My Last Letter - GM "Chairman"

[ParanoiA]

A friend of mine left this in my chair when I came to work this morning, and I thought I'd share it, see what you guys think. He left a note saying he doesn't believe this was actually written by the Chairman, but rather Porter Stansberry - to make a point.

 

I don't know much about GM or how they've conducted business over the years. Maybe some companies are better at prolonging this, keeping their head above water, and maybe GM squandered their money but the exponential increase in retirees and health care costs are legitimate enough to suggest inevitable destruction, I would think, for any business.

 

What do you all think?

 

My Last Letter

By the "Chairman" of General Motors

 

 

Apparently $50 billion was the magic number...

 

 

As the CEO and chairman of General Motors, I'm now responsible for more than $50 billion in losses – in only the last three years. I thought they'd fire me after the first $10 billion – when Kerkorian was trying to force me out. But I survived. Considering what has happened since, it's hardly a victory I can celebrate. Off the top of my head, I can't think of any American executive in history who has lost as much money as I have – ever.

 

 

My legacy will be the bankruptcy of one of America's greatest corporations – at one time the wealthiest and most powerful in the world. Until the 1970s, GM sold roughly half of the cars built in the world. How could GM have been destroyed so quickly, while its sales volumes are still so large? I'll explain one more time. But this will be my last letter to the subscribers of Stansberry Research.

 

 

Privately, the board told me the gig is up. The announcement of my "retirement" won't be made for a few more weeks. Publicly, of course, I keep spouting off the same nonsense I always have – useless comments about how pleased I am with the way our 'turnaround' is going.

 

 

"Our actions over the past several years, and today, position us not only to survive this tough period, but to come out of it as a lean, strong and successful company..."

 

 

It's pretty amazing what you can get away with saying as the chairman of a public company. The press actually takes that crap seriously. Not a single newspaper reporter in America can read a financial statement... luckily for me.

 

 

Here's what I should have said:

 

 

"We don't have a prayer of saving this company and, really, we never did. It is impossible to repair the fatal damage done to our great company by the enormous pension and health care liabilities promised to our workers decades ago. The best we can do now – by suspending our dividend, cutting health care benefits for all white-collar retirees, and 'postponing' our required union health care funding – is keep the lights on another two or three quarters."

 

 

Of course, these sad facts aren't news to Stansberry readers. About a year and a half ago, (when our stock traded for more than $40), I began writing these letters to you. I wanted you to know the truth – we had no way to avoid bankruptcy, as I explained in the opening paragraph of my first letter.

 

 

 

We own one of America's proudest companies, whose heritage and reputation far exceeds its operational capabilities today. We have infrastructure and employee obligations that outpace what we can afford given our greatly reduced profit margins and debt load. Our ongoing results reflect these important structure problems, which may be beyond our best efforts to fix...

–"A Letter from GM's Chairman," March 14, 2007

 

 

GM suffers from two insurmountable and interconnected problems: rising debts and declining market share.

 

 

Even now, in the last innings of this horrible game, GM's overall debt load increased by $1.5 billion last quarter. And our global market share declined by another percentage point, to 12.3%. This is the terrible trap I've been describing to you, quarter after quarter. There is no escape. Our debts make it impossible to invest enough capital to upgrade our manufacturing capabilities. And our inability to upgrade the styling and performance of our cars causes us to lose market share, little by little. Since 1992, our share of global car sales has fallen from 30% to about 12%. Meanwhile, our debt load quadrupled.

 

 

Why did this happen? How could GM's executives ignore the noose being laid around our necks? Are we really as stupid, lazy, or greedy as certain newsletter writers have claimed? Why didn't we think to pay down our debts as our market share fell and our pricing power evaporated?

 

 

We had no choice.

 

 

In the last 15 years, GM has spent $55 billion on pension plans – compared to only $13 billion in dividends. Cutting our dividend to zero 15 years ago wouldn't have made much of a difference in terms of our solvency today. It would have bought us another year of operations, at most. What bankrupted America's leading manufacturing company wasn't inept or greedy management. What bankrupted GM (and what will soon bankrupt the United States government) are unlimited pension and health care promises whose costs cannot be contained and could not have been estimated at the time they were granted.

 

 

As I told you in my last letter, GM is now in a death spiral. In the most recent quarter, we lost more than $15 billion. Our sales volume fell 20% from last year. We even lost $2.4 billion on leases – which indicates bigger problems to come. We're no longer offering leases on most of our cars, a move that will decrease revenues further. About 10% of our sales volume comes from leases.

 

 

We are now down to $21 billion in cash. As I've told you, we must have between $10 billion and $14 billion to keep operating. Given the rapid decline of our operations and revenue, I think we'll be very lucky to survive 2008. There's no way we can last through the end of 2009 without filing for bankruptcy. We're doing everything we can to conserve cash, but it won't make much difference.

 

 

We've been steadily losing around $3 billion in cash reserves per quarter since the third quarter of 2007. All of our efforts to staunch the bleeding have ended up being overwhelmed by our deteriorating credit quality, rapidly declining market share, and the losses from our 49% owned financial subsidiary GMAC (which was a major originator of subprime mortgages).

 

 

If you remember from my first letter, I warned that as our debt matured it could only be refinanced at much higher rates. This has always been the supreme risk to our shareholders – our Sword of Damocles. It was only a matter of time before it fell on our head.

