Mary Beth Stanek said: "GM does not charge for FlexFuel capability."

Ms Stanek,

Of course not. Adding Flex-fuel capability to your heavy pickups, SUVs, and sedans is a very small investment to make for the huge return you receive because of the "E85 loophole" that allows you to avoid paying millions of dollars in CAFE penalties.

If you charged for FlexFuel, you know most people would elect not to buy it, preventing you from taking advantage of that loophole.

I'm sure you know by now that the Senate has agreed to extend the "E85 loophole" to 2014. Your lobbyists and the Michigan delegation must have called in all their favors.

Regards,

Gary Dikkers

Mary Beth Stanek said: "One writer wanted to know more about the total ownership experience so that they could compare hybrids, FlexFuel vehicles and other offerings."

Ms Stanek,

You should direct that writer to the RAND study that USA Today showcased in their newspaper Thursday. From that article: "The research by RAND, a non-profit research organization, also found that light trucks and cars continuously fueled by a mixture of 85 percent ethanol and 15 percent gasoline – known as E85 – compare unfavorably with the other two alternatives. “Advanced diesel and hybrid technologies show very well in this study, in terms of benefits to the individual and society overall,” said John Graham, dean of the Pardee RAND Graduate School and senior author of the research paper. “E85 simply doesn't provide the same benefits.”

Ethanol E85 fuel loses cost-benefit test to diesel

RAND press release -- Diesel- and Hybrid-Powered Vehicles Can Provide More Societal Benefits than Gas-Powered Autos

Regards,

Gary Dikkers

Mary Beth Stanek said: "For those of you interested in energy diversity in the U.S. I believe we can look to Brazil to see what the future may hold for us."

Ms Stanek,

Since you just returned from Brazil, you should realize that making ethanol there has huge advantages that don't exist in the U.S.

1. Latitude
2. Climate
3. Inexpensive manual labor

Brazil's latitude and climate mean that cane grows well there, in fact it has one of the best climates on the earth for growing cane.

In the U.S. only Florida, Louisiana, Hawaii, and parts of Texas are suitable for cane.

Since our ability to grow cane is limited, we have to rely on corn as our feedstock for ethanol which is far less efficient for making ethanol than cane.

Brazil also has a large population of people who are willing to supply manual hand labor for very low wages. For good reason, our corn farmers are reluctant to get rid of their diesel-hungry tractors and combines, and instead wade into their fields with machetes.

Many people don't realize it, but much of Brazil's advantage comes from that surplus of manual labor. (What we might call serfs or sharecroppers.)

While in Brazil, did you get to see the seamier side of how they grow and harvest cane?

Regards,

Gary Dikkers

Gary: This is what happens when you try to regulate what businesses produce instead of regulating consumer demand.

CAFE standards are to blame for the rash of SUVs in the last 5-10 years. Some people just want big cars -- there's clearly a demand for them, and any auto maker that doesn't supply them is at a disadvantage.

If we want to discourage gasoline use and inefficient vehicles, the only proper way to do it (from a governmental regulation standpoint) is to drastically increase gas taxes.

Gary;

Yeah, I thought of you when I read the news stories about the proposed energy bill. What a shuck.

Never mind the rampant deforestation in Brazil, and the greenhouse gas and other environment catastrophes which follow.

Anyway, thanks for relentlessly telling the truth. Otherwise, nobody would challenge the spin.

Brock:

Well I have to agree with you on fuel taxes.

As to the advantages of trucks and SUVs, it would appear the those are rapidly eroding in the face of $3.00 gasoline. The latest sales figures show GM truck sales down something like 7% year to year, with Ford similar and Chrysler even worse. GM is supposedly going to reduce production by 11% in the first 2 quarters of 2008.

So let me get this straight.

The fact that Brazil survived the economic pitfalls of the sporadic supply of imported oil and the price shocks of the OPEC cartel makes Brazil and its citizens worse off?

The fact that once poor and even impoverished farmers both here and in Brazil can get a decent price for their commodities is also a bad thing.

The fact that Brazil diverts it's once costly energy bill from rich OPEC countries to it's farmers is ill conceived?

That any country that wants to help its domestic industry and farmers is doing wrong.

