Cars are getting better, but not the fuel economy — D1

Auto makers are trying very hard to get better fuel economy out of their cars. They are promoting the so called sub-compact cars, like Toyota Yaris, Honda Fit and soon-to-be-shipped Smart fortwo from Chrysler. They are advertising alternative energy. Toyota’s hybrid technology is used extensively on the compact, standard and SUV models. Ford is shipping its hybrid sedans and SUV’s now. You may think that the makers are getting better fuel economy than ever before. But, surprisingly (at least to me), they did a much better job twenty or thirty years ago. In 1980’s compact cars could easily get average 50 plus miles per gallon. Cars in 80s performed even better than today’s most advanced hybrid cars on the road.

The magic of the astonishing fuel efficieny is simple, a smaller, less powerful engine for a lighter, smaller car. While wonderful technical advances in internal combustion engines have been made in the last two decades, most of these efforts focused on horsepower increass instead of fuel efficiency improvement. Can you imagine a BMW with 75 horsepower? That’s what a BMW 315 coupe has in 1979. Today, BMW 3 series coupe base model has a 230hp engine in it. While the now car can easily smoke its old brothers thanks to a better and larger engine,¬† we are not gaining any fuel economy here. Besides the pursuit of power and speed, today’s drivers pay much more attention to vehicle safety than before while shopping a car. The safety issue steers the auto makers to make bigger and heavier cars now. Today’s Civic is 3 feet longer and 900 pounds heavier than its ancestor in 1986. You can hardly emphasize the importance of safety, but safety comes with a price. Traditionally, Americans believe bigger-is-better when shopping for a car. They might baby cry when gas price soars, but they tend to forget what happened right after price goes down and rush to trade-in their compact cars bought because of gas prices.

Another surprising story on yesterday’s paper is that flight time is actually getting longer than before. With better technology in communication, mechanical design and engine design, it’s natural to assume that we can fly from point A to point B in less time compared to ten years ago. However, the truth is, airplane can fly faster, but the sky has never been more crowd. Just like traffic jam on the highway, air traffics are heavier and the flight time is longer. This not only annoys travelers but also hurts the airlines, badly.


Wildly Green Vegas — Opinion

It’s hard to promote the environmentally friendly buildings, which usually requires extra design work and more importantly, expense to ensure energy conservation. Nevada officials thought the promotion is hard too. So tax breaks are used to encourage companies to develop “green” architectures. The state offers property taxes cut up to 50% and a 2% sales tax cut for the building supplies used in the “green” construction. This sounds like a win-win situation for both the for-profit developers and for-a-great-cause state government. However, the tax incentive the government offered was so alluring, many more commercial developers applied than anticipated. Now Nevada is out $974 million over the next ten years for the several already approved constructions, while the state previously only expected just a quarter million tax cut altogether. The state authority rushed to stop the program and amend its original tax reimbursement plans to cut the total tab by half.

Never underestimate the power of money.

Also noted: recently, former US president Bill Clinton proposed the Clinton Climate Initiative, which coalesces city mayors, large banks, landlords and building developers to promote the “green building” concept to fight the much talked global warming. His initiative focuses on financial incentives instead to policies to push environmentally friendly building upgrades. The five banks will provide up to $1 billion each in loans to the cities or private landlords to upgrade energy-hungry heating, cooling and lighting systems in older buildings. The saving from utilities bills, usually 20% to 50% of the original expenses, will be used to pay back the loans and interests. Sounds like a nice idea to me.

GM: Green Motors — A8

General Motors Corp. is investing heavily in the development of next generation fuel-efficient alternatives to current car engines. The concept car, Chevrolet Volt, which uses a huge T-shape battery pack to drive the wheels, was shown in the last Detroit Auto Show. Now GM is hiring as many as 400 technical experts to work on alternative fuel technology, hoping to turn Volt to a production car in three to four years.

The Volt does have a small gas engine, but to recharge the battery instead of driving the wheels. GM estimates that the fuel efficiency of Volt can reach 150 miles per gallon, which is about three times higher than that of current hybrid cars from Toyota.

While they are putting a lot of resources into the innovation, GM executes are conscious that the vehicle, even if they are able to put it in the production line, may not make money for the company, at least not in the recent future. GM is seeking a “halo” product that will burnish the auto maker’s overall reputation as an environmentally friendly corporation, and more importantly, not merely as a maker of gas guzzlers. They want consumers to think of fuel economy when they see a GM product, just as what they perceive Toyota cars now. As the gas price reaches record high in recent months, alternative fuel innovation seems more urgent than ever, especially for the struggling Detroit auto makers.