 

 

In mid-2007, our company was downgraded from an investment-grade credit all the way to "junk" status. Currently, our near-maturity bonds (the 7.2% 2011s) are trading at $0.60 on the dollar, yielding 32%. This implies the credit market expects us to default on these bonds – to file for bankruptcy. This makes it impossible for us to roll over our existing debts – we cannot afford to pay 32% a year on our obligations. In 2008 and 2009, we have around $5 billion in debt coming due. We have no way to refinance these obligations and no way to repay them. We will file for bankruptcy. And quite honestly, the sooner we file, the better.

 

 

How can we fix GM?

 

 

As I told you in my last letter, "A company cannot suffer 40 years of bad decisions, bad ideas, and bad debts and expect to compete with the rest of the world's automakers." In our noble efforts to make the lives of our employees better, we have bankrupted our company and made it impossible for GM to compete in the North American market. Before GM can do good for its workers and pensioners, it must first do well in the car business.

 

 

All of GM's stakeholders will pay a price in GM's eventual restructuring. Its shareholders will be wiped out. Its bondholders will suffer defaults and losses. Its employees will face declining wages, and its pensioners will lose benefits.

 

 

Yet the greatest risk to America is this restructuring won't be allowed to take place. GM will face enormous political pressure to maintain its pensions and its labor agreements. But if GM's bloated cost basis is simply passed from shareholders to bondholders through bankruptcy, GM will emerge no stronger than it is today. It will simply have a clean balance sheet on which to stack more losses and more bad debt.

 

 

Please believe my warning: What has happened to GM will soon happen to America as a whole. How we face these challenges during GM's bankruptcy will be an indication of how we will face them in the future as a nation. Will we go on making promises we cannot afford? The retirement years of many public and private sector workers vastly exceed the number of years spent working. Retirement incomes, when health benefits are added, are now frequently a multiple of current working wages. Far from being a small amount of money to help support workers in their old age, retirement has become a lifestyle choice for millions of Americans. Like it or not, as a nation we simply cannot afford the size of these obligations. Will we squander America's wealth and impoverish our children by giving away unlimited benefits to our retired workers?

 

 

Or... will we see that in order to grow the wealth of our nation we must be competitive with the rest of the world? To maintain our standard of living we must find more efficient ways of taking care of our elderly workers and delivering health care. We need to adopt sensible pension guarantees that promote saving and investing, rather than adding an unlimited expense to our largest corporations and public coffers.

 

 

There are no easy solutions. But one thing is certain: If we do not take steps to reform our health care and pension guarantees, GM will not be the last great American company to go bankrupt. And in only 15 to 20 years, our entire federal government will be bankrupt as well.

 

 

Best regards,

 

 

Your chairman

[iNow]

Kind of a non-sequitur there at the end, comparing apples and oranges. "Didn't work for us since dividends were so much less than pensions, won't work for the US government." It does not follow. It was an interesting read, but I'm not sure I can sign on to the leap he's made toward that final conclusion.

[Phi for All]

Kind of a non-sequitur there at the end, comparing apples and oranges. "Didn't work for us since dividends were so much less than pensions, won't work for the US government." It does not follow. It was an interesting read, but I'm not sure I can sign on to the leap he's made toward that final conclusion.

Don't forget the pension and retirement benefits Congress gave themselves a while back. It's insane that they can serve a couple of terms and then receive the benefits it takes some people a lifetime of work to achieve. And some of those benefits are unlike any others, with provisions to pay for offices and staff after retirement. I remember thinking how untenable this would eventually become after Congress cycles through a few decades of politicians, giving benefits packages for life to people who had worked for just eight or twelve years.

 

Btw, I have no sympathy at all for GM. They could bring a fully electric car into the marketplace before the end of the year. Coupled with home solar power, we could have a vehicle that would cost us practically nothing to operate. But they would rather go down in flames it seems.

[CPL.Luke]

phi for all have you heard of the chevy volt?

 

the fact is battery technology isn't there yet, the volt was supposed to save the company by being the first plug-in hybrid, 40 miles per charge and then it would have a gas generator in it to keep it going. The main problem with it has been the batteries.

 

The car was originally supposed to be a mass-market thing with a price tag between 20 and 30 thousand, more than capable of competing with the prius. with every statement the projected cost of the car went up, first to 30 then to 35, and now between 45 and 50 thousand. the projected cost of the car's developments are now at around 5 billion. GM put all of their available resources behind it and they have failed the best compression they could get on the timeline. The Volt would have been 5 years in development for a release date in 2010.

 

the problems with electric cars are little understood by the general public, as it is not just a problem of batteries, it is a problem of charging. A gas pump delivers 5000 kilowatt-hours/sec to your car, whereas an electric outlet can only deliver .0006 kilowatt-hours/sec in other words assuming equal efficiency of charging (a questionable assumption) if it takes 3 minutes to fill up your tank which normally has a range of 300 miles, it would take days to charge up a car to the full 300 mile range (I seem to be getting a ridiculous answer when I try to calculate the time it would take to charge a car).

 

People don't understand how wonderful oil is, and how hard it will be to replace it. There is a question chem-eng professors ask their students at the the start of a class.

 

"what can fill a teacup and can lift a 1 tonne block a thousand feet in the air"

 

answer: oil

[Phi for All]

There's no doubt that oil is more convenient for the way we drive today. The same was said of horses when the automobile first came out. Look at the infrastructure we had to create, the old habits and conveniences we had to change to make cars viable.

 

And don't forget that charging your car overnight and again during the day when you pull into work can give even the early EVs a range of 80-100 miles. That's good enough for the vast majority of drivers.

