Is Detroit Getting Ready to Retool to Make Small Cars?

Another interesting story from Der Spiegel.

German carmaker Opel, owned by American automobile giant General Motors, as well as the European division of Ford could both profit from the current crisis at their mothership companies across the big pond. GM and Ford have been hit hard by falling sales of gas-guzzling pickup trucks and SUVs. With drivers having to pay an average of over $4 per gallon, sales of larger cars have slowed to a trickle, blindsiding US automakers, who have focused for years on the formerly lucrative truck and SUV market. Unable to quickly retool to develop their own fuel-efficient models, GM and Ford are both reviewing their units in Europe -- where compact and subcompact models are far more prevalent -- for possible models that could be produced for the American market.

It's been an open secret since the new GM-UAW contract was signed that the company would be introducing two fuel vehicles into their American fleet. Product commitments made by GM included a commitment to start production of the Volt, a plug-in hybrid at Hamtramack, MI, and a hatchback vehicle in Lordstown, OH the same year.

Most likely, this will involve GM taking vehicles designs from their Opel division in Germany and producing them in US factories. GM has already imported many vehicle designs from this division for use in its Saturn plants. The Opel Astra and the Saturn Astra are virtually identical, the main difference being branding.

So let's take a look at some of the vehicles available from GM and Ford's European divisions that could be produced in the US. I'm going to take examples from the offerings made by both companies in the UK. In the UK, Opel is sold under the Vauxhall brand. I'm getting my figures from here, remember that 1 Imperial mpg is only 0.833 US mpg.All the figures I'm quoting are in US mpg.

So let's start with the Vauxhall Agila 2008 model. 30 city, 48 highway, 40 combined for the unleaded model. 43 city, 59 highway, 52 combined for the diesel model. This is an Opel model, owned by GM, sold under the Vauxhall brand name in Britain for the US equivalent of $18,000-20,000. The low dollar really jacks up that price, and I think that somewhere between $13,000 and $15,000 is a realistic production price if it was made in the US.

Remember this is only one model, look at the page I linked to above, and then use this calculator to convert Imperial mpg to US mpg.

And it's not just GM. Ford continues to produce the Ford Fiesta for sale in the UK. Looking at the most fuel efficient Fiesta model, you get great gas mileage, bigger engines mean less miles per gallon. So for the most efficient unleaded model, 30 city, 50 highway, 40 combined. For the diesel model, you have a large engine, but still get great mileage. 40 city, 62 highway, and 52 combined. Remember that diesel has more energy density per gallon than unleaded, and it also generally more expensive. Again the UK price in US dollars is about $18,000-20,000. Which would likely be considerably lower once production occurred in the US

The point here is that Detroit has the capacity to import these designs into American production here and now. The thing that stops them is the cost of retooling their American plants.

This is a place where I think where the government can play a key role. Subsidizing the cost of retooling would do a great deal towards bringing these cars to the US market. And it could be a one time investment by the government to reconfigure the makeup of the US auto fleet. CAFE standard for these cars is something like 27.5 mpg.

My suggestion would be to offer $1000 for every increased mile per gallon over the current standard. To be split 50/50 between a subsidy to the manufacturer (specifying that US production content must exceed 90% to qualify), and the consumer at purchase.

So let's take a look at that Ford Fiesta. Let's assume for the second that it costs $14,000 to bring to the US market. It has a combined mpg of 40, or about 12 over the US CAFE standard. That means that the vehicle would receive $12,000 in subsidies. $6,000 going to the manufacturer, $6,000 to the consumer. So the actual cost of the vehicle to the consumer comes to $8,000. At 8% interest, the monthly payment on a 5 year loan comes to $162.21. If have this subsidy reflected on the show floor, imagine how fast these things would fly off the floor. And the cost.

Assuming all 11 million vehicles produced in the us saw a 12 mpg increase. It would cost the US government $66 billion. Or put in other terms, 40% of $165 billion in military spending recently approved by the Congress.

