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Should the U.S. government cut subsidies for corn ethanol? Comments by Ford CEO Alan Mulally hint at that, saying the government should support "one technology" (electrification), rather than spreading funding.  (Source: Hollandtown: Holland Farm: Corn Harvest)

More controversial is the proposal to block states like California from self-governance when it comes to setting stricter fuel economy standards.   (Source: treehugger)

Alan Mulally saved his company from bankruptcy, while peers GM and Chrysler went through government takeovers and restructuring. Mr. Mulally warns that the auto industry is seeing slowing sales this quarter.  (Source: Bill Pugliano/Getty Images)
Executive would like to see states banned from setting their own arbitrary standards

Ford Motor Company (F) CEO Alan Mulally is one of the most respected figures in the auto industry today, having been the only head of a member of the "Big Three" U.S. automakers to save his company from bankruptcy in the 2007-2008 financial crisis.  However, his new comments will certainly be considered controversial by politicians, lobbyists, and citizens alike.

I. Block States From Self-Governance of Fuel Economy?

Mr. Mulally met early Tuesday morning with House Speaker John Boehner (R-Dayton, Ohio); Rep. Fred Upton (R-St. Joseph, Michigan), chairman of the House Energy and Commerce Committee; and Rep. John Dingell (D-Dearborn, Mich.), a key supporter of the Detroit automakers. 

Later in the afternoon he attended a meeting co-hosted by Reps. Dan Benishek (R-Crystal Falls, Mich.); Bill Huizenga (R-Zeeland, Mich.); and Jeff Duncan, (R-Laurens, S.C.); with Rep. Hansen Clarke, (D-Detroit, Mich.) also in attendance.  He also met with Bill Daley, the White House chief of staff, and David Plouffe, senior adviser to President Barack Obama in a separate session.

At the meetings Mr. Mulally urged lawmakers to take Congressional action to implement a single consistent fuel economy standard and block states from proposing their own stricter standards.  

Despite the fact that Congress is indeed preparing a new set of fuel economy standards, which would extend the Corporate Average Fuel Economy (CAFE) through 2025, the proposal to strip states of the right to regulate their own standards to a stricter threshold is controversial.  

First, opponents argue that it strips states of their right of self-governance.  This is a place where Republicans, in particular find themselves in a philosophical dilemma.  Their party has recently run on a platform of state rights, but they have traditionally opposed letting states regulate their own emissions, with former Republican President George W. Bush moving to block California and other states from doing so.

Second, the decision would run afoul of a 2007 Supreme Court ruling 
in the case Massachusetts v. EPA, which concluded that states had the right to set their own stricter mandates.  The ruling allowed California to effectively sue the federal government and force it to stop obstructing its standard.  In the wake of the suit, President Obama instructed the U.S. Environmental Protection Agency and Congress to allow states to set their own standards.

The issue will likely be pushed.  Even as the U.S. debates the future of CAFE, California, the nation's most populous state, is moving to set its own stricter standards for 2025.  It will likely be followed by several other states that adhered to California's previous emissions policy, adopted by President Barack Obama for the entire nation.

II. Ford: Back "One Technology"

Mr. Mulally also urged members of Congress to back "one technology" if they were serious about alternative energy vehicles.

Ford Motor Company officials did not specify what this "one technology" was, but most construe it to mean electrified vehicles.  Ford has been less enthusiastic than its peers about the "other" leading alternative vehicle technology -- ethanol fuel.

The potentially implied proposal to ditch federal subsidies of ethanol and corn farming is a controversial one -- among corn farming states, at least.  Farmers have grown fat off billions in yearly government subsidies, with a major chunk of it coming from ethanol grants and mandates.  In total corn farmers drew $73.8B USD from 1995-2009 from the U.S. federal and state governments.

The pull of the corn farmers is particularly strong in the U.S. Senate, where the numerous low-populous farm states have a much larger representation.

The proposal may also target other alternative fuel technologies -- such as compressed liquefied natural gas (CLNG), which some say could supplement traditional petroleum, much like ethanol.

III. Ford in Trouble?

One thing mentioned by Mr. Mulally may trouble Ford investors.  He would not comment on Ford's Q2 2011 sales, but did say that the market is "slowing down … it's a little less than what we hoped for at the beginning of the year", according to The Detroit News.  