 

Google Cobasys, the company Chevron formed around the large format NiMH battery technology it acquired through GM. Cobasys is only selling to hybrid manufacturers, so it may be a while before we see their patent applied to electric-only cars. From what I read (I'll find it and post it again), the technology can produce a battery with the power to drive a 4-5 seater vehicle over 100 miles on a charge. Get your employer to install a solar array so you can charge while you're at work and now you have a daily range that would cover practically every driver in the country.

[CPL.Luke]

I don't know what "convenience" your talking about when it comes to giving up horses.

 

also your thing about congressman seems to be a bit misinformed

http://www.snopes.com/politics/taxes/pensions.asp

 

back to the electric cars, looking at the average number of miles driven everyday and arguing that a car that fulfills those needs is sufficient is at best a bit misleading, at worst its a strawman. Most americans require lengthy car trips easily exceeding several hundred miles. Further any policy that mandates such things would cause tremendous economic harm as various attractions and factories etc. are shut-down as people are no longer capable of reaching them.

 

also its not a question of the technologies capacity but rather a question of its cost and charging times.

 

For instance I could build a truck that could drive a thousand miles on a single charge if I took a semi-truck put an electric engine in it and filled it with batteries. but it would take several days to charge and if I were running a trucking company a quick calculation would show that the downtime of such a machine would hurt me alot more than running on gas would.

 

similarly I could use lithium-ion batteries to power a car that could beat a ferrari and would run for a 100 miles on a charge. But it would cost so much that only a couple of people would be able to afford it. see the tesla

 

and yet both of these scenarios bring me back to the problem of charging, which has yet to be solved, as "keep it charging for longer" is not a solution.

 

not to mention that your choice of solar-panels in order to do the charging is the least credible option, as solar panels cost the most out of any commercially viable electric solution (at around 11-23 cents /kwh compared to 4 cents per kwh for coal). not to mention that as the sun varies from day to day it could also afect your ability to get to and from work.

[iNow]

Most americans require lengthy car trips easily exceeding several hundred miles.

What is your source for this claim? Also, can we get some real numbers? How many/what percentage is "most" Americans? What is the actual distance travelled that translates into your description of "lengthy?"

 

Specifics are the only way to get out of this rhetorical mud of faux disagreement.

 

 

 

Further any policy that mandates such things would cause tremendous economic harm as various attractions and factories etc. are shut-down as people are no longer capable of reaching them.

Let's talk dollars since you brought up economics. How many factories will close? What is the cost to the economy as a whole for those closures? Also, how many factories will be opened to begin production of the batteries (i.e. to counter balance the other factory closures), and what is the net economic impact?

 

Be specific. Specifics are the only way to get out of this rhetorical mud of faux disagreement.

 

 

For instance I could build a truck that could drive a thousand miles on a single charge if I took a semi-truck put an electric engine in it and filled it with batteries. but it would take several days to charge and if I were running a trucking company a quick calculation would show that the downtime of such a machine would hurt me alot more than running on gas would.

Let's see a source. Why would it take "several days" to recharge the batteries? What type of batteries would take this long to recharge? What is the power source filling them? How many days = "several?" How much money is the trucking company saving for the gas they no longer need, and how does that savings compare to the cost of longer recharge time on batteries?

 

Be specific. Specifics are the only way to get out of this rhetorical mud of faux disagreement.

 

 

similarly I could use lithium-ion batteries to power a car that could beat a ferrari and would run for a 100 miles on a charge. But it would cost so much that only a couple of people would be able to afford it. see the tesla

 

Shall I say it again? Be specific. Let's see dollar amounts, and let's be sure to account for environmental benefits and new economic opportunities as a result of the change.

 

 

 

Not exactly your best post ever, Luke. Try harder. If you're going to continue arguing for the status quo and being a nay-sayer toward some of the newer possibilities, you're going to need to do much more than just wave your arms about and expect us all to come on board with your pessimism.

[Phi for All]

I don't know what "convenience" your talking about when it comes to giving up horses.

The convenience of having transportation you could feed yourself from crops you grow at home, as opposed to finding a place that sold petrol in the early 1900s. The convenience of being able to ride almost anywhere instead of having to find a "road" that wasn't full of ruts that trapped those skinny little tires. The convenience of having a transportation mode with an even temperament that only needed rest instead of costly parts and repair. And the convenience of having a relatively quiet ride that produced fertilizer instead of noxious fumes. All of these were concerns back then, and objections which were voiced by by the majority at some point or other.

 

also your thing about congressman seems to be a bit misinformed

http://www.snopes.com/politics/taxes/pensions.asp

It seems you are misinformed about my "thing". I mentioned nothing about Social Security, nothing about receiving the same pay for life, and nothing about them having paid zilch into the system. Read further down in your own article to find that the pensions for some members of Congress are three times what an average person can expect, despite the fact that they don't even have to work half as long.

 

back to the electric cars, looking at the average number of miles driven everyday and arguing that a car that fulfills those needs is sufficient is at best a bit misleading, at worst its a strawman. Most americans require lengthy car trips easily exceeding several hundred miles.

You're moving the goalposts. Did anybody else think I was talking about anything besides daily work commutes? And you accuse me of strawmanning?!

Further any policy that mandates such things would cause tremendous economic harm as various attractions and factories etc. are shut-down as people are no longer capable of reaching them.

Again a strawman. Please show where I wanted a policy mandate.

 

also its not a question of the technologies capacity but rather a question of its cost and charging times.

 

For instance I could build a truck that could drive a thousand miles on a single charge if I took a semi-truck put an electric engine in it and filled it with batteries. but it would take several days to charge and if I were running a trucking company a quick calculation would show that the downtime of such a machine would hurt me alot more than running on gas would.

