As the White House pushes for changes to the corporate average fuel economy program (CAFE), some automakers are taking matters into their own hands by improving the efficiency of their vehicles. During today's OnPoint, Edward Cohen, vice president of government and industry relations for Honda North America, explains why CAFE should be modified, and discusses Honda's plan to boost sales of hybrid cars. Plus, Cohen talks about the automaker's strategy when it comes to alternative fuels such as hydrogen, diesel and ethanol.
Monica Trauzzi: Welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Ed Cohen, vice president of Government and Industry Relations for Honda North America. Also joining us today is Greenwire reporter Alex Kaplun. Ed thanks for joining us.
Ed Cohen: Delighted.
Monica Trauzzi: I want to start off by discussing Honda's 2010 Vision initiative. It's an aggressive plan to not only increase production in North America, but also work on some environmental programs.
Ed Cohen: Correct.
Monica Trauzzi: Why has Honda decided to take the initiative to improve on fuel economy rather than wait for a government mandate?
Ed Cohen: Well Honda has traditionally been an environmental leader. If you look at the technologies we've introduced, year after year after year we have always been ahead of the curve in terms of meeting government regulations. We think that this is a critical time in U.S. petroleum consumption initiatives and we want to be a part of it.
Monica Trauzzi: How much of the decision is being driven by the expectation for higher CAFE?
Ed Cohen: Well, I think it's a core philosophy of Honda to excel environmentally. It's a challenge to our engineers. It's part of our DNA to use a trite phrase. So it really is, the reward is the achievement as opposed to meeting regulations or exceeding regulations.
Alex Kaplun: But the increase that you guys have talked about is roughly 5 percent, which is something like 1.5 miles per gallon. That's an increase by 2010. You know, some environmental groups say that the auto industry can get to somewhere in the mid-30s relatively easily without a lot of sort of changes. Why not push for something even more aggressive to get your fleet up there into the 30s?
Ed Cohen: Well first of all let's think of what our commitment was. Our commitment was 30.6 miles per gallon for the entire fleet by 2010. Keep in mind what the standard is. The standard is 22.5 for light trucks, 22 for trucks, 27.5 for passenger cars. So we already are well above the standard and we're going to continue to push beyond the standard. And that's why we are bringing these new technologies to the market.
Alex Kaplun: One of the things that the administration has done recently is they changed the CAFE standard for SUVs to sort of reflect the vehicle's size. They're talking about doing the same thing for passenger cars ...
Ed Cohen: Right.
Alex Kaplun: ... assuming they can get legislation through Congress. And kind of one of the explanations that's been given is that this is more fair. The domestic automakers kind of make bigger cars. What's Honda's viewpoint on that? Do you feel that it kind of hamstrings you a little bit, this new system that's sort of, at least partially designed for the American automaker?
Ed Cohen: No. It doesn't hamstring us at all. And in fact, we're delighted with the way NHTSA did the truck attribute standard. We were arguing strenuously that if the government was going to do an attribute-based standard that it used safety as opposed to weight. And NHTSA did that and we think that's a good change. We'd like to see the same change actually for passenger cars.
Monica Trauzzi: Let's switch gears to hybrids for a moment. Sales for the Accord hybrid dropped this year. Why did sales drop when presumably they should be on the increase because hybrids at an all-time high popularity?
Ed Cohen: Well, I think that's a very interesting question Monica. We, obviously, are a little bit disappointed at how the Accord did, but our explanation for this really is that we emphasize performance over fuel economy. And what our future trend is going to be, as reflected in the fact that we're bringing this very affordable hybrid to market, smaller than the Civic, is to try to integrate the hybrid technology in smaller vehicles and use it primarily for fuel economy purposes.
Alex Kaplun: One of the things that's been talked about a lot is there's some question about exactly how popular hybrids are. People say the Prius did really well, but maybe it did really well because it's very unique looking and it has sort of a cool factor, that celebrities drive it. I mean do you think there's a lot of demand for hybrids that basically look like any other vehicle but just have a hybrid slightly more fuel-efficient engine?
Ed Cohen: Well, I think if the Civic hybrid is any example the answer to that question has to be yes. It's exceeded our expectations in terms of sales. There's a back up in the marketplace for them. I think the key to hybrids, like almost anything in the market, is that it has to make marketplace sense. The cost differential between the hybrid and the traditional technology has to be sufficient for consumers to believe that it makes a good economic deal. And performance has to meet their expectations.
Alex Kaplun: So how do you bring those hybrids into the mainstream? You talked about a low-cost vehicle do you plan to introduce, is that sort of a big part of your plan?
Ed Cohen: Exactly. We're talking about 100,000 vehicles a year in North America, mostly in the U.S. when we bring that new hybrid to the market. And it's going to be affordable and it's going to perform well and it's going to meet customer expectations in terms of being a useful vehicle.
Alex Kaplun: Honda has talked a lot about being sort of the leader in this hybrid arena, but now you have a lot of American automakers jumping on board, now that they see how potentially important fuel efficiency is. How concerned are you that you're kind of losing your advantage in this market?
