Sunday, November 23, 2008

Big 3 Redux

Thanks to feedback I got from a smart DOD Energy Blog reader over the weekend, I'd like to revise the Army vs. Big 3 comparison made in the previous post. My claim was that the Army was out ahead of GM in renewables and fuel efficiency R&D, and that this demonstrated commendable thinking on the Army's part. And that this was a sure sign of GM's (and Ford & Chrysler's) continuing neglect of an important new market segment.

Well, it's worth noting that the Army is compelled to action, at least in part, by DOD's recent embrace (in NDAA 2009 and earlier) of the the fully burdened cost of fuel (FBCF) concept as a key performance parameter (KPP). After years of system design and budgeting in a vacuum free of the constraints of fuel costs, conducting concurrent large-scale operations in Iraq and Afghanistan during a time of high and volatile oil prices has awoken the Pentagon to this problem ... in a big way.

US automakers have had no similar moment of truth this decade, as they've attempted to meet customer demand for higher quality, but not necessarily higher mileage, vehicles. I happily paid $1.87 per gallon to fill up my Ford yesterday and expect, barring a significant act of war or espionage, to pay low prices for some time. But what do I know? And aside from the Peak Oil theory to which many folks including me subscribe, what does anyone know about the price of oil in the next few years?

The Big 3 have prospered (generally) from selling cars that people in the US and Europe have wanted to buy. The current economic crisis is hammering them as it is all auto manufacturers. But my guess is that what's got the US companies in their particularly precarious present position has less to do with the fact they've yet to produce a Prius, and more to do with structural challenges and not really tackling their quality issues until relatively recently.

Photo of Ford's "Glass House" HQ courtesy of Wikimedia Commons

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