The Greening Of DetroitDavid Woodruff and Thane Peterson
The scene is Warren, Mich., spring of 1989, at a road rally that General Motors Corp. is sponsoring for methanol-powered cars. Throngs of keyed-up college students are milling around, poking at the motors of 15 gleaming Chevys. Among the GM executives on hand is a tall fellow in thick trifocals, who pumps the collegians for details on how they converted gasoline engines to methanol. He is Robert C. Stempel, soon to be GM's chairman. One day, he tells the students, vast numbers of vehicles will run on a fuel other than gasoline: "We need to be ready."
Sooner than he thought. Less than two years later, a new age is dawning in the auto industry. Clean-air rules being imposed by the U. S. government, a growing number of states, and the European Commission will compel auto makers to nearly stamp out harmful exhaust emissions. They'll spend billions to do it, starting now. The immediate goals are to revamp internal-combustion engines and their pollution-control gear, even as oil companies develop cleaner-burning gasoline. Then, within a decade, less-polluting alternative cars are likely to hit the road, powered by natural gas, electricity, and maybe even hydrogen. In fact, the first models of GM's Impact electric car may be out by 1993. And by 1996, the Bush Administration's proposed energy plan would force fleet owners to start phasing in alternative fuels for their 4 million vehicles.
Meeting all the new regulations may be even more wrenching for carmakers than the triple whammy of the oil crisis, environmental regulation, and influx of Japanese cars that swamped Detroit in the 1970s. And the timing couldn't be worse. The Big Three lost $2.1 billion in the last quarter of 1990--and they could lose up to $3 billion in 1991's first quarter. Already burdened with making cars safer in accidents, Detroit is furious at also having to spend billions on cutting emissions. "The regulators have run amok," growls Stempel.
They probably aren't through yet. Europe is proposing large increases in average mileage for new cars. In Germany, a draft government regulation calls for a 60% mileage increase, to 47 miles per gallon, by 2005; carmakers hope a 25% increase they've suggested will do. In the U. S. last year, the Senate narrowly defeated a move to boost the current 27.5-mpg average to 40 mpg by 2001. With auto makers sweating for tenth-of-a-mile gains, Chrysler Corp. Chairman Lee A. Iacocca calls the whole idea "crazy." Still, Senator Richard H. Bryan (D-Nev.) has reintroduced the bill and promises that the vote "is going to be close." So on Mar. 21, Stempel, Iacocca, and Ford Motor Co. Chairman Harold A. Poling lobbied George Bush to head off changes they call financially ruinous.
ERA OF LIMITS. That's because Detroit's quickest-selling, highest-profit models have remained gas-gulping big cars, pickups, and vans. Gas-sippers, by contrast, have been loss-leaders, peddled cheap to keep unit sales high and, thus, mileage ratings up. Auto fuel economy has doubled since the early 1970s, and the easy gains have been made, the companies say. Raising mileage targets more would have "the American public driving around in cars the size of a combination washer-dryer," gripes Chrysler President Robert P. Lutz. Even so, Chrysler aims to boost its rating nearly 2 mpg, to 29 mpg, by 1996. It fears a compromise will force up mileage at least a bit, despite all the opposition.
Indeed, public sentiment may be changing in favor of a greener Detroit. The war on Iraq dramatized once again the costs of relying too much on imported fuel. Moreover, environmentally conscious voters are concerned with more than just reducing ozone, the goal of last year's federal Clean Air Act. Polls show growing concern over global warming, to which carbon dioxide is an important contributor. Some 20% of all CO emissions in the U. S. come from cars, and raising mileage is the best way to cut auto emissions of this otherwise harmless compound. By fits and starts, then, the U. S. may be headed for a new era of limitations that could sound the death knell for that most profligate of American institutions, the gas-guzzler.
