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Washington Auto Show panelists debate vehicle technologies and alternative fuels

At the 2006 Washington, D.C. Auto Show last week, industry experts discussed some of the major new trends in automotive technology, with a focus on how biofuels and hybrid cars could lessen foreign oil dependence and also allow auto companies to offer a wide range of choices to consumers. During today's E&ETV event coverage, Mike Jackson of AutoNation, Ed Cohen of Honda North America, Sam Kazman of the Competitive Enterprise Institute and Stephen Goguen from the Energy Department's FreedomCAR program discuss the future of the automotive sector.

Transcript

Ed Cohen: First of all there's no question that we need to be weaning ourselves off of petroleum. It is a finite resource and it's not too early to begin looking for alternatives. As much as I'd like to speak for the entire industry, I don't know that General Motors and Ford and Chrysler would feel so good about that. So let me speak solely for what Honda is doing. We're actually looking at several different approaches. First of all the internal combustion engine has got a lot of promise to it. You can make the internal combustion engine much more efficient than it is and we're spending a lot of time and effort doing that. For example our variable cylinder management system improves fuel economy by 11 percent. That's a pretty good jump.

So we haven't given up on the internal combustion engine, and as our speaker today mentioned, they're looking, BMW's looking at it using a different fuel. We're also looking at hybrids and there are various ways to go about hybrids. We have our approach. Other manufacturers have their approach. I think there's tremendous promise in hybrid technology and I think we're just seeing the beginning of that. I think also a third approach that we're looking at, are alternative fuels and that really is one of the focuses of this discussion. Honda, I think, is the only manufacturer producing a natural gas vehicle. And you think, well, gee whiz, why are you doing that? There's a shortage and great demand for natural gas. I think that that's a cyclical problem. I think that that's a problem that is going to get resolved, but more importantly we learn a lot from natural gas work. We've learned how to work with compressed gases, which of course is directly applicable to hydrogen. We developed a home refueling device for natural gas, which is directly applicable to hydrogen as well. The future perhaps being that you put this device in your garage and you use natural gas or some other feedstock to not only heat your home, but also produce hydrogen for your vehicle. So there are a lot of synergies in these technologies.

And then finally of course fuel cells. Where, again, we've been making significant progress. We announced in Detroit the other day that we're going to be producing our next-generation fuel cell vehicle, which is a very cool looking vehicle. But more importantly, the fuel cell stack has gotten very small. It's located down the console, so unlike today's fuel cell vehicles, which are very high because you have the stacks under the car, the stack in the new fuel cell that we add goes down the console and it's a lower vehicle. All of these technologies are synergistic. They're going to cross pollinate one another in terms of the technologies. And one of the reasons that we have not really hitched our star to one particular technology is that I don't think anybody can guess today where this is headed. But each product we develop, each technology we look at brings new ideas, new technologies, new concepts that then have applicability into other approaches.

Mike Jackson: I think we have a long way to go with the American consumer as far as stimulating their demand for fuel-efficient vehicles. I would observe that over the last decade all of the advances in engine technology have gone into horsepower, zero to 60 times have improved by 40 percent over last 10 years. They've gone into increasing the size of the vehicles. The average vehicle weighs 30 percent more today than 10 years ago. And yet fuel efficiency, for all of the hoopla of the past year, for the vehicles sold model year '05, improved from 20.8 to 21.0. And on the consideration list for purchasing fuel efficiency has just passed cup holders. So we have a long way to go to, the technologies exist, but one who's interacting with the consumer every day.

This is one of those issues where don't look at what the consumer is saying, look at what the consumer is doing. And there hasn't been this seismic shift yet. And then if you put into the equation, a little bit of something that Don was referring to, that this is an issue of national security, America's dependence upon imported oil. When it comes to energy this is the only thing that everybody agrees on, is that it's an issue of national security. Yet due to the lack of any federal energy policy our dependency from the last crisis has gone from importing 30 percent of our oil to importing 60 percent of our oil, half of which is coming from OPEC. So I'm saying considering the stakes wouldn't it be appropriate to announce that you're increasing the gasoline tax by a dollar a gallon? Phase it in over 10 years, so that the impact is very gradual. Make a credit where it is regressive. But it's a powerful message to the American consumer that the party is over. The technologies exist.

We have to justify the cost of these technologies. And a way to do that is to change the decision when they're at the gasoline pump. And I think this would be an important step to begin to have a coherent energy policy for America. I mean what are we going to do? Talk about wearing sweaters and hand out pamphlets? Or get serious about this issue? After I came out on this we did research. And on an issue where you could say well, you're going to get tarred and feathered, the consumer said that if an increase in gasoline taxes was part of an energy independence policy they would support it. If it was just another tax the goes against the deficit or something else they want no part of it. But the American consumer is fairly sophisticated and the idea of going off to war every 10 or 15 years on energy is not where they want to be.

Stephen Goguen: Well I would just like to say that the energy situation is a dire situation right now. We're consuming 22 million barrels a day overall, 60 percent of that is consumed by the transportation sector. And that's what we focused on, is trying to reduce that amount of fuel consumed. We go at it with a two-pronged approach. One is through displacement using alternative fuels and the other is through increasing energy efficiency of the vehicles. Clearly, I think energy efficiency shows the most promise in the near term, although alternative fuels are promising as well. But I think that most of the gains could be made through energy efficiency increases through vehicle technologies we support. We have an active program of supporting hybrid vehicle technologies. And we're also working on the edge of some advanced combustion engines that will deliver significantly higher fuel efficiency.