Well let me tell you, just about every oil producing country from Venezuela to Russia, from Great Britain to Iran has laws, taxes, subsidies, government policy and regulation that protects, strengthens, supports, subsidizes, monopolizes, and/or outright owns their oil wells, fields, and companies.

So if the U.S. does likewise and supports it's home crop or industry then it is flat wrong?

Name a country that does not support their energy industry, or farm community and I will show you a government that no longer is around.

Mary Beth Stanek said: "Just back from Brazil where the price difference between a liter of alcohol and a liter of gasoline (containing 20% ethanol) was approximately 44% less for alcohol in Sao Paulo."

Ms Stanek,

You may be interested in this recent story from the Memphis Commercial Appeal. It explains part of the reason why cane ethanol is so much less expensive in Brazil than corn ethanol is here. To quote from the story:

Brazil's pioneering use of sugarcane-based ethanol, which fuels about 30 percent of the country's automobiles, has made Latin America's largest country a global leader alternative energy. Getting less attention is the squalid labor conditions of nearly half a million people who toil in the fields six days a week to supply the cane to the nation and a growing export market."

Converting the sugar in cane to ethanol is naturally more efficient than turning the starch in corn to ethanol, but they also benefit from using dirt-cheap manual labor.

The entire story is here: Harsh conditions mark harvesting of Brazilian sugar cane

Best regards,

Gary Dikkers

Edward Hayes asked: "So if the U.S. does likewise and supports it's home crop or industry then it is flat wrong?"

Mr Hayes,

Well, to be frank, yes.

The problem is that ethanol from corn is inefficient and not actually a renewable fuel.

There would be no ethanol from industrially-farmed corn without the constant consumption of irreplaceable, unrenewable fossil fuels.

Using natural gas to make synthetic nitrogen fertillizers to grow corn, and then using more natural gas to mill, ferment, and distill that corn into ethanol is not a good use of a fossil fuel as valuable as natural gas. It would be far more efficient to use that natural gas directly as a fuel, or to transform it into a liquid motor fuel using a more efficient chemical process.

Unfortuantely, corn ethanol is nothing more than recycled natural gas.

By the way: Did you see the news report last week that the "closed loop" ethanol plant at Mead, NE has gone bankrupt? They said it was due to an "equipment failure" but it's more likely the Laws of Thermodynamics finally caught up with them.

Regards,

Gary Dikkers

Interesting post.

I'd like to start by commenting that I am a fan of the idea that GM vehicles can run off of ethanol. This in mind I can only wonder why ALL of GM's vehicles don't offer the flex fuel option. Having the option for E85 is a great way to start changing the US infastructure to get away from conventional fuels.

However, I am concerned that people are being fed hype and missing a few important points about ethanol. I really wish GM would address these concerns. I'm fully aware that GM wants to sell as many Flex Fuel vehicles as it can, but I think that it is important to further discuss the implication of using E85.

How much petroleum goes into the production of E85. I'm not talking coal or biomass (both the US has plenty of). I'm talking about oil and products based on oil.

1)Are there farm implements used to harvest the raw materials for E85 using oil or bio diesel?

2)Are the fields fertalized with petroleum derived fertalizers?

3) Is Brazil a good country to compare with, since a fair amount of their crop production is sugar cane which can more efficiently be used to create ethanol? And how much rain forest is being cut down to farm ethanol resources (if any)?

What is the real cost savings running ethanol?

What about the real petroleum savings (not just the up front apperent savings)?

Brock,

You are correct, but I don't see the last 5-10 years as a bad thing. The issue isn't so simple as just SUVs versus other cars. The problem is one of population, more people are driving then before and there are more cars on the road.

What your post doens't clearly mention is the goal you have in mind. Are you aiming to cut down the big bad SUVs out there or increase the cost of fuel? Or both? The problem isn't just SUVs, If you wanted to fix that you'd make people pay a gas guzzler tax thats more steep, you'd tax the car companies that build them and the fuel that runs them, the parts in them etc. Our free market doesn't work that way. But as demmand for fuel goes up the price too will rise, or so supply and demmand claims. This itself will force people who WANT SUVs to DEMMAND that the people making them make them more efficient. If they don't make them more efficient, it will slow down the purchase of them but not stop it.

I guess my question to you is what is your goal? And your viewpoint?