You've heard it all before, right? Such talk started after the 1973 oil crisis, and two decades later, oil consumption is rising, while cars and trucks gulp nearly half the oil the U. S. burns. But this time, incentives could give green cars a real boost. The key one is that auto makers are "looking down the gun barrel of the law," says David E. Cole, director of the University of Michigan's Center for the Study of Automotive Transportation. The gun was loaded last September with new air-quality regulations imposed by smog-choked California, where 2.2 million vehicles a year are sold, 11% of the U. S. total. Over the next dozen years, California will clamp down on tailpipe emissions, perhaps forcing some vehicles to switch to alternative fuels by 1996.
Then, in 1998, the state will require 2% of the cars each auto maker sells there to emit no exhaust at all. This will rise to 10% of unit sales, or about 200,000 vehicles annually, by the year 2003. Massachusetts and New York are adopting California's standards, though it isn't clear if they will also go for zero emissions. New Jersey and Maryland are expected to follow. Europe is, too: "We may need electric cars in some cities even earlier than in California," says Wolfgang Reitzle, BMW's research chief. Auto makers have to plan now for these contingencies, since it takes four or more years to develop a new car. So despite the industry's trepidation, "we're gonna go for it," says GM's Stempel.
HEAVY COSTS. Greener cars will cost a bundle. Oil companies say just making cleaner-burning gas may require a $20 billion to $40 billion investment in upgraded refineries, raising pump prices by up to 20~ per gallon. And the added research and development expense of making cars pollute less may be enough to shake out weak players, since even healthy ones are feeling the strain. BMW is spending one-third of its $845 million annual research budget on meeting new clean-air regulations, including alternative cars. Eventually, such spending may exceed what "any one manufacturer can afford," predicts GM President Lloyd E. Reuss. That's why GM, Ford, and Chrysler have formed a joint venture--with Washington putting up half the $100 million annual budget--to develop longer-lasting electric-car batteries.
In the meantime, the priority is improving conventional engines, which auto makers argue can be made to meet most air-quality standards. The primary change is to vastly improve catalytic converters. Using current ones, cars spew out untreated pollutants during the first 80 seconds after startup, before the converter heats up to 500F and kicks in. So future converters will heat up electrically before a car starts. That way, they'll eliminate 99% of pollution, vs. 95% now. Mercedes-Benz plans to be out first--on its 1994 models--with preheated converters that will last the Clean Air Act minimum of 100,000 miles.
Carmakers also are refining onboard computers for more precise spark timing and fuel injection, so gasoline burns more completely and fewer hydrocarbons escape. Most producers are still eking out mileage gains, too. Honda Motor Co. says its redesigned 1992 Civic Hatchback VX will get 65 mpg on the highway, a 25% increase. And Germany's Audi plans a sedan made of aluminum--a weight-cutting measure only tried before in exotic sports cars.
Such moves aren't likely to head off alternative cars, however. Chrysler is designing its new LH family sedan, due out in 1992, with an extra-big gas tank and a sensor system so it can run on methanol, ethanol, gasoline, or a blend of the three. GM and Ford and foreign makers such as Volkswagen have flexible-fuel vehicles coming, too. But this all falls short if the goal is zero emissions. So the world's major auto makers have electric cars planned for the 1990s. Honda will even test a battery-powered motorcycle in Japan this year. By the late 1990s, Mazda Motor Corp. says, it may commercialize a limited-production, hydrogen-powered car, the ultimate cleanmobile, whose main emission is water vapor. That would match or surpass BMW and Mercedes-Benz, the leaders in hydrogen research.
This new generation of alternative vehicles won't be the glorified golf carts envisioned in the 1970s. GM's Impact prototype zips to 60 mph in just eight seconds and can hit 100 mph. Alternative cars also will have power-hungry amenities, such as air-conditioning and sound systems. Mazda is developing technologies to help make this possible. This summer, it will introduce solar-powered ventilators that cool parked cars. That should cut the energy needed for air-conditioning once the driver returns.
