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Business News/ Companies / Auto Economics | Saved from retirees, GM still faces extinction
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Auto Economics | Saved from retirees, GM still faces extinction

Auto Economics | Saved from retirees, GM still faces extinction

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To grasp the wider import of General Motors Corp.’s new contract with the United Auto Workers, thumb through a copy of Zoom: The Global Race to Fuel the Car of the ­Future.

This breezy book zips into our greenhouse-gassed future to reach an unexpected conclusion: “Oil is the problem; cars are the solution."

Iain Carson and Vijay V. Vaitheeswaran of The Economist say the race is on to “fuel the car of the future". They sketch a tomorrow in which the US auto and oil industries must adapt to climate change or die. “Dinosaurs" like GM and Exxon Mobil Corp. might well face extinction if the Chinese roll out hydrogen-powered cars that emit only water vapour.

“The world is at an energy cross-roads, and the decisions made about cars and oil in America and China over the next decade or so will set the course for the coming century," they write.

The melodramatic tone is warranted. Motown—once the tail-finned pride of America—today looks like “a pension system with a car and credit business on the side," they say.

Hence the importance of last month’s contract, under which GM would shed some $50 billion (Rs1.9 trillion) in retiree health-care obligations by placing $29.9 billion in a union-run fund. This should allow Detroit to forget the past and build a future.

US oil majors, by contrast, look healthy. Yet, even as they throw off record profits, they’re running out of oil, the authors say, competing with China and India for reserves, and betting their futures on places such as the Caspian, West Africa and deep waters off Brazil.

They could increase output from unconventional hydrocarbons such as Alberta’s tar sands, which in theory hold more energy than “all the oil in Saudi Arabia".

One snag: Unconventional oil contains much more carbon and could ruin any chance of curbing global warming, the authors say.

If this sounds gloomy, read on. The authors brim with optimism when it comes to alternative cars.

Toyota Motor Corp.’s hybrid Prius isn’t the car of the future, they say, though it proves drivers will buy cleaner alternatives.

By hacking into its software, adding a bigger battery and attaching a plug for recharging, some owners now get 100 miles per gallon (100km per 2.35 litre).

Alternative cars need not be frumpy: Tesla Motors Inc. has an all-electric roadster that accelerates from zero to 60 miles per hour (96.5km per hour) in under four seconds.

Why haven’t alternatives gone mainstream? Blame it on lobbying and investments already made: Think of rigs, refineries, factories and America’s 170,000 petrol stations. Where can I fill up my hydrogen tank?

As enlightening as this book is, I do have some gripes. Swathes of the text have been lifted, word for word, from old Economist articles. No wonder passages sounded familiar.

Nor do I share the authors’ belief that the US can tax its way to a clean future by “forcing dirty energy to pay its way". “The next president," they write, “could announce a bipartisan plan to raise the price of petrol by, say, a nickel or a dime once a month, every month, for 20 years."

For a shocker, do the math.

This argument flows partly from Europe’s heavy fuel taxes, which have cut average car emissions to about half the US level. It also ignores an inconvenient truth.

Taxes pump average petrol prices up to €1.327 a litre, or $7.08 a gallon, in 13 European countries surveyed by Wood MacKenzie Consultants Ltd. Yet greenhouse gas emissions from transport—93% of it road transport—rose an average 25% in the region between 1990 and 2004, according to a recent study from the European Environment Agency.

The upshot: European regulators are now drafting a law that would force auto makers to cut carbon dioxide emissions from cars.

As an American in Belgium, I ride the train to work. Many of my European neighbours drive SUVs. Taxation alone is no panacea. Bloomberg

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Published: 10 Oct 2007, 12:50 AM IST
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