That could be a trouble sign as Ford and other automakers had seen strong sales over the past couple quarters.

If the American automakers are indeed starting to struggle once more, that could make the debates over ethanol and emissions even trickier.  After all, the automakers say that a strict 62-mpg standard could "kill" the American auto industry.  And any money in ethanol subsidies will likely come at the expense of government funding of electrification efforts, which the automakers will likely need to satisfy CAFE.



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Why
By Dr of crap on 6/1/2011 12:26:34 PM , Rating: 3
"Mr. Mulally also urged members of Congress to back "one technology" if they were serious about alternative energy vehicles."

On this he is wrong.

We need to back all forms of different possible alt. energy that can move cars down the road. Who's to say what might happen in one or more of these and become the dominant player.

Electric cars, IMHO, is not one of them. They have a small niche and that is all. Why not get others more money, like CNG, which is more viable than EV will ever be.




RE: Why
By bah12 on 6/1/2011 12:58:52 PM , Rating: 5
quote:
We need to back all forms of different possible alt. energy that can move cars down the road.
Agreed, but as long as "us backing" them means R&D not subsidies. Subsidies are not effective. If we put 50% of the costs of the subsidies into R&D instead, we'd be way better off and out a lot less money.

Put my tax dollars into research, let the market decide if the results of that research are viable.


RE: Why
By Aikouka on 6/1/2011 1:25:07 PM , Rating: 2
I feel the same way, bah12, and amusingly enough... I was actually talking about this with someone earlier! I'd really prefer to see tax dollars pushed more toward research and development rather than providing tax credits for hybrid vehicles. Essentially, we shouldn't be propping up technology that can't sustain itself. If people consider hybrids too expensive without the tax credit, the R&D could be (partially) allocated toward lowering the cost of some of the components or even working out a cheaper method of fuel savings.


RE: Why
By chick0n on 6/1/2011 8:57:05 PM , Rating: 2
sorry, that just won't happen, cuz the government always decides what "they think" we want, not what we really want.

they should just get rid of all subsidies, including REGULAR GASOLINE. and spend all those money into R&D. but hey again, they always give us what they wanna give us, not what we actually want, so they can all keep partying everyday while we work our ass off to pay for them.


RE: Why
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RE: Why
By wookie1 on 6/1/2011 2:15:32 PM , Rating: 2
Well, once the taxes are collected from you, you're no longer free to direct how the $ are spent. This is part of the problem with these subsidies. Whether some gov't agency directly does the R&D, or it is a subsidy to a private company to do R&D doesn't really matter that much. Non-subsidized companies have a competitive disadvantage, and so you'll get the non-optimal solution favored by some beaurocrat whose motive may just be to help some of his friends or secure a better paying job after leaving the gov't.


RE: Why
By rbuszka on 6/1/2011 1:08:49 PM , Rating: 3
Apparently you're not even the doctor of 'crap', because nobody with a Ph. D would close their eyes to the fact that every major technology transition is a one-to-one move, not a one-to-many move. Eventually, consumers will demand that the industry standardize on a single technology before they will adopt it. We essentially have one vehicle technology right now, and a couple that are still (by the numbers) on the lunatic fringe. Hybrid vehicles aren't a true technology transition because they simply add another technology (batteries and electric motors) to the existing one (a gasoline engine and a mechanical drivetrain), which dilutes the effectiveness of the new technology. We need to move from one vehicle technology to another vehicle technology, and in order to do that, we need to pick the new vehicle technology that has the most technical merit.

The surest way to kill alternative fuel efforts is to spread those efforts among all available technologies so that customers and investors have no idea which one to invest in so they won't be left out in the cold when the entire industry standardizes on one technology. Because so many separate players (vehicle manufacturers, refueling stations, parking providers, car dealers, the federal government) all need to be able to cooperate for the whole system to work, we need one technology that we can agree upon as the way to go. I personally like the idea of compressed natural gas, simply because of its abundance and the minimal cost in adapting the existing technology, but I think that electric vehicles ought to get the investment so they can grab a larger amount of market share.


