Reprinted from a December 16, 2008, letter to the Canadian (federal) and Ontario (provincial) governments.
I believe that we should spend as much as is necessary to save the Canadian automotive industry.
But not a penny more.
Any restructuring package obviously needs to make financial sense, but in the end, this isn’t just about money.
- It’s about self-sufficiency and self-reliance.
- It’s about our ability to service the changing needs of our various domestic markets through public and private industry.
- It’s about the viability of our economy during challenging economic times and its sustainability over the long term.
- It’s about being able to move people and things reliably and efficiently from Point A to Point B.
In a country as large and wintry as Canada, the argument for having an automobile is profound ~ sometimes, if only because they have built-in heaters.
If Only We Had Seen This Coming
Imagine if, being able to see this far ahead five years ago, we had instituted a Canadian Automobile Reinvention Initiative in this country. Had this initiative targeted an average 10% fuel efficiency improvement within five years, taxpayers (individuals and corporations) would have been able to retain approximately $4 billion in obviated expenses over the past twelve months. And they would save at least that much in every subsequent year – if not more, due to both incremental and revolutionary advances in technology over time. But let’s return to the present: How do you expect things will look five years from now?
We probably can’t spend our way out of the current economic crisis, but we just might be able to invent a way out of it.
Canada has long been an exporter of ingenious technologies in fields ranging from aerospace, communications and nuclear science …to zippers, insulin and foghorns. Innovation has often been a hallmark of Canadian endeavour – and I don’t see any reason why that shouldn’t apply especially well in this case.
The next significant stage in the development of hybrid [gas:electric] vehicles will be “serial hybrid” technology. (Please have your techies fill you in on this.) The gains in efficiency we witnessed with the introduction of our current crop of hybrid vehicles will be viewed as small in comparison to the next generation of these automobiles. Efficiency gains of at least 30% within 10 years have been widely (and very conservatively) projected. More confident forecasts anticipate fuel economy in the range of 200-500 miles per gallon (at least for small passenger cars) within twenty years!
One of the problems with implementing serial hybrid technology (requiring the electric motor to be the sole engine engaged to the drivetrain) has been the relative absence of high-efficiency variable torque electric motors, but this is now about to change. There have been a number of patents filed over the past few years for devices that will deliver appropriate torque and rotor speeds under the full range of typical motor vehicle operating conditions. Prototypes and production models of some engines are already available. Some of these designs will not only reduce vehicle weight but also the number of parts required to construct the drivetrain. Brake wear will also be reduced in most instances, only adding to the long list of potential benefits.
Recouping the Costs of a “Bailout”
If we’re looking for ways to ensure that we’re paid back for our assistance to the automotive industry, then we must consider increased fuel efficiency to be one of the most effective (though least visible means) of achieving that goal.
Of course, any government financing extended to Canada’s ‘Big Three’ would also require a proper repayment schedule and a reasonable interest premium.
High fuel prices are a drag on the global economy and constitute an insidious form of pseudo-taxation for individuals and corporations alike. Less fuel used, means more money available for personal discretionary spending and more capital for industrial restructuring.
It can easily be argued that the cost of doing nothing is potentially far greater than the cost of a reasonable auto industry reinvestment plan. The broader automotive sector (parts manufacturing, etc.) is particularly sensitive to effects cascading from production slowdowns or stoppages by the ‘Big Three’ – not to mention the deficit in which such companies would immediately find themselves in the case of one or more bankruptcies among the major automakers.
Last time I checked, a penny saved was still a penny earned. By that standard, we stand to make a pretty penny by increasing vehicle fuel efficiency and improving market stability and confidence. And then there’s the matter of making our automobiles more competitive in the world market (and, accordingly, more competitive against foreign products in our own market) by reducing the cost of vehicle production and lowering basic vehicle operating costs while increasing reliability through improved drivetrain simplicity.
Energy Efficiency as a Matter of National Security
The current global economic malaise is much bigger than our experience of it in Canada ~ heck, it’s big enough to subdue that vast, economic giant to our south. Its effects stretch completely around the world, leaving few–if any–places untouched. As we have witnessed in both economic and military terms in recent years, insecurity anywhere affects security everywhere. Hence, a global problem is also a Canadian problem.
When a government, like the one in Tehran, can provoke a worldwide petroleum price spike by simply threatening to close the Strait of Hormuz, we are left with few options to directly combat such a ‘security tax’. But increased fuel efficiency acts as a direct hedge against this form of economic ‘attack’. Canada may be energy self-sufficient, but many of our best friends and trading partners are not. And they will become increasingly dependent upon us (and our resources) as time rolls on.
Many electric motors manufactured today use Rare Earth Elements (such as neodymium) in their Permanent Magnet motor assemblies. This constitutes an additional risk since more than 90% of worldwide REE production comes from China whose production is expected to crest in just a few years’ time — just as their own industrial consumption begins to outstrip their ability to mine more of these critical elements. There are several variable torque electric motor designs which do not use REEs and would therefore not be sensitive to shortfalls in availability, or even possible embargoes.
Perhaps it’s time for a ‘Made in Canada’ solution
If we were to make available $1 billion dollars for each of our three main domestic automakers in the form of government-guaranteed lines of credit, this would allow each of the manufacturers to continue operations while only drawing on funds as they need them.
We could also offer a grant to each company of another $1 billion if they would participate in a joint effort to improve the efficiency of Canadian automobiles through the development of a uniquely Canadian, next-generation, serial hybrid vehicle architecture.
A development corporation (funded to the tune of $1 billion ~ making our running total $7 billion) could be formed to retain any unique intellectual property generated by this co-development work, in which all participating companies would share. Stakeholders would include the ‘Big Three’ and the Government of Canada, but direct positions would also be open to qualified regional and national manufacturers, as well as to key international technology contributors. Eventual revenues from the licensing of these technologies to the world market would enrich each of the participants in direct proportion to their technical contributions to the project.
I haven’t mentioned the environment as an excellent reason for limiting our release of greenhouse gases and other pollutants, but the link is obvious. The trick is to do it without damaging our economy in the process. Or better still, to do it while improving the state of our economy. If asked, most Canadians would probably say that they consider themselves to be environmentalists or conservationists to some degree. That’s great, but it’s very difficult for me to imagine how we can be responsible stewards of G-d’s good earth unless–and until–we become proper managers of our technology and more mindful of its impact on the greater whole.
The regrettable oversight committed by our automakers, in construing a demand for vehicles that consumers would ultimately prove unwilling to buy, serves to demonstrate the high cost associated with making mistakes in today’s turbulent markets.
As I see it, our best choice now is to stabilise the Canadian auto sector through wise reinvestment that focuses on innovation and efficiency; supports Canadian autoworkers and their families; better positions all our energy- and transportation-dependent industries for the future; and puts Canada back on the technological leader board.
The auto industry clearly needs a “Manhattan Project” (or maybe a Peterborough Project) to quickly develop the sorts of cars that Canadians truly want to buy; the sorts of cars that will save them money at the pumps and offer power and performance comparable to—or exceeding—their expectations of purely gas-powered vehicles.
Build a better car and Canadians will warm up to it quickly ~ especially in winter.