Moreover, each alternative technology has advantages over gasoline. Natural-gas engines and electric motors should last longer and be easier to maintain than gasoline models. And electric cars and trucks don't need expensive and complex systems such as fuel-injection and catalytic converters.
For every plus, however, there is still a problem to solve. In Italy, Fiat's Elettra, the only electric on the market from a major carmaker, goes for $22,000, more than twice the price of the Panda, its gasoline-powered twin. And alternative fuels aren't readily available. Only a fraction of the 111,600 U. S. service stations dispense anything but gasoline and diesel. Worse, alternative vehicles don't yet have the minimum 250-mile driving range that experts say consumers want. A trunkful of natural-gas tanks power a conventional car about 100 miles. And the poky Elettra goes just 45 miles per charge. "I'd prefer a horse," gripes a Milan utility official who drives one.
For auto makers, these problems are compounded by the issue of which alternative to build. "We've got to make some major decisions, and I don't think we're going to have the lead time we need," worries Kelly Brown, a top Ford emissions engineer. For instance, GM and Ford have models ready for production that can run on methanol, which is usually extracted from natural gas. But methanol, like gasoline, leads to smog. Ethanol, by contrast, comes from grain and burns more cleanly. But growing grain takes lots of energy, so ethanol ends up costing more than gasoline. Optimists dream of commercializing experimental solar-powered cars such as Toyota's futuristic RaRa. But the best models to date are flimsy and generate about enough power to run a hair dryer.
NATURALISTS. Taking all these problems into account, auto companies have decided, for now, to put the most resources into natural gas and electricity. The first switch of any consequence may be to compressed natural gas (CNG). It burns more cleanly than gasoline, and North America has a surplus of gas. The U. S. Energy Dept. estimates that existing pipelines could supply enough to replace 1 million barrels per day of gasoline and diesel fuel and run 8 million vehicles. A $3 billion investment would add enough pipeline capacity to fuel twice that number--and equip 16,000 gas stations with refueling compressors.
Adapting vehicles to natural gas is reasonably easy. It costs about $2,500 to equip a gasoline engine with pressure regulators and fuel-metering systems and to add aluminum tanks to hold gas under pressure. And such retrofits can still run on gasoline. The switch makes sense for fleet operators such as Federal Express Corp. and United Parcel Service Inc., which says it eventually may convert up to 10% of its 75,000-vehicle fleet to natural gas, since such vehicles can be fueled at a central pump at night. That's crucial, because high-pressure compressors cost $250,000 each. Most large fleet operators are preparing to switch some vehicles to CNG, even if Congress kills the Bush energy plan: The Clean Air Act imposes extra-tough tail pipe standards on fleets in the 22 most polluted U. S. cities.
Going beyond fleet use is harder. Today, there are only 308 CNG pumps in the U. S., just a handful of them open to the public. Home fill-up units--which fuel one car overnight--cost $2,500 apiece, though the price will drop if sales pick up. Boosting driving range will require new car designs to incorporate the bulky fuel tanks without eating up cargo space. Moreover, vehicles that can meet tougher emissions rules and still be peppy will require high-compression engines, complete with special catalytic converters, that burn CNG only. Such engines are only now being developed. Brock J. Austin, general counsel of GE Capital Fleet Services, a big fleet operator in Eden Prairie, Minn., sees a consumer market for CNG vehicles--but only after the year 2000. "Once the fleets solve the technological and logistical problems, the consumer market will start to open up."
SURPLUS JUICE. By then, a market may have developed for the next most practical option--electric cars. A report by Congress' Office of Technology Assessment says that the U. S. already has enough electric-generating capacity to run "several tens of millions" of these if they are recharged at night, when other demand is low. They wouldn't use much energy: GM's Impact needs as much power as a TV uses in six hours.
