University of Michigan study: fuel-efficiency equals profits

It's no secret that the Big 3 are collectively suffering due short-sightedness in fuel-efficiency. However, a new study by the University of Michigan's Transportation Research Institute (UMTRI) attempts to quantify near-future gains and losses if the domestic auto makers were to make proactive efforts to maximize fuel-efficiency fleet-wide.

The study focuses on the 2010 model year using 3 fuel price scenarios, $3.10, $2.30 and $2 per gallon. At $3.10, Ford could increase its profits by $1.4 billion, $500 million at GM and $100 million at DaimlerChrysler. While the Japanese manufacturers stand to lose up to $600 million. The gains for the Big 3 remain true even at $2 per gallon with a total of $1.3 billion in increased profits with Japanese loses at $300 million.

The study also took a look at the impact on auto industry employment in the U.S. At $3.10 per gallon, progressive fuel-efficiency efforts by the domestics could save 35,000 jobs at their own plants while costing 19,000 jobs at plants of foreign manufacturers in North America.

The fact that it can take 3 to 4 years to develop a new vehicle highlights the immediate significance of the 2010 model year. Walter McManus, head of UMTRI's auto analysis division sums up the study's implications by saying, "Deploying new technologies takes time and money to accomplish, and time and money are in short supply in Detroit. While management is currently focused on cutting capacity through massive layoffs, they need to undertake a deep transformation to much more fuel-efficient fleets to avoid going under. The dilemma the Detroit automakers face is that while they may believe that they cannot afford to make fuel economy a high priority, in actuality, it turns out that they cannot afford not to."

[Source: Auto Industry]

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