Now let's talk about benefits. Each mile per gallon increase in CAFE results in a 3.6% increase at current standards. So lets say that this incentive is able to increase the efficiency of all 11,000,000 vehicles produced in the US annually by 5 miles per gallon. Assuming 15,000 miles traveled annually (the average) that means each vehicle on average uses about 81 gallons less gas a year. That's 1.93 barrels per vehicle annually, or 21.23 million barrels annually, or about 58,165 barrels a day. Coupled with a plan to purchase and scrap older less fuel efficient vehicles, it could be considerably more than that.

The US used 9.29 million barrels daily of finished motor fuel. So the reduction at a 5 MPG increase in fuel economy over the entire annual production is about 0.6%. Raising the fleet average by 10 miles per gallon would double that to 1.2%, or 116,330 barrels daily.

In the end, we're going to need to address the design of cities to cut miles traveled if we are going to end our dependence on imported oil.

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Comments

I sure hope so

You look like our auto expert from this post.

I posted earlier about GM closing 4 SUV factories instead of retooling and I asked why the hell they are not retooling, bringing back the box cars from the 1970's, 80's and keeping those jobs in the US.

What I did not know about are all of these subsidies you list, which is good. The Geo Metro gets about 50 mpg.

I also watched a show about the death of Suburbia. I don't think it should be death of Suburbia, I think it should be death to the corporate demand that people must go to their cubes on a daily basis for many jobs. Change the work week and the hourly structures. Stagger the working hours as well.

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Auto Expert

no...

I only think that the subisidies I mention should exist. They don't currently. But I think that the price is right.

The real key to cutting demand is going to have to be in terms of miles traveled though. And honestly that didn't really go to hell until offices started moving out of downtowns into the far suburbs in the 70s and 80s.

We need to have strict zoning laws that keep offices and retail within a 1/2 mile area of bus stops. With sidewalks people can walk that. And then you can run electric streetcar connectors between nodes in the system.

Require the big box stores build in existing areas within a half mile of a bus stop, and push limit them to a few nodes, and then you can concentrate trips so the mass transit becomes viable.

Even better, require a 2-1 match for commerical space with affordable housing above the stores, and you can drive a movement back to an urban plan where walking is an option for most needs.

That isn't to say that it doesn't make sense to start getting serious about fuel efficiency.

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ah, yes me too

It's so obvious to provide subsidies and tax credits, rebates on box cars I was thinking someone actually got a brian in DC....ha, ha, ha.

This amazes me how one can really just crank the numbers and come up with win-win policy for corporations and the US and when that is the case, one is sure it will never happen.

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Pathetically late

This is just poor management. They are only reacting once the crisis is already in full swing.
And now they have to use european manufacturing because all our auto plants are geared towards gas guzzlers.

It looks like another milestone down the road towards the end of auto manufacturing in America.

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Whatever happened to the true economy car?

Even after revising the 1985-2007 mpg estimates to make them comparable to the new 2008 mpg estimates, the 1989 Honda CRX-HF is rated at 41 city and 50 highway mpg.

http://www.fueleconomy.gov/feg/noframes/5263.shtml

After 20 years of technological innovation, and four years of sky-rocketing fuel costs, shouldn't a new car model get at least 41/50 mpg before that car is considered to be ecologically friendly? Yet greencar.com features the 2008 Nissan Rouge (22 city/27 highway mpg) as a "Top 2008 Fuel Economy Faves." The 2008 Nissan Rouge also has a sticker price of $19,250.

http://www.greencar.com/features/fuel-economy/

Seems to me that true economy cars been pulled from the market, and replaces with the new hybrids. Major car manufacturers want us to think that 30+ mpg is something miraculous, and requires an expensive, heavy, complicated, hard-to-maintain, hybrid.

