On Tuesday, we covered the news that Ford, Nissan, and Tesla had been granted a total of $8 billion in low-interest loans by the US Department of Energy to retool for advanced automotive technologies.
With a few days under our belt, we've considered the story and have a few questions for you to watch and consider.
(1) What's the balance between better gasoline engines and hybrid or electric cars?
Hybrids and electric cars get more than their share of press, considering that even three or four years hence, global production will just have crossed into six figures. But vastly more efficient gasoline engines will do the heavy lifting in the decade ending in 2020.
Ford will use much of its $5.9 billion in loans to expand availability of its EcoBoost turbocharged gasoline direct-injection engines, so that they'll be available in all of its volume vehicles by 2015.
If more fuel-efficient combustion engines get shortchanged for a focus solely on electric-drive cars, short-term gains could be sacrificed for long-term goals. So far, that doesn't seem to be happening.
(2) Will funds go to manufacturing of cars, battery packs, or lithium-ion cells?
Cars are built all over the world, and electric vehicles are actually easier to build than conventional ones because they have fewer individual components and moving parts. (Hybrids, however, are considerably more complicated.)
Much of the intellectual property around electric cars lies in their battery packs. These metal boxes house anywhere from 100 to 8,000 individual cells to form the overall "battery" that holds energy for an electric car. The software that monitors battery condition and flows power to electric motors is highly complex, and so is the instrumentation and cooling inside the pack.
The individual cells themselves are built in factories with the same cleanliness, and close to the same pricetag, as a silicon wafer fabrication plant for microcircuits. Right now, almost 80 percent of the world's advanced cells are made in Asia.
So building the cars themselves in the US is least important; we already know how to do that. Where the US needs to gain and retain crucial competitive knowledge is in the battery packs.
If the US doesn't develop a manufacturing infrastructure for lithium-ion cells, it'll be just like buying all our gasoline from overseas. Oh, wait ....
(3) Will GM and Chrysler get loan guarantees?
Probably, but not til they're out of bankruptcy. To be eligible for loans, applicants have to be "viable". Almost by definition, a company in Chapter 11 bankruptcy is not present viable.
But both companies have applied for the loans, and assuming they survive, most observers expect them to be granted. Like Ford, GM needs funds for both advanced gasoline engine factories and electric-car manufacturing, in this case the 2011 Chevrolet Volt.
Chrysler's advanced technology future is a little murkier. It recently appointed a new head for its ENVI advanced vehicle program, and few analysts believe it is competitive in electric-vehicle design. Instead, Chrysler's loans might be granted to build its partner Fiat's MultiAir engines with electro-hydraulic valves here in the US.
The $8 billion of loans granted thus far are only half the allocated funding for the program. Expect more within a year, perhaps sooner.
(4) Why are funds going to a company headquartered, controlled and run from another country?
That would be Nissan, and the answer is: Because Nissan may well have the most aggressive electric-car plans of any major global automaker.
So if they're going to build EVs, we want some of them to be built here, even if profits go back to Japan. Nissan has to use the money for its US manufacturing plant in Smyrna, Tennessee.
(5) Will the dollars be used well? How will we measure the success of these measures?
This question came, off the record, from the CEO of an electric-car company. And it's a good question that can't immediately be asnwered.
The loans begin to come due one year after production starts on the cars or components they funded. So getting the cars with advanced powertrains, or those powertrains themselves, into volume production counts as success.
Would those vehicles and powertrains have come anyway, given the new and higher gas-mileage requirements recently imposed? Could the carmakers have afforded to meet those standards in the current downturn that brought GM and Chrysler to bankrupcy?
Those are questions that can only be answered retrospectively. Watch for early repayment of the loans as a sign that the sustainable automobile these loans are meant to spur has arrived.
Nissan Smyrna Tennessee