k miles a year my fuel bill is laughable. If I got a 4 door hybrid it would take me years to make it cost effective and my clients would be eating their knees. I still think the answer is decent sized vehicles with full hybrid systems using bio-diesel, none of this rube goldberg dual gas/electric system with all the weight and complexity they entail.
Posted by: Ziv | 02 October 2005 at 02:21 PM
Yes, Pimental is totally full of crap! He didn't take into account that farm equipment is used for multiple years - not just bought every year it is needed, and was completely oblivious to the fact that most ag machinery is diesel powered. Even now, in the USA Midwest, many farmers are already using biodiesel on the farms. "My Country, My Farm, My Future".
It's a shame and a scam that his old stuff gets regurgitated up every year. And, yes, biodiesel is carbon neutral because you are using the carbon that was put into the plant in that particular growing season, not a million years ago like with fossil fuel.
Posted by: tb2 | 03 October 2005 at 11:47 AM
Let's go to one fuel - BioDiesel.
Then we can tell the potentates in the Middle East to kiss our collective asses.
Posted by: Lucas | 03 October 2005 at 12:50 PM
Soy oil is a poor choice as an energy crop at only 48 gal/acre. Palm oil is an impressive 635 gal/acre and could be a big boost to the southern Mexico economy if the proper investments were made. Europe seems to favor rapeseed at 127 gal/acre. Corn oil yeilds only 18 gal/acre but is cheap because we grow so much of it.
Posted by: tom | 03 October 2005 at 02:54 PM
"Soy oil is a poor choice as an energy crop at only 48 gal/acre."
In the United States, soymeal presscake is as valuable as the oil itself. Add to this the fact it can be recycled (biodiesel from waste vegetable fryer oil) and you can see it's clearly not strictly a transportation crop. The food value alone (protein) makes it worthwhile. It fixes nitrogen and can be grown in rotation with grasses like wheat and corn. Not advocating it's the #1 fuel, but it has many, many uses that should not be discounted.
Posted by: emil | 12 October 2005 at 10:22 AM