You are messing with only one side of the equation. If it takes five hours to charge a NiMH battery designed for a consumer vehicle using a home outlet, what makes you think a commercial trucking company would use the same source? You're also assuming there would be no provisions to recharge a commercial vehicle while it's driver was sleeping or taking a meal break. I find your argument specious.

similarly I could use lithium-ion batteries to power a car that could beat a ferrari and would run for a 100 miles on a charge. But it would cost so much that only a couple of people would be able to afford it. see the tesla

New technology is ALWAYS more expensive before the market demand pressure kicks in. You sound just like Ford when Volkswagen threatened the market with sub-compacts. They claimed it would bankrupt them to retool. When Datsun and Toyota entered the market, Ford retooled and produced the Pinto in less than two years, and wow, they didn't go bankrupt.

 

and yet both of these scenarios bring me back to the problem of charging, which has yet to be solved, as "keep it charging for longer" is not a solution.

 

not to mention that your choice of solar-panels in order to do the charging is the least credible option, as solar panels cost the most out of any commercially viable electric solution (at around 11-23 cents /kwh compared to 4 cents per kwh for coal). not to mention that as the sun varies from day to day it could also afect your ability to get to and from work.

*sigh* Creating demand by actually using the technology is the only thing that is going to encourage research and development to bring the price down, short of a policy mandate. I'm a free market kind of guy and that just doesn't appeal to me. But using the argument that it's too costly *now* is just really bad, imo. Personal computers were really costly when they first came out. We really should have stuck with mainframes and let the people who really know about such things have all the control.

[CPL.Luke]

bah I just wrote out a pretty long post in response to phi for all and accidently left the page to see if inow was from America.

 

anyway I'll just respond primarily to inow for now and cover some of phi for all's points later.

 

first of all

Be specific. Specifics are the only way to get out of this rhetorical mud of faux disagreement.

a zinger line like that is useful only once, excessive repitition is partronizing and annoying.

 

What is your source for this claim? Also, can we get some real numbers? How many/what percentage is "most" Americans? What is the actual distance travelled that translates into your description of "lengthy?"

 

I have not met a single person who does not take a long trip (over 200 miles) at least once a year, even the people who live in New York City I know make trips of that nature at least once a year, its one of the benefits of having a gas powered car, people take advantage of it.

 

Let's see a source. Why would it take "several days" to recharge the batteries? What type of batteries would take this long to recharge? What is the power source filling them? How many days = "several?" How much money is the trucking company saving for the gas they no longer need, and how does that savings compare to the cost of longer recharge time on batteries?

 

you may want to try reading a thread before replying to it, as you may have noticed I spoke a little bit about it in my first post. it appears though that I had my units wrong for the power of a gas pump, and that explains the 3 orders of magnitude error when I tried to calculate the time.

 

http://www.hybridcars.com/electric-cars/power-of-pump.html

 

^source

 

a gas pump produces a power output (into your car) at 3960 kilowatts and a standard household electrical supply of 1.5 kilowatts (I believe the author assumes an inefficiency in the batteries ability to charge). It would take 9 days to deliver the equivalent of a 10 gallon tanks worth of energy.

 

as for economic damage I cannot say as the technology for wide scale implementation does not exist yet. however I'd imagine it takes more people to produce the oil than it does to produce the batteries and the like etc. gathering information for a precise economic impact calculation is something that I don't have the time, expertise or resources for.

 

but it is rather logical that economic growth is hampered whenever the ability to transport people or goods is limited. And I don't believe there has been a single incidence in modern history where this situation was not so.

 

Phi for all

 

It seems you are misinformed about my "thing". I mentioned nothing about Social Security, nothing about receiving the same pay for life, and nothing about them having paid zilch into the system. Read further down in your own article to find that the pensions for some members of Congress are three times what an average person can expect, despite the fact that they don't even have to work half as long.

 

fair enough I saw the 3x increase however I thought that everything was still on par with what other people recieved, but perhaps I should do more reading.

 

You're moving the goalposts. Did anybody else think I was talking about anything besides daily work commutes? And you accuse me of strawmanning?!

 

Further any policy that mandates such things would cause tremendous economic harm as various attractions and factories etc. are shut-down as people are no longer capable of reaching them.

 

Again a strawman. Please show where I wanted a policy mandate.

 

sorry I didn't mean to miscontrue what you were saying to mean you wanted a policy mandate, I was trying (and clearly failing) to say that if a policy mandate were in place it would have massive negative consequences.

 

fair enough on the charging point for a commercial trucker, however the lack of any move in this direction when trucking companies are losing business back to rails would indicate that somebody did a cost analysis and found that it would be far to expensive to implement.

 

 

as for new technology coming in, the demand for new battery technologies has never been stronger than it is today, as cell phone makers and computer companies demand cheap high capacity batteries to power their equipment, the technology will probably be developed to solve the electric car problem... eventually. My point is that its not at the point that would enable a company to role electric cars out in large quantities and expect to make any money.

 

switching away from fossil fuels will probably be similar to the expected switch to quantum computers. which is also a subject under considerable debate today.

 

For instance if quantum computers can be made using the same types of technology as microprocessors the switch could occur in a matter of a decade and be extremely profitable for the innovators who get it out in time.

 

whereas assuming quantum computers follow moore's law but the manufacturing technology requires the equivalent of a reset to the early days of the microprocessor, than by the time quantum computers can best classical computers even in the things that quantum computers are better at, may be 50-100 years after a working one was developed. preventing anyone from ever making money off of them

 

Like the switch away from oil the switch to quantum computers is seen as inevitable as classical computers will be unable to increase their density much farther beyond the 2020's, and there aren't any known solutions to prevent this.