They wouldn't pollute the air, either, though the plants that generate their electricity would. So switching to electrics would help eliminate smog in such cities as Los Angeles, where 80% of the electric power is generated outside the L. A. basin, and in Japan, Canada, and parts of Europe, where nuclear and hydropower are plentiful. Electric cars might even make sense in the Northeastern U. S., if electric utilities keep switching from oil and coal to natural gas. Today, electrics there would produce as much pollution as gasoline cars.
Batteries are the bugaboo. Current lead-acid battery packs are heavy, cost about $1,500, and must be replaced every 20,000 miles. For more wallop, ABB Asea Brown Boveri (Holding) Ltd., the Swedish-Swiss power-equipment giant, and Britain's Chloride Silent Power Ltd., are both gearing up pilot production of sodium-sulfur batteries. Such batteries use electrodes of molten sodium and sulfur, which are lighter and can hold up to three times as much energy in the same space as lead. Tests indicate that such batteries might last about 100,000 miles, and ABB says its version may be produced by 1994, though some carmakers are skeptical. Detroit's battery consortium hopes to come up with a workable sodium-sulfur battery first--while also working on such approaches as lithium-polymer and lithium-metal sulfide, which could be ready in three to five years.Without better batteries, electric cars won't be an easy sell. Operating costs aren't a big problem: GM figures the Impact costs the equivalent of $1.50-per-gallon gasoline to operate, not too far above current U. S. prices. In Europe and Japan, electricity rates are higher, but driving the Impact would still be a bargain, vs. the $3-plus price for a gallon of gas. Trouble is, the car goes 120 miles at most on a charge. And replacing the batteries is like buying two years' worth of gas up front. To ease the shock, GM is considering leasing the batteries and recycling them after they wear out. Another drawback: A full charge takes eight hours. Fast chargers can do an 80% charge in two hours, but even that isn't practical for long trips.
There is a possible solution to this. GM's HX-3 electric van prototype uses a gasoline-powered 40-kilowatt generator to recharge its own batteries. A 10-gallon fuel tank gives it a range of about 300 miles between fill-ups; flip a switch on short trips, and the van runs on batteries. But the HX-3 won't be practical unless cheaper components can be developed. Adding batteries and electric motors to the engine and other paraphernalia of a gas-burner makes it too costly.
If it's all going to be this complicated, why bother? For one thing, the Big Three are looking beyond California to Europe, where they now have nearly 25% of the market. In December, the European Commission adopted stricter emissions standards that start bringing Europe close to the tightening U. S. rules. Auto makers fear that cities in environmentally aware Switzerland, Germany, and the Netherlands may ban gasoline-powered vehicles in city centers. And overseas drivers are used to small cars. So alternative cars could catch on in a hurry with an advance or two in technology.
In the U. S., there's another incentive. Federal laws let the Environmental Protection Agency dole out higher mileage ratings for alternative cars. Electrics may get credit for 150 mpg to 200 mpg. Under the EPA's formula, Ford could improve its rating by 1 mpg if it sold 100,000 alternative cars annually--about 5% of its sales. That's no small potatoes: Ford has spent nearly $4 billion since 1982 on incentives to boost small-car sales and keep its mileage average up.
Beyond this, there's the chance to conquer new markets. Experts figure two or three leading world auto makers will grab the lead in alternative cars--partly to get economies of scale. It won't pay to make electric cars just for a few states and cities. It takes production runs of at least 50,000 to make a profit on resonably priced cars. GM may be in front now. But the Japanese won't lag for long, given their exposure in California, where they have 50% of the market. "Some Japanese companies are going to treat this as an opportunity," says Daniel Roos, of the Massachusetts Institute of Technology's International Motor Vehicle Program. One sign of interest: The city of Osaka and several companies are spending $3.3 million on 10 charging stations for an electric-car trial.
TECHNO-FEAR. Nobody has done detailed number-crunching yet, but the market for alternative cars could be large. The most likely buyers are in the roughly 42 million U. S. households, 52% of the total, that have two or more cars and do lots of commuting and errands. In the U. S., the average round-trip daily commute is just 22 miles, according to government studies, and experts say 95% of all trips taken are within the range of the Impact. Indeed, GM has already gotten 4,000 queries on the car and several dozen unsolicited deposits of up to $300. It has sent them back for now.
