Energy Department Awards Advanced Technology Loans

Secretary Chu of the Department of Energy has just announced a new $25 billion loan program for the automobile manufacturers. The loan program is designed to help automakers meet the new CAFE standards, which will increase the average fuel economy of new cars from 27.5 to 35 mpg by 2016. The only way to do that is to increase production of fuel efficient automobiles. and reduce production of gas guzzlers.

These are the companies and the amounts that have been announced so far!

• Ford $5.9 billion.....for will use the money to retool five plants, which will improve the mileage of two million cars produced annually.


• Nissan $1.6 billion....to modify its Tennessee plant to produce zero-emission electric vehicles and the lithium-ion battery packs. They estimate that production will eventually ramp up to 150,000 electric vehicles annually. Currently, Nissan manufacturers their full size pickup and SUV's at the plant.


• Tesla $465 million....which will be used to build the Model S plant in Hawthorne, California.

Additional funds will be allocated to both large and small manufacturers and part suppliers per Secretary of Energy Steven Chu. The Department of Energy has indicated that these upgrades should lead to fuel savings of more than 20 million gallons per year.

SUMMARY:

President Obama has set a new direction with fuel efficiency with the new CAFE standards. Now his backing up his new laws with something to help the beleaguered auto industry.

The U.S. has mismanaged it's energy policy for the last forty years....now that oil is getting expensive we are having to pay the piper....higher energy prices. Brazil has gone from a substantial importer of oil to an exporter of ethanol. They have managed their energy policies wisely!

The importation of substantial amounts of oil is depleting the U.S. of substantial amounts of cash....if this goes on for to long it will be the largest transfer of wealth in modern history. Translated that means that the U.S. will become a second rate country with the living style to match.

So, I support President Obama and Energy Secretary Chu in doing the right thing! We as a country need to find ways to improve our energy usage and eventually achieve energy Independence. This is such a major project that only the government involvement will allow it to happen.

This maybe the second step to the revitalization of the U.S. auto industry....and the possible resurgence of American automobile production.

Obama Sets Fuel Mileage and Emissions Regulations

This man will have a major impact on the vehicles that we drive! Changes are coming that are the largest since the invention of the automobile. I do not agree with him on many issues, but regarding the issues of fuel economy and pollution standards, the U.S. has to be the world leader. Stay tuned for my series Paradigm Shift, which outlines all the changes occurring that will change our vehicles, the auto industry and the way we live!

He is the first president that is truly an environmental giant. On Tuesday, President Obama will announce new green house pollution standards and national fuel economy standards (CAFE). Obama began this process on the seventh day of his administration. He ordered the Transportation Department to establish higher automobile efficiency standards starting with the 2011 year.

The new standards are being set so the auto manufacturers have a solid target regarding emission standards and fuel economy standards (CAFE). They have previously engaged in litigation and engaged in pressing congress to hold the EPA in check.

The CAFE standard was established in 1975 in response to the Arab Oil Embargo. Under the proposed new CAFE guidelines auto manufacturers would be required to increase fuel economy by 5% annually from 2011 -2016.

Apparently, Obama has lined up support from state governments and many of the domestic and foreign automakers. California had been seeking permission to establish their own emission standards for automobiles sold in California. This will set a federal standard that all the states must follow. California Governor Arnold Schwarzenegger will attend the announcement.

He is raising the CAFE standards to reduce the U.S. dependence on foreign oil and to cut green house gases caused by automobiles. The U.S. imports approximately 70% of the oil used in the manufacture of gasoline! It is projected that the price of oil will skyrocket again once the world economy turns around.

SUMMARY:

This will impact the automobiles that we drive in the following ways.

(1) Auto manufacturers will cut production of high output motors...such as the Chevrolet ZR1, Chevrolet Camaro SS, Mustang Shelby GT. General Motors has already transferred the engineers, who work on high performance vehicles like the Chevrolet ZRI, Cadillac CTS-V, to other units. These types of cars will be phased out in their normal life cycle but not replaced.

(2) They will begin manufacturing smaller lighter vehicles. In the SUV class Crossovers will replace most SUV's.

(3) Auto manufacturers will begin manufacturing more hybrid vehicles, electric vehicles.

(4) Auto manufacturers will start manufacturing diesel powered vehicles.

(5) Turbo engines will begin a resurgence...Ford is currently starting to manufacturer a V-6 turbo series of engines with the power of the a V-8. These will also be used for pickups and SUV powertrains.

(6) These government mandated changes will cost the consumers an estimated $1300 plus per vehicle.

White House Shreds Auto Restructing Plans

President Obama today announced that they have turned down the restructuring plans submitted by General Motors and Chrysler. GM apparently did not meet certain promises made in exchange for the $13.4 billion in government loans. Obama cited a failure in leadership in Detroit and Washington. My February 16th post GM Time To Pay the Piper outlines GM's misfortunes.

Apparently, the automotive task force was not convinced that the revised plans were viable, therefore the auto companies should not receive additional bailout money.

There have been over 400,000 jobs lost in the automobile sector in the last year. That includes manufacturers, dealers, and suppliers. Currently, Michigan which has the most automobile employees has over 10% unemployment.

“We cannot, we must not, and we will not let our auto industry simply vanish,” the president indicated in his speech. Obama will give GM 60 days to submit a new viability plan meanwhile providing operating money to GM. The automobile task force will find new management for GM, CEO Rick Wagoner was asked to resign yesterday. Fritz Henderson, GM's President and Chief Operating Officer will be the new CEO. New directors will now make up the majority of the GM Board of Directors If the new restructuring plan is approved permanent loans will follow.

Chrysler has less time than GM, they must reach a deal with Fiat SpA within thirty days. Fiat will be allowed to buy up to 35% of the struggling automaker. The Fiat deal would give Chrysler some small car designs with good fuel economy. Fiat would get stock for transferring the technology. If Chrysler is successful $6 billion in permanent loans would follow.

It is possible that if one or both companies do not put together a successful business plan, the auto task force will sponsor a structured bankruptcy. This would allow the companies to operate, reduce debt and restructure without fear of creditors.

This is a sad day for the auto industry! There will probably be many more people laid off due to this severe downturn. I am of the opinion that a government sponsored bankruptcy is the only way to get either of the companies turned around. GM will probably survive in a much smaller reorganization, Chrysler may not survive!