Study Shows Fuel Economy Essential for Big 3

Did they need a study to know that? With them, you never know. In Can Proactive Fuel Economy Strategies Help Automakers Mitigate Fuel-Price Risks? (pdf), Michigan’s Transportation Research Institute (UMTRI) says that "the strategy with the best financial outcome for domestic automakers is to focus on improving fuel-economy across their lineups" and that the industry's assumption that fuel economy is only important to people when gas prices are high is erroneous (they investigated future scenarios with gasoline at $3.10, $2.30 and $2 per gallon).

Walter McManus of the UMTRI said:

What is surprising is that each automaker is financially safer if they follow a proactive fuel-economy strategy, regardless of what their competitors do. Sure, Ford might not capture sales if their competitors make a better car that has high fuel economy, but what is certain is that Ford cannot capture those sales without higher fuel economy.


From the study:

At $3.10 a gallon, a marketwide proactive fuel-economy strategy could save nearly 35,000 jobs at GM, Ford and DaimlerChrysler, while costing foreign automakers with plants in North America more than 19,000 jobs. By contrast, a business-as-usual approach could result in Big Three job losses of nearly 43,000, compared to less than 1,900 job cuts at the foreign transplants.

When will automakers understand that fuel efficiency is not just important to nature, people's wallet and many countries' national security, but that it is also important to their bottom line? They've started moving, but not nearly fast enough. In the short-term, GM, for example, could probably modify and bring over fuel efficient European Opel models much faster than it can create new ones. But to really make a difference they'll have to do something like what Amory Lovins is preaching (ultra-light, ultra-efficient hypercars).

Of course, there are also downsides to fuel efficiency: When fuel prices are low, it can encourage people to drive longer distances than they otherwise would, negating the environmental benefits of the gas-sipping cars. That's why a carbon tax might be necessary if peak oil doesn't take care of keeping fossil fuel prices high.

::Can Proactive Fuel Economy Strategies Help Automakers Mitigate Fuel-Price Risks? (pdf), via ::Study: A Strategy Based on Fuel Economy Provides Best Outcome for Domestic Automakers