[Phi for All]

I have not met a single person who does not take a long trip (over 200 miles) at least once a year, even the people who live in New York City I know make trips of that nature at least once a year, its one of the benefits of having a gas powered car, people take advantage of it.

Forgive me for pointing out the obvious, but wouldn't it be better to own an electric vehicle you could charge from home (maybe off your own photovoltaic system) to use for daily commutes (US average 16 miles), and then just *rent* a gas-powered vehicle once a year for your vacation?

 

 

fair enough on the charging point for a commercial trucker, however the lack of any move in this direction when trucking companies are losing business back to rails would indicate that somebody did a cost analysis and found that it would be far to expensive to implement.

Remember that Chevron owns the patent for the best battery out there, and they aren't selling to anyone who is making EVs. They are protecting their market by suppressing the technology. Cost analysis aside, the batteries just aren't being sold for this purpose.

 

 

as for new technology coming in, the demand for new battery technologies has never been stronger than it is today, as cell phone makers and computer companies demand cheap high capacity batteries to power their equipment, the technology will probably be developed to solve the electric car problem... eventually. My point is that its not at the point that would enable a company to role electric cars out in large quantities and expect to make any money.

The technology is there, has been since the late 90s. I respect the rights of a company to patent technology, but sitting on it to protect an existing market forces us to pay their price. We don't allow monopolies for this very reason, but companies that can afford it are using the patent office in ways it was never intended. And with the new patent laws, companies like Chevron can even extend those patents simply by using what they have the most of: money.

 

 

switching away from fossil fuels will probably be similar to the expected switch to quantum computers. which is also a subject under considerable debate today.

Why? Are quantum computers expected to be that much more expensive? Is the cost of running your old computer going to triple or quadruple within its lifetime? Is quantum computing going to help clean up our environment?

 

For instance if quantum computers can be made using the same types of technology as microprocessors the switch could occur in a matter of a decade and be extremely profitable for the innovators who get it out in time.

Unless someone with a vested interest in the old computer technology sits on the patent for quantum computers.

 

 

whereas assuming quantum computers follow moore's law but the manufacturing technology requires the equivalent of a reset to the early days of the microprocessor, than by the time quantum computers can best classical computers even in the things that quantum computers are better at, may be 50-100 years after a working one was developed. preventing anyone from ever making money off of them

OK, this has crossed the line from analogy to red herring. Cars don't follow Moore's Law at all. If they did we'd be flying in them right now.

 

 

Like the switch away from oil the switch to quantum computers is seen as inevitable as classical computers will be unable to increase their density much farther beyond the 2020's, and there aren't any known solutions to prevent this.

I waited for this to seem relevant and I'm disappointed. I'm telling you that the battery technology to put out at least a two-seater EV with a range of over 100 miles exists today. It's being used for hybrids only. As far as cost goes, I think you'd have to convince me that GM couldn't sell half a million units before the end of the year if the range was right and they actually marketed it the way they do their IC vehicles. The commercials for the EV-1 were pathetic.

[CPL.Luke]

sorry I got a tad bit caught up in quantum computing, my point was that existing infrastructure and the like is hard to replace. if for instance we find viable alternatives like new biofuels that don't mess up our food supply it can be fast, if the future comes in the unlikely form of a hydrogen economy, it will take a very long time to switch as neither hydrogen gas nor liquified hydrogen can move through existing pipelines to my knowledge, and so a new and very costly system of mass distribution would have to be built. Any business trying to attempt mass marketing and distribution of hydrogen power vehicles and a deployment of infrastructure to support the vehicles hits a catch-22 with their customers saying "how could I fill up" and the guys building the infrastructure saying "who am I building this for" businesses trying to market capital goods tend to have a similar problem when they move into a new country or area where people won't buy their equipment unless there are service centers in the vicinity, similarly the business can't deploy service centers unless they have customers.

There are a few solutions, but they are difficult to implement particularly in the transportation sector where the point of transportation is to go somewhere other than where you bought the car, so people demand infrastructure be in existence already (I'm not saying that its impossible just extremely difficult)

 

-it should also be noted that all of the necessary technology for mass scale hydrogen powered vehicles and infrastructure exist.

 

Which brings us back to electric, where we have an existing electrical grid, that allows us to power our vehicles using whatever source we want. Which by itself solves the issue of whether you can "fuel" your car no matter where you are, allowing decent sized niche markets to exist around the country, so you can immediatly target the eco-friendly or the gadget lovers across the country, rather than in a small segment.

 

however this doesn't change things like the charging issue. For instance if a battery existed today that could charge at whatever rate you could feed it and soak up as much energy as you wanted, and everyone switched to vehicles like this, then the electrical grid would have to expand by

 

11000 miles/year ('95 data)~30 miles/day ~7.5 kwh required per day to meet average requirements.

 

average household electrical use in 2001 was ~11000 kwh/year~30 kwh per day.

http://msl1.mit.edu/Mar2Lecture/Use_Safety3.htm

http://www.eia.doe.gov/emeu/recs/recs2001/enduse2001/enduse2001.html

so shifting the burden of powering our cars toour electrical grid would require at least a 20% increase in baseload power required to power US homes, assuming a 100% efficiency between outlet and batteries for the duration of charging. however a considerable investment in distribution technologies would have to be made to guarantee power for when people decided to charge their cars. (most of our current residential load is dedicated to things like refrigerators and the like, so the changes in power consumption are relatively minor in comparison to climate control, refrigeration, and lighting which are all predictable changes in power demand.