The main impediment is fear of new technology. Ford's surveys show that just adding sensors so vehicles can use several fuels bothers buyers. "Customers worry that the car may stall more or that driving range will be decreased," says John P. McTague, Ford's vice-president for technical affairs. This may not put off "early adopters," the 1% to 2% who buy novel products before they're proven. But cracking the broader market will be tough: "Our guys can build anything," says GM's Stempel, "but somebody's got to want to buy it."
Strong government incentives could speed things along, though they haven't been easy to enact. In California, Democratic State Senator Gary Hart has reintroduced an auto-pollution tax that passed last year but was vetoed by former Republican Governor George Deukmejian. Hart's plan would double the state's usual 4.5% sales tax for a car that pollutes a lot--and waive the tax on a low-pollution model. Charles R. Imbrecht, chairman of the California Energy Commission, says the bill likely won't be vetoed if it passes again, as expected. But experts say added incentives, such as access to ride-share lanes and preferential parking for alternative cars, might be needed to jump-start sales.
However such issues are ironed out, heightened environmental pressure on auto makers is here to stay. They'll lobby hard, but they won't slow the pace of change much. One reason, Detroit concedes, is its low credibility. It has portrayed most major changes required of it in the past 20 years as impossible, from higher mileage to pollution control. Then, it has met the challenge anyway, in part to keep up with the Japanese. Chances are, this will happen again.
Until last year, for instance, alternative cars took a back seat at Honda. In fact, top brass was upset to learn from newspaper accounts that the company had entered a race for experimental solar cars in Australia: An employee had begged the $3,900 entry fee from superiors. Then, Honda's entry, dubbed the "Dream," finished second. Now, Nobuhiko Kawamoto, Honda's new president, has made meeting environmental goals a top priority. After taking over last June, he made 99 speeches in three months to prep Japanese and overseas employees for the challenge. There's a simple answer to why: "If a maker doesn't build more efficient cars," Kawamoto says, "it can't survive."
CLEAN CARS IN 13 YEARS? 1990
SEPTEMBER The Air Resources Board in California, where 2.2 million cars and trucks are sold annually, imposes air quality standards that will dramatically cut auto emissions in the 1990s
OCTOBER Congress passes a new Clean Air Act to bring 100 cities with badly polluted air into compliance with federal ozone standards
DECEMBER The Massachusetts legislature votes to adopt California's tough standards. New York has done likewise; 6 other Northeastern states are expected to follow
The Clean Air Act requires oil companies to start reformulating gas so it burns cleaner and pollution by evaporation is reduced
California's rules begin to kick in: Emissions of carbon monoxide, a poisonous gas, must be cut in half for cars sold there. Also, auto makers start getting extra federal mileage credits for alternative vehicles
Some 10% of cars sold in California, rising to 20% by 1996, must meet even tougher emissions standards that will require reformulated gas or cleaner-burning fuels, such as methanol or natural gas
The Bush Administration energy plan, if passed, would require some 4 million corporate and government fleet vehicles to start switching to alternative fuels
California tightens the screws again. Emissions of hydrocarbons and nitrogen oxides, the main components of ozone, must be cut by 40% and 50%, respectively, for 25% of cars sold, rising to 100% by 2000
Some 2% of cars sold in California, rising to 10% or about 200,000 annually by 2003, must have zero emissions--a rule only electric cars are likely to meet. The Clean Air Act requires fleet vehicles in the nation's 22 cities with the most polluted air to start meeting tougher emissions rules
The Clean Air Act tightens emissions rules for fleet vehicles in the 22 most polluted cities even further
Pending cost-effectiveness and feasibility studies, the Clean Air Act could require all U.S. cars to meet the 1997 California limits