Gary,

Its good to see someone else looking for the truth on here besides myself. While I'm not a die hard environmentalist, I do beleive it to be foolish to squander what resources we have, and not making better efforts (read less cost based efforts) to come up with a good vaible energy source for the future. As a country we don't really have many options we either find a better energy source, we cut down usage or some of us don't get to enjoy the lxuary.

Edward,

It has nothing to do with Brazil surviving economic pitfalls etc..

It has everything to do with the science, facts and politics of energy usage and production.

Brazil is able to grow the cane crop, produce cane, and produce ethanol at a lower cost, with less energy input because of several key factors which include avialability of land, sunlight, proper climate and inexpenive labor. Without the sugar cane they couldn't produce ethanol in a cost effective manor. Additionally the land they have is probably better suited for the production of cane, not even considering their climate is more favorable too.

It isn't just about helping the farmers. I would love to see that, but it is important to be realistic and practical.

Right now in the US the reality is that ethanol is expensive to make in large enough quantities to meet our energy demmands. Additionally the resources required to do this do not make it cost effective at present. This doesn't even touch on the fertalizers being used that are made from natural gas or other petroleum products.

It is important to consider the whole process before jumping on the wagon. Its about supporting US business, producing less emissions and equally important using less petroleum. Right now those three parameters make it very tough to do cost effectively.

It isn't as simple as just supporting our home crop or industry. It is about doing it while not causing further environmental problems, using more petroleum to do it, and doing it at a cost that will sell. Right now cost is and petroleum usage are big holdups. If farmers were to get all their equipment running on Bio diesel and ethanol, and were able to fertalize their fields with no petroleum derived fertalizers then I'd say its worth the effort. BUt not yet, the industry it so immature to be ready for larger scale production.

You Know,

A three year old and his little brother can find a problem with the solution. But no one has yet found a better solution to the problem.

Another 66,000 gallons of oil destroys yet another pristine beach in the pacific with gas aiming for $4.00 and a barrel of oil kissing $100 and OPEC, Chavez, Akmadenajab, and who knows who else threatening to turn the oil spigot off at will.

There are solutions, I call it HEED. Hydrogen, Hybrid, Electric, Ethanol, and Diesel. But all of these technologies except for 1 will not have an immediate impact on oil prices within a year, none except for ethanol.

Now within the ethanol solution there is corn, cellulose, and imported cane ethanol from Brazil. Cellulose ethanol is very promising but it needs a longer time frame to develop up there with electric and hydrogen.

Corn ethanol, around for 100 years is the quickest and most dynamic solution to the immediate problem. It can be blended up to 10% on all vehicles on the road today. Hay we import 10% of our oil from Venezuela. GM, Ford and Chrysler already have millions of E85 vehicles already on the road that can run on 85% ethanol content.

Farmers growing corn have not seen the price of their corn crops go up for 30 years, not until interest in ethanol took off over the past 5 years. In about the same time the yield from an acre of corn doubled from 1999 to today. With new investment in corn growing other progress has been made with better seeds, higher yielding varieties of corn corn that is drought resistant etc. As a result the US had the biggest corn crop since 1943. Along with 30 million acres farmers were paid to leave fallow to keep corn prices from collapsing the bottom line is we can impact the market for oil most significantly and quickly with ethanol from corn.

Is is the best solution. In the short term yes, in the long term no. In the long term these ethanol facilities will be diverting more and more of their feed stock from corn to other materials, first the corn cob and corn husk.

In the next 3-5 years we will be looking to more hybrids and hydrogen, electric vehicles. Diesel will take off with biodiesel development which mirrors ethanol with breakthroughs everyday will algae to biodiesel plants now sprouting up. Algae reproduces every 6 hours instead of a full year for the soybean crop, the current crop to produce biodiesel. Also there is a lot of used oil that can be made into diesel.

Does the solution to the oil problem going to be simple? No, because there is no silver bullet. The solutions are diverse and in that is the strength of tomorrow's fuel. We are dismantling an international juggernaut monopoly that is trying to dictate price and what we drive and many will give in. But this undermines the basic freedoms which we live by.

While the European Community dictates to Microsoft and other American companies who they can or cannot merge with and penalizes them, OPEC has as a monopoly is running free with answering neither to the EU, USA, NATO, or any of their respective governments.