 

(not saying that their aren't solutions to this, just that methods of controlling baseload power and distributing techniques are required)

 

as for the idea that chevron is sitting on the best battery technology in the world I suggest you look at the wikipedia page on rechargeable batteries, it appears lithium Ion are superior in every way except possibly energy density (hence their used in laptops and cell phones)

 

http://en.wikipedia.org/wiki/Rechargeable_battery

 

 

.

 

The technology is there, has been since the late 90s. I respect the rights of a company to patent technology, but sitting on it to protect an existing market forces us to pay their price. We don't allow monopolies for this very reason, but companies that can afford it are using the patent office in ways it was never intended. And with the new patent laws, companies like Chevron can even extend those patents simply by using what they have the most of: money.

 

corporations don't often bury things that they own if they expect to make money, its contrary to the nature of business. However they do occasionally pursue crappy business models.

 

Also I don't buy things that I have to rent after I made my purchase

[iNow]

I waited for this to seem relevant and I'm disappointed. I'm telling you that the battery technology to put out at least a two-seater EV with a range of over 100 miles exists today. It's being used for hybrids only. As far as cost goes, I think you'd have to convince me that GM couldn't sell half a million units before the end of the year if the range was right and they actually marketed it the way they do their IC vehicles. The commercials for the EV-1 were pathetic.

 

Interesting special on Charlie Rose the other night where he visited GM and interviewed Bob Lutz about the Chevy Volt. I enjoyed it, you might too.

 

 

http://video.google.com/videoplay?docid=-5331337021910564036&ei=2_OtSMepEJOGwgP5-4SJCQ&q=charlie+rose+bob+lutz

[Phi for All]

CPL.Luke, most of your arguments are about how expensive it will be to convert. By that standard, we should never have given up horses, we should never have bought personal computers and we should definitely stay away from alternative energy sources, particularly solar.

 

This is precisely the thinking GM and other auto manufacturers have displayed year after year, tweaking their vehicles just enough every year to entice people to sell their old ones and buy the latest model. Innovation costs profits and they just don't want to do it until the market forces them to.

 

A few years ago, Dyson came out with a bagless vacuum cleaner, something that could have been done a long time ago to save consumers over $500,000,000 a year. Since Dyson screwed up everything by going to market with his innovations, now every vacuum cleaner company has been forced to retool and remarket. Are they going bankrupt? No. Are consumers happier that they get to save half a billion dollars? I know I am.

 

Sure, infrastructures are hard to replace. Sure, it impacts manufacturers more than it does consumers. But that doesn't mean it won't be good in the long run, and that we shouldn't try as hard as possible.

Also I don't buy things that I have to rent after I made my purchase

So, you don't see the merit in having an EV with enough range to get you to work on a daily basis that costs less to run than your IC car, and merely renting an IC car for your once a year trip?!

 

Interesting.

 

I do that kind of thing all the time. I bought my home but when I go on trips I rent a hotel room. I bought my kitchen appliances but occasionally I rent space at a restaurant or banquet hall to throw a party. It's really quite cost-effective, and it saves my sanity because I hate buying things I only use occasionally.

[waitforufo]

Remember that Chevron owns the patent for the best battery out there, and they aren't selling to anyone who is making EVs. They are protecting their market by suppressing the technology. Cost analysis aside, the batteries just aren't being sold for this purpose.

 

This locking up of technology with a patent is a myth. Anyone can go to http://patft.uspto.gov/, look up a patent, create exactly the invention described in that patent, build it, market it, and sell it. The person that owns the invention so patented, can then, if they choose, sue for damages. During court proceedings, in front of a jury, the inventor has to describe how they were damaged and the financial value of those damages. What jury is going to award Chevron damages for lost oil revenue because someone stole there battery invention? Now if Chevron was building the battery and marketing the battery for the same purpose, they would have real damages. But then they wouldn't be locking the technology up would they.

[iNow]

This locking up of technology with a patent is a myth. Anyone can go to http://patft.uspto.gov/, look up a patent, create exactly the invention described in that patent, build it, market it, and sell it. The person that owns the invention so patented, can then, if they choose, sue for damages. During court proceedings, in front of a jury, the inventor has to describe how they were damaged and the financial value of those damages. What jury is going to award Chevron damages for lost oil revenue because someone stole there battery invention? Now if Chevron was building the battery and marketing the battery for the same purpose, they would have real damages. But then they wouldn't be locking the technology up would they.

 

Wrong thread, WFU. Please take it over here:

 

http://www.scienceforums.net/forum/showthread.php?t=31281

[ParanoiA]

Interesting special on Charlie Rose the other night where he visited GM and interviewed Bob Lutz about the Chevy Volt. I enjoyed it, you might too.

 

 

http://video.google.com/videoplay?docid=-5331337021910564036&ei=2_OtSMepEJOGwgP5-4SJCQ&q=charlie+rose+bob+lutz

 

Thanks, that was great. I think Lutz represents that business rationale I'm counting on and the competitive spirit that wants to exceed the exceptional. I liked his whole bit on being resentful about the Prius and how we needed to leap forward, not just "be competitive".

 

But it all has to play out first. Hopefully they won't disappoint. My main concern is battery longevity. Also, I wonder about the total lifetime of the vehicle when you can replace the battery.

[CPL.Luke]

Phi for All your failing to understand the critical difference between this move and others, we've spent the better part of a century building our oil infrastructure, drilling wells etc. We can't replace it that fast.

