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Stubborn GM engineers its decline

AS GASOLINE prices surge to record highs, General Motors teeters on the verge of collapse with a credit rating one step above junk. This is hardly coincidence. GM has willfully ignored fundamental trends in technology and oil. To make matters worse, so has our government. U.S. security is threatened by rising dependence on oil and instability in the oil-rich Persian Gulf.

Our automakers and government have a brief window to adopt an aggressive strategy to push fuel-efficient vehicles, especially hybrids, or we risk yielding our destiny to outside forces.

Oil prices have risen sharply, yet GM stubbornly keeps making the wrong vehicles, losing market share to fuel-efficient, foreign-made vehicles that have caught the public imagination - the identical predicament GM found itself in three decades ago. GM had been warned in the early 1970s that oil prices would rise, but it refused to match the gas-sipping, high-quality competition from Toyota, Honda and other imports. GM fought the future and lost.

In the 1990s, when oil prices again were low, many predicted that prices would rise within a decade, threatening our security. OPEC nations simply had (and still have) much more oil production capacity and reserves than non-OPEC nations. Population growth, industrialization and urbanization were, predictably, driving oil demand steadily up, especially in China and India. Also, U.S. demand was again rising steadily as the political will for tighter fuel-efficiency standards had ended with the low oil prices.

Back then, the Energy Department partnered with GM, Ford and Chrysler to speed the introduction of hybrid gasoline-electric vehicles. Ironically, the main result was to motivate the Japanese car companies to develop and introduce their own hybrids. GM walked away from hybrids as soon as it could - when the Bush administration came in.

The result: GM, which had a technological lead in electric drives, let its No. 1 competitor, Toyota, achieve a stunning seven-year head start in what will likely be this century's primary drive train. GM was publicly criticizing hybrids as late as January 2004, and only recently announced a half-hearted effort to match Toyota. This miscalculation will be regarded as one of the biggest blunders in auto industry history.

GM stubbornly pursues hydrogen cars as its vehicle of the future, but such cars require multiple scientific breakthroughs and massive government subsides. They would reduce the freedom of American drivers by keeping them tethered to a small number of fueling stations dispensing expensive hydrogen fuel. Most independent analysts believe these cars are decades away.

When Bill Reinert, U.S. manager of Toyota's advanced technologies group, was asked in January when fuel cells cars would replace gasoline-powered cars, he replied, "If I told you 'never,' would you be upset?" The government and carmakers should do long-term research on hydrogen, but that's all.

The future is easier to predict now than it was 10 years ago. Steadily rising demand and the risk of a terrorist attack on the Persian Gulf oil infrastructure mean oil prices have more upside risk than downside. We also have the ever-growing evidence for global warming from manmade greenhouse gas emissions. That, coupled with the ratification of the Kyoto Protocol by most industrialized nations, means our economic, energy and environmental security increasingly depends on steadily reducing the oil consumed by our cars. The jobs of the future belong to the car companies and nations that build the clean, efficient vehicles of the future.

After current hybrids, the vehicle of the future will be a hybrid that can run on a mixture of gasoline and biofuels and be plugged into the electric grid. That multifuel hybrid would increase consumer choice and be cleaner and cheaper to operate than current cars. The U.S. government should enact tougher but more-flexible fuel-economy standards now - as the bipartisan National Commission on Energy Policy recommended - and use tax incentives to help U.S. carmakers switch to hybrids. It's not, as GM has argued, fuel-economy standards that costs jobs and market share, it's the lack of them.

If we don't take these actions soon, the consequences are easy to predict. GM will continue to lose market share and be surpassed by Toyota as the world's No. 1 automaker. Our trade deficit in oil will surpass a heart-stopping $200 billion a year, undermining our economic health. Our security position will be increasingly in the hands of Persian Gulf governments. Geopolitically, we will bump heads with China more and more in the race to secure the energy supplies of the 21st century.

It is predictable and preventable.

Joseph J. Romm, acting assistant secretary of energy in 1997, is the author of The Hype about Hydrogen: Fact and Fiction in the Race to Save the Climate.

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