In my opinion there is more to ecological friendliness than just mpg (although the present line-up fails at even that). Hybrids have huge batteries, and disposing of those batteries is never ecologically friendly. Then there is the ecological impact of manufacturing and shipping these huge, heavy, vehicles. Furthermore, recent road tests carried out by Auto Express show that hybrids often have worse CO2 emissions than standard autos.

http://www.timesonline.co.uk/tol/news/environment/article3958376.ece

To have a real impact on fuel consumption, and emissions, new vehicles need to be affordable. Hybrids are about the most expensive vehicles on the market. How can hybrids have a positive effect of the environment, if practically nobody can afford the beasts? Even if you can afford the steep sticker price, what about the cost of maintenance? Hybrids have two engines, and use a complicated system to charge their huge batteries. I hate to even think about the cost of maintenance and repair.

It used to be common that most fuel efficient cars also had the lowest sticker price, and lowest maintenance costs. The cars where simply smaller, lighter, and required more manual operations. With smaller, cheaper, parts, and a less complicated design, the cars were cheaper to maintain. When I bought my 1992 Ford Festiva, the 30/37 mpg rating was the least of my criteria, I was also concerned with sticker price, and maintenance costs.

Why can't we do as well now, as we did 16 to 35 years ago?

1973 Honda Civic rated 35/40 mpg
1986 VW Golf Diesel rated 31/40 mpg *
1989 Geo Metro was rated 43/51 mpg
1989 Honda CRX-HF was rated 41/50 mpg
1992 Ford Festiva rated 30/37 mpg

* I got over 50mpg driving from Florida to New Jersey, while running the air conditioner.

Related:

57 mpg? That's so 20 years ago
Want to drive a cheap car that gets eye-popping mileage? In 1987 you could - and it wasn't even a hybrid.
http://money.cnn.com/2007/12/17/autos/honda_civic_hf/index.htm

Efficiency? Think Racing Cars, Not Hybridso
A renowned racing car designer has said that car manufacturers should be looking at making cars lighter to improve efficiency, rather than adding complex drive trains.
http://news.bbc.co.uk/1/hi/business/7387432.stm

Hot Cars Best Gas Milage
Welcome to hi-mpg.org. We are automotive enthusiasts and travel aficionados who also love the environment. We appreciate both form and function, all while striving to leave future generations a legacy of clean air, scenic grandeur and a continuum of natural resources. In addition: the freedom to drive.
http://hi-mpg.org/best-cars-with-high-gas-mileage.phtml

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welcome to EP!

I have another site also talking about this, mpgomatic.com
where they also are wondering what is going on and why is it technology that was around 40 years ago is taken off the market.

Whatever is going on here is pure BS and basically they are going to squeeze the middle class period, either in buying an overpriced hybrid and/or gas prices.

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one of the big problems is

that much of the efficiency gains of the past 30 years have been dedicated to improving the horsepower of the engine rather than improvements in miles per gallon.

Totally agree about hybrids. The simple fact that Ford and GM are able to put small vehicles that get better gas mileage than hybrids on the road in Europe should be a dead giveaway.

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manfrommiddletown

Saw your name and just had to say Hi. Michigan's unemployment rate hit 8.5%. They said it was summer job seekers and Amercan Axle.

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Whatever happened to the true economy car?

You bring up an excellent point - what did happen to the true economy car?

Basically the thinking among automakers, and especially in detroit, but they are all guilty to some extent, is to compensate for poor quality, efficiency and style and justification for higher sticker price by packing them full of geegaws and gimmicks.

Personally I prefer a more utilitarian vehicle with spartan appointments and an absense of useless features such as power and heated seats and other unecessary power gadgets and accessories. As my grampa used to say about power accessories - "its just more stuff that can go wrong with it"

As long as the price is right, the reliability is good and it gets me to point a to point b without a lot of expense in fuel and maintenace then thats the car for me.

Sadly very few auto makers are making such cars

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further comment

This is part of the reason the market shifted to trucks in the 80s - trucks offered spartan utilitarian reliable vehicles at affordable prices. Todays trucks are just as loaded up with power accessories and needles options as cars are - and the prices escalated accordingly, and effciency and reliability went down as maintenace and other costs of ownership rose.

The other prime advantage of simpler and basic car designs is that the average backyard mechanic was able to makes simple repairs and do the routine maintenance himself - todays cars that is virtually impossible - and you can't even get a service tech to lift the hood for less than $150

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