 

you also seem to be ignoring large parts of my posts where I say that I think we will movie to electricity, but I was merely saying its not a thing GM can wave a wand and have done by the end of the year. Or the end of 5 years for that matter.

 

Switching to horses and computers had direct economic benefit (but you didn't see IBM making a $500 computer in 1970 did ya?)

 

switching to solar now or at any time in the recent fututure switching to solar would be bad. Solar costs 11-23 cents per kilowatt-hour whereas coal costs 4 cents, it costs that much because the panels are expensive, and last time I checked the law of supply and demand, when people wanted more of something the price increased. economies of scale won't lower the price below coal.

 

Now lets consider why we buy cheaper things, we buy cheaper things because it allows us to have more money, more money means more resources, resources we can invest.

 

if we all switched to solar tomorrow it would make electrical cars about on par with gasoline because the cost of electricity would quadruple. Thus Solar would have eliminated other green initiatives.

[CaptainPanic]

Phi for All your failing to understand the critical difference between this move and others, we've spent the better part of a century building our oil infrastructure, drilling wells etc. We can't replace it that fast.

 

You (and us too) have spent the better part of the century building up the infrastructure over and over again. Every bit of the infrastructure is replaced within 10-40 years... most of it rather 10 than 40 years.

The same goes for housing, roads, etc.

 

Therefore I am convinced that going for electricity is not necessary to take any longer than 2050... and then we can have 100% of it, if we want to.

 

Batteries are one option, but trains, trams and trolleys have overhead cables, and that could be option 2 (especially for the long distance trips on the highways).

[iNow]

you also seem to be ignoring large parts of my posts where I say that I think we will movie to electricity, but I was merely saying its not a thing GM can wave a wand and have done by the end of the year. Or the end of 5 years for that matter.

 

Doesn't the video to which I linked above essentially show your point here to be wrong?

[waitforufo]

Remember that Chevron owns the patent for the best battery out there, and they aren't selling to anyone who is making EVs. They are protecting their market by suppressing the technology. Cost analysis aside, the batteries just aren't being sold for this purpose.

 

Phi for All,

Can you please provide a patent number for this super battery?

 

iNow,

GM is going broke. Do you really believe that they could produce a car that everone would want to buy, and nobody has, but somehow it is not in their business interest to build and sell such a car?

[CPL.Luke]

you realise that GM has been working on that car since sometime in 05-06 with the full resources of their company, and it won't be out till late 2010 early 2011 with the price having nearly doubled from what they originally wanted. THey are half expecting to lose money on these things at this point as the car is just to expensive for what they spent developing it.

 

CAptainPanic, but its not like we build it from scratch every 10-40 years, their are the factories that have been built to build and maintain the power plants. There is a transportation network for bringing the finished product to the site, etc.

 

and all of these new bits of infrastructure have pre-defined times to become profitable. Any new type of infrastructure that doesn't provide an immediate cost reduction or tangible benefit to the users faces a large risk of not being adopted.

 

Also if you read any articles on it you'll see that the main problem has been that they and their suppliers are litterally inventing the battery technologies required for this

Edited August 22, 2008 by CPL.Luke

[ParanoiA]

Phi for All,

Can you please provide a patent number for this super battery?

 

iNow,

GM is going broke. Do you really believe that they could produce a car that everone would want to buy, and nobody has, but somehow it is not in their business interest to build and sell such a car?

 

I believe they can and will. All you're really doing here is pointing out how really super duper hard something is and how we couldn't possibly do something super duper hard. That's ridiculous. Capitalism will prove you wrong.

 

I hope you, CPL Luke, and Peak Oil Man are still members on this site for the next few years so that you're accessible for ridicule as we do the super duper hard like we always have.

[CPL.Luke]

I'ver been around for 3 years now, I'll probably still be here in the future.

 

I'm not saying we won't do it, in fact I gave a rough outline of how a company could get hydrogen powered vehicles out and how that transition could occur given thats the only option.

 

My point was merely that you guys are talking like the big evil corporations are trying to stop the switch and if they only saw the big picture I'd be driving an all-electric car by the end of next year

 

Btw, I have no sympathy at all for GM. They could bring a fully electric car into the marketplace before the end of the year. Coupled with home solar power, we could have a vehicle that would cost us practically nothing to operate. But they would rather go down in flames it seems.

 

The technology is there, has been since the late 90s. I respect the rights of a company to patent technology, but sitting on it to protect an existing market forces us to pay their price. We don't allow monopolies for this very reason, but companies that can afford it are using the patent office in ways it was never intended. And with the new patent laws, companies like Chevron can even extend those patents simply by using what they have the most of: money.

 

I think you'd have to convince me that GM couldn't sell half a million units before the end of the year if the range was right and they actually marketed it the way they do their IC vehicles. The commercials for the EV-1 were pathetic.

 

 

We will switch... eventually

 

also paranoia whats wrong with peak oil man? his evidence has been quite clear that peak oil will occur at some point soon, and that has been somewhat backed up by recent oil prices.

[Phi for All]

Interesting special on Charlie Rose the other night where he visited GM and interviewed Bob Lutz about the Chevy Volt. I enjoyed it, you might too.

Thanks very much for that. I am less disappointed with GM after having seen this. I agree with what ParanoiA says here:

I think Lutz represents that business rationale I'm counting on and the competitive spirit that wants to exceed the exceptional. I liked his whole bit on being resentful about the Prius and how we needed to leap forward, not just "be competitive".

