Three Decades of American Amnesia
Reprinted from Automotive News
By Kjell Bergh, GMAP04
September 28, 2009
During our first energy crisis, General Motors tried a shortcut solution to its sorely underdeveloped engine program. It took a 350 CID Oldsmobile V8 gasoline engine and Dieselized it with predictably disastrous results. (Remember all the stalled New York taxicabs?)To divert attention from its engineering failure and the resulting massive lawsuits, the 14th floor of the old GM building directed its P.R. machinery to declare Diesel yesterday’s technology. In those days, GM enjoyed enormous marketing clout with its roughly 50 per cent market share and it didn’t take long before other manufacturers pulled their Diesel engine programs and the gas stations pulled their Diesel tanks, leaving consumers to go hunting for truck stops.
Largely because of that, we Americans have had a frozen image of Diesel-powered vehicles unalterably etched on our brains ever since: they were slow, noisy and smelly. In the ensuing years, a complete absence of a coherent U.S. energy strategy kept gasoline prices here unrealistically low and thus there were few incentives for manufacturers to spend much time on alternative power-trains, except brief spurts when successive administrations handed out massive grants to Detroit and suspended its anti-trust provisions.
Meanwhile, in Europe, Japan and most of the rest of the developed world, long-term national energy policies led to hefty gasoline- and vehicle-taxation, based on a variety of factors, including displacement, horsepower or poor fuel economy. The net result is that manufacturers located in or serving those countries were forced to develop highly energy-efficient vehicles which sharply curtailed imported oil dependency in the respective countries and helped keep the individual driver’s fuel costs within acceptable limits.
So in which direction did the technology go? Plug-in electrics, hybrid vehicles and other more radical solutions still only account for a miniscule, single-digit market share, despite liberal tax incentives in many countries. There were exceptions, like Brazil, which was able to convert the bulk of its national fleet to run on sugar-cane based ethanol fuel. The real success story is the huge market share world-wide (except in the United States) for Diesel-powered cars. These are not your Uncle Henry’s 70’ies Oldsmobile Diesel; they are highly sophisticated, quick-starting, quiet, powerful and fuel-sipping direct-injection turbo-Diesels built by Mercedes, BMW, Volvo, Volkswagen, Audi, Nissan, Toyota and most of the world’s manufacturers, curiously including GM’s and Ford’s European operations.
I recently brought my most senior manager, a seasoned auto industry veteran, to Sweden, where Volvo had lined up a variety of gasoline - and Diesel - powered cars and wagons of various brands for us to test-drive. All had engine-identifying badges removed and my man was in the majority with those failing to recognize when he was driving Diesel-powered vehicles. In a word, he was astonished.
While it is true that these cars cost a bit more up front, (but less than electrics) they get on average about 30 per cent better fuel economy, last much longer and have vastly more torque than their gasoline-variant cousins, making them superior for towing boats, travel-trailers, snowmobiles or jet-skis. (With active particulate filtration systems, they are also cleaner overall than gasoline engines.) These factors lead to lower ownership costs overall. For example, a 2009 study by IntelliChoice found that if a car is driven 70 000 miles over five years, it will cost less than a comparably equipped gasoline-powered vehicle. Their research proved that a Volkswagen Jetta TDI with a purchase premium of $ 2070 will produce savings of $ 6210 over five years of driving.
While developing various formats of electric - and hybrid vehicles as well as fuel cell - powered vehicles makes a great deal of sense long-term, it has been clearly demonstrated in other countries that even with strong incentives, it will take many, many years to get this segment into double-digit market share. The direct-injection turbo Diesels, on the other hand, are plug-and-play technology tested and proven in every-day use over several decades. In an example fairly typical of the European countries, Diesel-powered cars in 2008 made up 72.4 of all sales in Norway. Because of this demand, residual values are also much higher for Diesels.
With President Obama’s just released 34.1 MPG fleet-wide standard by 2016, direct-injection turbo-Diesels can get many manufacturers there without sacrificing consumer choice in vehicle size.
To unfreeze the American public’s image of Diesels will take a concerted effort on the part of the industry, manufacturers and dealers alike, with the aid of the administration and the press. Given that Diesel fuel perversely costs more at the pump, but much less to produce, there is substantial room to favorably differentiate the price per gallon and let the market work its magic. And if the Detroit Three get on the bandwagon quickly, but without shortcuts this time, it just might create badly needed jobs in the Rust Belt, too.
• Kjell Bergh is the owner of Volvo and Fisker dealerships in Minnesota, a former Chairman of AIDA and a graduate of the Global Master of Arts Program (GMAP) at The Fletcher School.