GM’s green bet is not riskless. The company is still discussing with battery suppliers to develop the vehicle’s most critical component. Even though it has no guarantee that the battery will be ready, GM decided to start designing other parts of the car and the manufacturing process to produce them. GM is desperate to lead and cash on the new technology this time.

PS. It’s interesting to read the story and Businessweek’s recent cover story about innovation. Businessweek says now CEO’s are generally more cautious about innovations now compared to two or three years ago. They start to realize innovations are risky, costly and quite often unproductive. Persistence is not necessarily negative. After a somewhat unsuccessful “Live Green, Go Yellow” campaign for their E85 ethanol cars, it will be interesting to see what happens with GM’s innovating electric car.

Informercial Documentaries? — Friday W4

The story ‘My Place in History,’ Devised by Me is about an upcoming documentary about the movie Star Wars — “Star Wars: The Legacy Revealed.” The documentary is produced in association with Lucasfilm, the creator of the movie. We can’t help questioning the creditability of the opinions in the documentary. When the subject of the documentary is also the investor, can it be directed, edited and produced without biases?

As the report pointed out, the practice happens a lot in documentary productions because of financial pressure and copyright issues. For the documentary about films and other performances, it’s almost inevitable to include a large amount of original, copyrighted materials into the documentary. However, the copyright owners (Lucusfilm in this case) are usually reluctant to license their work unless they are also involved in the documentary production.

I personally don’t feel anything wrong with the financial relations between programmers and the subjects. Autobiography, in which the writer and the subject are almost always the same person, is one of the most popular book genre. The autobiography is devised it place in history by itself, and we don’t have any problem with that at all.

China-U. S. Relations –A7

While the U.S. China Strategic Economic Dialogue is held in Washington, a lot of discussions about Chinese economy and U.S. China relationship are published in the Journal. As I recall, WSJ includes pet food scandal, trans-import and of course the “not-so-satisfactory” dialogue progress in recent reports. Today, they listed a series of numbers to sort out U.S. – China relations.

The U.S. trading deficit in goods with China is $232.6 billion ($287.8B import minus $55.2B export) is greater than the deficit with both European Union and OPEC, the second and third largest trading deficit  U.S. posts with. Among the $287.8 billion imports from China, 80% are consumer goods. The top four goods categories are computer parts, household goods, toys/recreation and computers, each accounts more than 10% of the total imports by value. China accounts 80% of US toy market by value, half of the footwear market and near half the TV and consumer-electronics market. Among U.S. exports to China, semiconductors, civilian aircraft, soybeans(!), plastic materials and raw cotton top the list.

Dollar dominated assets account about two-thirds of China’s $1.2 trillion foreign-exchange reserves. The $420 billion in treasury bills is about 20% of all the foreign-held debt of the U.S. government. China’s recent investment of $3 billion to the U.S. private equity firm Blackstone is widely reported by national and local news coverage.

Here are two quotes from the economic dialogue:

“There is a growing skepticism in each country about the other’s intentions. Unfortunately, in America this is manifesting itself as anti-China sentiment as China becomes a symbol of the real and imagined downside of global competition. ” — Henry Paulson, Treasury Secretary.

“We should not easily blame the other side for our own domestic problems. ” — Wu Yi, Chinese Vice Premier.

DELL goes retail, too — A3

Dell will start selling its PC in 3500 Wal-Mart and Sam’s Club stores on June 10.

Dell was exceptionally successful with its direct sales strategy until recently. HP took the No.1 spot in the PC industry last year as Dell’s direct sale lost its momentum. Now consumers care not only how powerful but also how beautiful the PC is. It’s not very easy to sense the beauty of the laptop you’re buying over the phone or on the internet. Dell recognized the importance of brick & mortar stores and opened its own retail chains just like Apple. However, it seems that HP and acer’s strategy to sell within established general stores like Wal-Mart and electronics stores like Best Buy is an even better idea than Dell’s own B&M retail stores.

As a loyal Dell customer, I’m looking forward to the brighter future of the cooperation of two giants.

By the way, Lenovo was doing very well in the last fiscal quarter.¬† With the surging Thinkpad sales, Lenovo bounces back to profit. Especially, Lenovo’s America operations turned to profitability for the first time after the acquisition of IBM’s thinkpad brand.