RE: Why
By wookie1 on 6/1/2011 2:27:25 PM , Rating: 2
Who decides what technology has the most merit? How will that person know
1) How to meet the diverse needs of 300M people
2) What business models will allow companies to be profitable to meet these needs

Technocrats suffer from the "knowledge problem".


RE: Why
By YashBudini on 6/1/2011 5:36:05 PM , Rating: 1
quote:
Technocrats suffer from the "knowledge problem".

And they think they resolve that by listening to lobbyists and often having them write the laws.


RE: Why
By Dr of crap on 6/2/2011 11:06:19 AM , Rating: 1
I disagee with your one tech statment.

I can see EV being used for in town traffic.
I can see CNG or pure ethanol for long haul driving.
Maybe these second fuel source cars as the second car.

Yes you need to standardize the way that the car is fueled up. And there might even be a dominant fuel, but there can also be the other fuels that have their area that works best for.
A RX8 has a different type of engine, yet it sells. We can have different types of engines and fuel to burn/use. The market will tell us which works and for whom.

This isn't the Dems against the Reps.
We can have more than two choices for the fuel that moves us around.
What I'm saying is lets give R&D money to all alternative fuel possiblites and see which ONES work out the best in the market they make the best choice for. Some will choose EVs, some will choose CNG, some gas.


RE: Why
By wookie1 on 6/1/2011 2:11:38 PM , Rating: 1
Of course he wants this. It shields him from having to compete in the market. If everyone is forced to only produce what Ford is already tooled up to produce, it is easier for Ford to compete. This is precisely why no technology should be "backed" specifically. The gov't funding research only to this failed ethanol fuel only crowds out research into viable alternatives. Because the gov't and any other centralized organization will not have information about all of the R&D taking place in the world, as well as the needs and desires of the end-users, the likelyhood of any gov't backed solution being close to optimal is about 0. BUT, the gov't can force us to consume sub-optimal solutions while a free market would not be able to do this for long as better solutions would replace sub-optimal solutions. The best products at the best prices happen when both the buyer and seller freely agree to the transaction.


RE: Why
By Targon on 6/1/2011 4:53:15 PM , Rating: 2
The issue is more about where to put R&D money, so Ford doesn't need to do R&D for: Flex Fuel, EV, fuel cells, etc. With all of these different areas, it makes it VERY difficult to know what to work on. I hate this idea that you have 10 percent ethanol, the threat of 20 percent ethanol being forced down our throats, possible EVs(which may not even have a standard way to plug them in at a "refueling station), fuel cells of various types, etc. The sooner there is a solution that doesn't require a different version for every state in the country, the better.

California and New York had their own unique fuel blends for a while, and while more and more states have jumped into the game of forcing fuel additives, it makes it hellish to design an engine that will not have problems in one or more states. You have the "PZEV" states, then you have the others, gas is a moving target, and if you buy a car today, E10(10 percent ethanol) is what the auto makers need to target, which means putting a 20 percent ethanol blend in will make for worse fuel economy than if the engine were designed and tuned for THAT percentage of ethanol.

I wouldn't mind if there were a federal "every state has the same gas formulation", and more of a push to eliminate forcing auto makers to make special versions of their cars for these select states.


RE: Why
By YashBudini on 6/1/2011 5:29:11 PM , Rating: 1
quote:
The sooner there is a solution that doesn't require a different version for every state in the country, the better.

But you don't know if the only solution is diversity. It seems that way right now.


RE: Why
By Targon on 6/2/2011 11:52:35 AM , Rating: 2
Auto makers right now is forced to sell two versions of every car, one for PZEV states and one for others. Making it where some states require E20(20 percent Ethanol) will add yet another version, and just adds to the complexity of the order and manufacturing process. Looking for new solutions is a good thing, but when each state can implement arbitrary rules, what that is going to do is cause the auto makers to eventually abandon making cars for certain states, and that is not good.

The federal government already is pushing all sorts of requirements, so having states like California and New York pushing yet more requirements is just going to hurt the auto industry as a whole.


RE: Why
By wookie1 on 6/2/2011 1:33:06 PM , Rating: 2
I don't think that every state having the same gas formulation works very well, at least with these oxygenated fuel requirements. In AZ, the hot summers require different additives that aren't ideal in other climates. But, maybe you're onto something if you meant that maybe all states ditch the oxygenated fuels and just run gasoline.


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