Ed Cohen: Well, first of all I think it's a good thing that other manufacturers are bringing in hybrids. We were the first of course and we've brought in several different generations. And we've announce this new vehicle that we're bringing in as well. And I think that it's always good when other companies emulate what you're doing, but importantly, in this area where the marketplace is going to benefit, that is to say customers are going to have choice. There's going to be better fuel economy. That's a very positive sign and we welcome the competition.
Monica Trauzzi: Let's discuss fuel-cell vehicles for a moment. Honda has already released several generations of fuel cells in the past couple of years. How far are we from having a fuel cell vehicle that's not only affordable, but that can compete with traditional vehicles?
Ed Cohen: I think realistically we're probably talking two decades. And there are two problems. First is the vehicle itself. And the Honda FCX is a very successful vehicle. It drives nicely. It's got good performance. It's been reasonably, it's been very reliable actually. But it's also very expensive. And we have to be able to get the cost of that vehicle down considerably. The second problem is going to be the hydrogen source. There's lots of hydrogen around. It's all over us. It's hooked to, it's in water. It's in the air. Unfortunately it's hooked to other elements and we have to find an inexpensive way to produce the hydrogen and get it distributed. So we've got a ways to go, but it's a very promising technology.
Alex Kaplun: One of the big issues with hydrogen technology that people talk about is getting the infrastructure out there, not just the vehicles, but also the fueling stations and whatever else. Can you talk about how big of a challenge that is? And also, I mean, is that an area where the federal government really needs to step in and say, you know, put a lot of things out there to make it easy to bring fueling stations across the country?
Ed Cohen: I think it is a very big challenge. And it's appropriate that the federal government is funding hydrogen research. It's appropriate that private industry is working hard in the area. Honda has a unique approach and I believe we're the only auto manufacturer looking at the fueling issue. We have two distributed power systems that we're working with in Torrance, one making hydrogen from natural gas and providing heat and energy for the home. The second, also very exciting, is taking it from water; using Honda developed solar cells for the energy source, producing hydrogen for the vehicle, heat and energy for the home. Zero emissions, zero greenhouse gas from the production of the hydrogen to the burning of the hydrogen in the vehicles. Zero emissions well to wheels. And that's why I say this is very promising and exciting technology.
Alex Kaplun: One of the other things your company is working on is, I believe, a diesel engine that can meet U.S. air quality regulations. I mean how far away from you from introducing something like that? And do you think there's still a market for diesel technology in the U.S. given sort of some of the negative experiences a few decades ago?
Ed Cohen: Well, first of all I think that there is a terrific market in the U.S. because diesel inherently gets 30 percent better fuel economy than gasoline. We have announced that we'll be bringing a diesel vehicle to the U.S., four-cylinder, in three years. We've also announced our intention that it will be the cleanest diesel on the market. We also are doing research on a six-cylinder diesel. With the low sulfur fuel that starting to be phased in now I think it's very promising.
Monica Trauzzi: At the same time, U.S. automakers seem to be pushing flex-fuel vehicles and also E85. And there's also a push on the Hill for this as well. Why has Honda not pushed for this technology as much as the American car companies? And is Honda at all fearful that once E85 becomes more mainstream that Honda will be locked out of this technology?
Ed Cohen: No. First of all, technologically it's not a problem for us to make a flex-fuel vehicle. We already do it in Brazil where the market is very mature, where the fuel is price competitive, where it's readily available. So the problem is not the technology. We think ethanol, as well as many different approaches, is a potential solution to America's petroleum challenge. But in order for any fuel to the successful, or indeed any technology to be successful, it's going to have to meet the marketplace test of being economically viable and being available to consumers. At the moment all the E85 vehicles that are out there are burning gasoline; 99 percent plus of the fuel being burned in E85 vehicles is gasoline. There are only 600 ethanol fueling stations. There's a lot of promise here. And the second generation of ethanol made from cellulosic fiber, I think is very promising. Honda is looking very closely at flex-fuel vehicles. Now we've made no decision.
Alex Kaplun: Something that you just touched on is that there's a lot of different technologies being explored and we've talked about a bunch of them, you know, fuel cells, ethanol, hybrids, plug-in hybrids, natural gas vehicles. I mean how feasible is it to, it looks like we're headed towards a future where you have three or four different types of fuel potentially available. I mean how feasible is that from an infrastructure standpoint, a logistical standpoint? Should the federal government step in or should automakers step in and say, look, we're going to be working on this. It's going to be our one fuel of the future?
Ed Cohen: Alex that is really the $64,000 question. First of all I think we're going to have to let these technologies mature. There's so many questions about every one of these technologies. We make a natural gas vehicle. We've talked about ethanol. We've talked about hydrogen. We've talked about diesel. We've talked about obviously gasoline. And I can't tell you which one of these is going to win the day. And I think it's more likely than not that no single technology is going to win the day. That I think we're looking at a future of multiple technologies that are addressing our energy needs.
Monica Trauzzi: Ed, we're out of time. Thanks for joining us.
Ed Cohen: Thank you. This was great. I appreciate it.
Monica Trauzzi: This is OnPoint. I'm Monica Trauzzi. Thanks for watching.
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