Ah, now we’re talking. Earlier this week I was a bit snarky about this article, which flung broad statements about with very little empirical support (understandable, I guess, for a breezy op-ed).
But a new study that just came across my desk puts some teeth in the argument that going green is smart business strategy for automakers.
Jointly published by the U. of Michigan and NRDC, the study analyzes what would happen to the Big Three U.S. automakers in the event of an oil-price spike.
As I’ve mentioned before, the possibility of such a spike is not remote. With supply and demand in such tight and tenuous balance, anything — domestic politics, terrorist attacks, accidents, you name it — could cause major disruptions in the oil market. How would American companies weather such a storm? From the NRDC press release:
Based on possible near-term oil shock scenarios and using highly detailed auto production forecasts, the study asks what would happen to the U.S. vehicle market if oil prices reached $80 or $100 a barrel — the equivalent of $2.86 or $3.37 a gallon, respectively. …
The study authors conclude that rippling effects of such prices through the economy would reduce annual vehicle sales by as much as 3.0 million units, and that the Big Three U.S. manufacturers would absorb two-thirds of the lost sales due to their heavy dependence on gas-guzzling vehicle lines. Total pre-tax profits in the industry as a whole would drop by as much as $17.6 billion.
Such profound market changes would have grave impacts for autoworkers and their communities, with Michigan, Ohio and Indiana bearing the brunt. The report estimates that at $80 a barrel, 297,000 auto-related jobs would disappear nationwide, 110,000 of them in the three auto-belt states alone. At $100 a barrel, projected job losses rise to 465,000 nationwide, and 172,000 in the three-state region.
It almost goes without saying that American automakers are much more vulnerable to these price spikes than Japanese automakers, since they rely so heavily on (recently highly discounted) gas-guzzlers, and since they are already in such dire financial straights.
One might be tempted to gloat. After all, in the words of Carl Pope (and yes, I’m fond of this quote):
This sad saga stretches back more than a quarter of a century, since the industry failed to respond nimbly to the combination of Arab oil that was more expensive and Japanese sedans that were better made. Detroit had two choices — one was to reach out to the nation and ask for public support in dealing with its underlying challenges. The other was to try sustaining itself by putting ever larger shells of sheet metal on old truck technology, and marketing the results as a passport to freedom and safety high above the road.
The industry took the second path.
But we shouldn’t gloat.
Sometimes we greens speak of the misfortunes of American automakers with scarcely-concealed glee, smug in our satisfaction that their gas-guzzling chickens are coming home to roost. But it’s worth remembering that these are real jobs, real livelihoods, and real people. The wages of bad strategy will not be paid by executives but by American workers with some of the country’s last remaining solid, unionized, living-wage blue-collar jobs. When we wish harm on Ford, Chevy, and GM, we wish harm on them.
So, Big Three, if you needed another reason to aggressively develop, market, and sell green vehicles — aside from global warming, auto emissions standards in Canada and California, high gas prices, and the resounding success of the Toyota Prius — here it is.