Paul Ingrassia On The Source of Progress on Automotive Fuel Efficiency

Today's Wall Street Journal features an excellent editorial on the historic sources of progress on automotive fuel efficiency. Written by former Dow Jones senior executive, Pulitzer Prize-winner and my former squash partner, Paul Ingrassia, it's entitled, "Detroit's (Long) Quest for Fuel Efficiency."

Paul Ingrassia knows cars and the auto industry. Probably better than any other American observer around. He was the WSJ bureau chief in Detroit, which provided him the opportunity to write his prize-winning book years ago. He's well-connected to various former and current senior industry executives. When you talk with Paul, cars and the auto industry are never very far from his mind, or your discussion.

In his piece, Paul provides a rare, valuable examination of the progress that America's, and the world's automakers have made on this front over the past sixty years. Coming, as it does, amidst a Presidential campaign which includes calls for 'energy independence' and 'higher fuel economy standards,' this piece provides great value.

He's organized his thoughts to offer three "lessons" about automotive fuel efficiency:

1. Incremental progress shouldn't be dismissed.

2. Market forces, not government regulation, provide the most effective impetus for higher gas mileage.

3. New technology will require new infrastructure, presenting a chicken-or-egg problem.

All three points have tremendous bearing on the current 'debate,' if you can still call it that, in the business and popular media regarding energy usage by automobiles.

Specifically, Paul cites the 1959 GM Corvair as having made significant advances in fuel economy for its time. By contrast, he notes that GM's electric EVI failed miserably thirty years later.

Among current incremental technologies, Paul describes the current European diesel as having great potential to improve fuel economy incrementally, without the need for a radical technological innovation.

His second lesson is perhaps the most politically astute one. That is, it addresses the aspect of this issue that generates the most heat, but least light, if you will, in current political debate.

As various Presidential candidates excoriate Detroit for its failure to build more fuel-efficient cars, they turn to Congressional CAFE legislation, as if this will really matter. Holman Jenkins, Paul's former colleague at the Journal, wrote similarly in a piece on which I wrote this post late last year.

Paul's meticulous retelling of the SUV story puts the lie to any belief that CAFE standards actually affect real consumer behavior. Gasoline prices and actual vehicle gas mileage do, but the standards do not.

Along with Jenkins, Paul notes that, when consumers want high fuel-efficiency cars, Detroit will build them. When they don't, Detroit will still have to meet consumer demand, but CAFE standards will become another constraint that doesn't actually accomplish anything except providing politicians with a false sense of having 'done something' about this issue.

Finally, Paul provides a detailed explanation of how one GM executive, then-president Ed Cole, simply introduced catalytic converters into the GM product line in 1975, forcing the oil refiners and gasoline retailers to provide unleaded gasoline, which is necessary for cars with these air-cleaning devices.

Paul notes that Cole showed more decisiveness and leadership more than thirty years ago then any current figure, public or corporate, seems to be capable of doing to move forward on this issue.

If anything, Paul's recitation of history, and the forces at work today, are cause for me to remain leery of expecting Ford or GM, or even Chyrsler/Cerberus to realize significant value-added, profit, and consistently superior market returns for their shareholders from their responses to the fuel efficiency dilemma.