Those pose some really great numbers for reducing energy consumption. On the side of alternative fuels, I've worked in alternative fuel air for about 20 years and we followed a few different pathways in that timeframe. But currently, where we are right now, I think what we've evolved to, looking at other options, is the use of ethanol in light-duty vehicles and the use of biodiesel. Now I'll put some perspective together for you on this. Currently, right now, in the United States ethanol production stands at about 4.3 trillion gallons per year. The gasoline production used in the United States is about 130 trillion gallons a year, so it's about 3, 3.5 percent of the mix. What we're doing at the Department of Energy is to try to increase the amount of ethanol that can be made and also reduce the cost of making it. But right now ethanol is mostly made from, in the United States, made from corn. You run into a situation there if you use, if you try to really increase using corn as your feedstock, you could run into a situation where you'd be getting into food supply issues. So one of the things that we're going after is looking at other feedstocks for making the ethanol. It's a different process, but you use actually the mass base of the plant rather than the food product of the plant to make the ethanol.

It involves a different process using a cellulosic ethanol process to make ethanol. We feel that that's very promising and when that does actually get into the marketplace, which we believe it will, it will significantly increase the ability to make ethanol. And on the flip side, on the user side right now, I think the car companies have made some serious commitments to make these flexible fuel vehicles, vehicles that can run on gasoline, ethanol or any mixture thereof up to E85, 85 percent ethanol mixture. And at the present time those vehicles can be run on, like I said, regular gasoline. And when you're running them on E85 there's no performance give ups or anything. You'll get a little less on the miles per gallon because there is a little bit of a Btu content issue on the ethanol side. But overall they deliver the same performance. And right now, as we understand it, the incremental cost of making these vehicles is significantly low, to the point that it could be rolled into the cost without much, where the consumer probably wouldn't even recognize it. We have some resources committed to trying to build up the ethanol infrastructure.

Right now it takes about, on average, we've calculated about $13,000 per fueling station to offer ethanol. That would be on the cheap end. On the high end you can go as high as somebody said $60,000 if you have to put tanks in and so forth. But let's just say on the cheap end you could do it for $13,000. We've got some monies committed to try to partner up, and the car companies have actually partnered, are partnering with us to try to get out there and make ethanol more available. You'd want to have it quote 'readily' available. But the benefit is if you buy a flexible fuel vehicle and you want to do the right thing and use the ethanol you might have to look around a little bit, but you can find it. And if you get stuck you can run it on gasoline as well. Incremental cost to the vehicle is zero. So as we get to the point that we begin to increase the supplies of ethanol, and ethanol right now is very cost effective. I mean during the, when the gasoline prices hit over $3 we had situations around the country, we could call some people, people were actually filling up their gasoline cars with ethanol because it was cheaper at the pump.

They were having some problems because they weren't set up for it. But it was to show you that people are pretty much educated on this and they're looking at these things as options. So that's on the light-duty side. Yeah, the ethanol makes a lot of sense on the light-duty side. We're looking at these advanced combustion regime engines, which will significantly increase the efficiency of the vehicles as well. On the heavy-duty side, on the diesel side, and diesel is beginning to look as a promising future for light-duty vehicles as well, so I'll just say diesel. We're looking at driving it with Bio diesel which can be made also from a food-based feedstock. In this country it's produced from soybean, its soy methyl ester, but we have an active program in that area. It doesn't show as much promise as ethanol for fuel displacement. The numbers are lower than ethanol. For instance on the biodiesel side, comparing it to diesel production, right now there's 37 trillion gallons a year of diesel fuel made, and right now we're producing about 75 million gallons a year. We are producing enough diesel, biodiesel fuel right now probably just to provide the state of Minnesota with the laws they have in place for using bio.

Sam Kazman: Well, whether or not people's expectations regarding continued mobility, continue to ease mobility in this country, have to change. It's a tough question, but I'd say that if they have to change natural events are much better agents of change than government is. I mean think what Katrina did to gas prices. If the government had announced that it's going to do that to gas prices, that is it sees some shortage looming and it decides it's time to start weaning us off gasoline, as Mike Jackson suggests, I think the consequences would have been far different. I think many people's anger would have been totally different in nature. With Katrina it was a huge upset, but it's something that passed in a relative manner, whether it repeats itself is an open question. But you did not have people feeling that something had been pulled on them, something artificial.

And so I'd say if in fact we're facing dramatic changes in energy supply pictures, let those changes happen. Let them affect prices and let people respond and really keep government out of it. I think the real threat to mobility is not a shift in energy supplies, but it's a shift in intellectual climate. Back in the early 1800s, when railroads first begin to spread across Great Britain, the Duke of Wellington sneered that railroads will just encourage the commoners to move about needlessly. Now today the attitude in some circles isn't that it's railroads in which the commoners are moving needlessly, but it's SUVs in which they're moving about needlessly. In a sense we've got not the Duke of Wellington, but the Duchess of Huffington, Arianna Huffington and her whole Bush, you know, this is separated by a century and a half, but I think at its base you've got the same sort of aristocratic attitude. That people just don't really have to do all of the moving that they're engaging in. I think it's quite similar.

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