I've always suspected a closed-door relationship between big oil and big auto (mutual interests, not conspiracies) that has kept advancements from being implemented, and now that oil is becoming less attractive as a fuel source for automotive use I hope designers like Lutz can truly be free to "leap forward".

 

This locking up of technology with a patent is a myth. Anyone can go to http://patft.uspto.gov/, look up a patent, create exactly the invention described in that patent, build it, market it, and sell it. The person that owns the invention so patented, can then, if they choose, sue for damages. During court proceedings, in front of a jury, the inventor has to describe how they were damaged and the financial value of those damages.

Anyone with a staff of legal talent equal to Chevron, you mean.

What jury is going to award Chevron damages for lost oil revenue because someone stole there battery invention?

Perhaps that's why the patent was transferred to Cobasys, a subsidiary of Chevron that does nothing else.

Now if Chevron was building the battery and marketing the battery for the same purpose, they would have real damages. But then they wouldn't be locking the technology up would they.

I may not have mentioned in this thread that Cobasys is selling only to hybrid manufacturers, so they most likely would be able to show damages. Oh, wait, I *did* mention this earlier in the thread, didn't I.

 

 

Phi for All your failing to understand the critical difference between this move and others, we've spent the better part of a century building our oil infrastructure, drilling wells etc. We can't replace it that fast.

And I think you're failing to understand how much of the electrical grid infrastructure is already in place, waiting to be augmented by solar and wind technologies. And you don't have to drill for the sun and wind. And you don't have to buy it from foreign countries. And you don't have to ship it or truck it in from places where it exists. Again, you are pulling from only one side of the equation.

 

you also seem to be ignoring large parts of my posts where I say that I think we will movie to electricity, but I was merely saying its not a thing GM can wave a wand and have done by the end of the year. Or the end of 5 years for that matter.

Please watch iNow's link to what GM's designers are up to. You are the one who first mentioned the Chevy Volt. Lutz has some visions you may not be aware of.

 

Switching to horses and computers had direct economic benefit (but you didn't see IBM making a $500 computer in 1970 did ya?)

This sentence doesn't make any sense to me, but I think I understand what you mean. Again though, I feel you are pulling from only one side of the equation. Jobs lost in the old market are usually made up for by jobs gained in the new market. And no one is arguing that costs in the next few years are going to be comparable to what costs will be ten or twenty years from now, so that is a strawman argument.

 

switching to solar now or at any time in the recent fututure switching to solar would be bad. Solar costs 11-23 cents per kilowatt-hour whereas coal costs 4 cents, it costs that much because the panels are expensive, and last time I checked the law of supply and demand, when people wanted more of something the price increased. economies of scale won't lower the price below coal.

You gave one of the best examples of demand driving the price down: computers. Why would you think that demand for EVs and solar technology wouldn't spur innovation and mass production that would bring down costs? And why does solar have to beat coal right away? Won't coal go up in price as we use it up, the way oil has?

 

Now lets consider why we buy cheaper things, we buy cheaper things because it allows us to have more money, more money means more resources, resources we can invest.

 

if we all switched to solar tomorrow it would make electrical cars about on par with gasoline because the cost of electricity would quadruple. Thus Solar would have eliminated other green initiatives.

For one, we can't switch to solar tomorrow and it's insulting that you say it that way. And I think you underestimate free market inspiration by leaping to the conclusion that going solar will "eliminate other green initiatives". That's just hand waving and has no basis in reality.

 

Phi for All,

Can you please provide a patent number for this super battery?

It may be in this Wikipedia entry. If it's not, I will try to find it elsewhere.

 

Sorry, running a bit behind for what looks to be a fun weekend.

[ParanoiA]

My point was merely that you guys are talking like the big evil corporations are trying to stop the switch and if they only saw the big picture I'd be driving an all-electric car by the end of next year

 

Don't lump me in on that. I never even hinted at such an idea. I simply think that market demand is here and capitalism will answer like it always has. The more people hate oil, right or wrong, the more demand for alternatives which will be answered by profiteers in the alternative business.

 

And no, and I don't think it's a rosey picture of transparent change in which the great capitalists of america save the planet and everyone lives happily ever after. I just think it will work, like it always has.

 

also paranoia whats wrong with peak oil man? his evidence has been quite clear that peak oil will occur at some point soon, and that has been somewhat backed up by recent oil prices.

 

Peak Oil Man has posited that massive infrastructure change, lifestyle change, housing change, civil design change - an entire freaking overhaul of the landscape of the united states and way of life is needed to deal with this crisis and requires a huge investment by the government. And I think I'm still understating the scope of his proposed alarm.

 

He does not believe we will be able to be innovative and come up with brand new ideas that do not require that kind of overhaul. If it doesn't involve massive government investment, then he doesn't believe it will work or be fast enough. I don't take issue with Peak Oil, because it's going to peak sometime, inevitably, and there is a laundry list of other reasons to ditch oil in the first place, so it makes little difference to me. I'm already excited about alternative energy solutions because I want energy independence.

 

I've always suspected a closed-door relationship between big oil and big auto (mutual interests, not conspiracies) that has kept advancements from being implemented, and now that oil is becoming less attractive as a fuel source for automotive use I hope designers like Lutz can truly be free to "leap forward".

 

Me too. And while it may not seem like it, I'm very cautious about giving Lutz credit until he delivers. Salesmen know how to talk and make promises, but I want results. I'll believe it when I see it, and I'll be damn excited about it.

 

That's also why I was curious about the total lifetime of the car without having a combustion engine with thousands of parts to wear down. It could be that these cars start at a higher price, but last much longer, to the point that it becomes cheaper in the end.