GM bets each way on drivetrain technology

The world is hanging out for a breakthrough in battery technology. Every element of alternative-fuel or alternative drivetrain system development has to work around the weight, durability shortcomings and lack of capacity associated with existing battery types, whether conventional wet-cell type, Nickel metal Hydride or Lithium-ion.

Fuel cells make up for the battery's lack of storage capacity, by storing energy as hydrogen -- and that's a whole new can of worms. Hybrids (mild or plug-in) rely on energy stored in petrol to make up for the battery's lack of storage capacity. Flex fuel vehicles attempt to side-step the battery issue altogether -- reducing fossil fuel consumption by as much as 85 per cent, but increasing reliance on water resource to produce ethanol in the first place.

To hear General Motors CEO, Rick Wagoner tell it, ethanol is still a viable short-term solution until the great leap forward in battery technology. GM is committed to all the various alternative fuel/power options available, but ethanol will yield the best results soonest.

"It's going well," says Wagoner about GM's ethanol program, in a Q&A session with journalists attending the North American International Auto Show in Detroit.

"The new administration has stated pretty clearly an interest in ethanol, which is great.

"I think the issue got sidetracked last year, with a significant debate on 'food versus fuel'... Probably some of it a little overstated. The incoming administration has expressed particular interest in the more sophisticated cellulosic-based process...

"We're still on track to meet our commitment to get 50 per cent of our production [fuelled by ethanol] by 2012.

"[E85] will have a bigger impact than hybrids."

Wagoner argues that a company has to sell double the number of hybrid-drive vehicles to reduce fossil-fuel use to the same degree as an E85/flex-fuel car. That's the environmental argument, but for consumers, there's also the cost of running the car to consider.

"[In Europe], when some of the traditional subsidies for diesel were reduced and regular gasoline prices got more competitive, we saw a shift back to gasoline," he argues, mounting a case for reduced running costs.

"You don't get the R&D, you don't get the cost of development..." he also pointed out about ethanol vehicles, versus hybrids -- essentially postulating that the flex fuel vehicles will be more attractive to consumers for their lower purchase price.

For ethanol vehicles, the fuel delivery technology is a refinement of current petrol delivery systems and, given the fact that the crops (whether pure cellulosic per se, or non-traditional crops such as sawgrass) actually need CO2 to grow, there's a carbon neutrality aspect to using ethanol.

Ultimately though, flex-fuel vehicles remain dependent on fossil fuels, just as hybrids do. GM's own plug-in hybrid vehicle is the Chevrolet Volt (pictured), a vehicle that has garnered considerable attention from the world's press, but Wagoner is circumspect about the car's impact in the marketplace.

"I think initially [the Volt] won't be a big deal," he says.

"A lot of people will be interested in the technology -- early adopters. After a couple of years... and we crank up production to higher and higher levels, obviously the economics won't be as compelling if oil prices are [US]$2."

Part of the Volt's inherent attraction stems from its announcement as US fuel prices were reaching $4 a (US) gallon. With the current global financial and economic crisis driving retail fuel prices back down to US $2 a gallon, American car makers have been relieved of the immediate demand for more frugal cars, but Wagoner doesn't expect fuel prices to remain that low for long. On the other hand, he doesn't see the Volt winning market share without some tax incentives from the government.

"Now maybe the government provides more tax incentives for the purchaser, as a way to offset that [slow adoption from the mainstream market].

"I stress, that nobody knows -- and if anything we've learnt from the last year -- you can't tell what's going to happen with oil prices...

"I don't think a scenario [of US$2 per gallon petrol prices] is likely."

It's fundamentally the volatility of global fuel prices that is driving GM towards a short-term future heavily reliant on E85/flex fuel vehicles. Just as Australian manufacturers have found with LPG, the Americans can tweak existing internal combustion cars to run on 85 per cent ethanol for a fraction of the cost of development for a hybrid.

"It wasn't that long ago that we would have been sitting here -- and oil was [US]$147 a barrel -- and we would have been speculating on 'can we get that [new alternative fuel technology] sooner?' and 'can you produce more than your current plan?'," says Wagoner, in defence of ethanol.

"We take it as a given, from today's oil price levels, everything suggests they should go up over time. It's just simple 'supply and demand' and we are going to be best served by being prepared with a product portfolio that is more robust against that [background]. We have to be willing to spend a little more money in every product to improve fuel efficiency, because no consumer will say 'hey, I'm not buying your car because it's more fuel efficient'. Sometimes they say 'I won't pay you more for that fuel efficiency' if [oil] prices are too low.

"We think that people are going to value fuel efficiency more than they have in the past, here in the US."

So a combination of low purchase price and low running costs (lower than purely petrol-engined vehicles) gives ethanol vehicles an advantage, in the view of GM, but the corporation is also looking further ahead.

"These other technologies... We think the day is going to come when we switch over -- and we would rather be ahead of that day than behind it," says Wagoner.

"It's going to switch over for a variety of reasons, but they centre around environmental issues...

"We want to... be ready for when someone comes up with a battery that costs less than an internal combustion engine."

And that's where and when cars like the Volt will become a true champion for the environmental movement.

AFP/Getty Images