Well they will have to answer to the humble and meager American and Brazilian farmers. Because with the way ethanol is growing to compete with oil, this monopoly finally can be challenged, competed with, if not broken, and America can have its free market in fuels back.

Perfect solution? No, but it's the best short term solution to an imperfect, world in which a free market is not the norm and efficiencies, rationalities, and environmental considerations don't even show up on the OPEC table.

Short term, corn ethanol is the best solution.

Intermediate term, cellulose ethanol,hybrid and electric vehicles will come into play.

Long term hydrogen vehicles and oil shale and oil sands can be developed. And we have enough of these to be energy independent on the continent.

Corn ethanol alone is not the best long term solution, it is the best short term solution. Over time if all of the energies made available here are developed energy independence is not a question but a fact, and an economical and efficient one at that.

Edward Hayes asked: "So if the U.S. does likewise and supports it's home crop or industry then it is flat wrong?

Mr Hayes,

No one is opposed to ethanol as a liquid fuel or product. The problem is and always has been that ethanol in the U.S. is made from corn. Here are the problems with corn ethanol:

We can hope that someday there will be better ways of making fuel ethanol in the U.S. But corn ethanol is not a bridge or transition to that day. Corn ethanol is really a farm program. If you're a farmer I understand why that is attractive to you, but don't delude yourself into thinking the programs that prop up corn ethanol have anything to do with energy dependence.

The only thing that will make cellulosic ethanol a reality is lots of research and hard work. If I had my way, I would throw the money that now props up corn ethanol into cellulosic research. Spending money subsidizing corn ethanol only retards the day cellulosic gets here.

Here's the link to the story about the closed-loop ethanol plant at Meade, NE shutting down.

Mead closed-loop plant stops operation

Regards,

Gary Dikkers

Edward,

Its not so much that we find it so easy to find problems with things as much as its that big a deal to know all the problems to make the best decision.

I challenge you as I'm sure you'll challenge me, to prove that ethanol is the wonder cure for the next year.

I still think you are missing the point. Ethanol is a great fuel but where are we getting the raw materials to make it and how much energy does THAT cost? Additionally the plants that we use require fertalizer so where does that come from? In the US it comes from oil byproducts (natural gas). So we aren't saving much.

In actuality electric and hydrogen are one of the easiest to generate. All it would require is the federal gov't allowing new power plants to be produced. That could be accomplished in less then 5 years. Ethanol might be the tommorrow fix but Its not the solution you think it is right now.

How do you propose we reaffix the nitrogen into the soil from all the corn we grow? Corn robs the soil of nitrogen, thus that 30 million acres is rotated with other crops or left to regenerate naturally, the nitrogen that corn robs it.

Hybrids are ok except what does it cost in materials, and energy to make the batteries, and what toxic by products are there?

Biodiesel is a great idea, they can first extract the oil from the corn then turn it into ethanol. And then you can put the waste into a pond and grow algae in it to make more diesel. Thats feasable, but I'm waiting ot see it on a mass scale. The question is still where to get the raw materials from.

There is a silver bullet actually but no one wants to touch it. Nuclear generated hydrogen with methane storage. Every engine out there can run either methane or hydrogen with conversions. It wouldn't be hard to do and per ton Nuclear power has the highest energy density of any fuel out there. But I'm guessing thats going to raise some concerns.

Even as it is there is no reason to not have cars that can run all of these fuels, except that its not profitable for companies to do so. There is also no reason to not retrofit cars for these fuels. Again I'm waiting to see someone be serious about the problem and step up and do something. GM is just fiddling with it now, they are barely serious about it otherwise they would have diesels and more hybrids. Is the technology to new or the profit margin to low? I don't have to wonder much to know that.

Ethanol will not take over oil. You forget the OTHER products that come from OIL, like plastics (that make up tons of products including the dash and front bumpers and tires etc..) we can't just get rid of oil by not buying gasoline or diesel. And if we do other countries will buy it instead. Our products depend on oil not just for fuel but for many many things.

What do free market, efficiencies, rationalities and environmental considerations have to do with it. OPEC has the oil, we have the demand, they set the price I dont' see where the question is.

In order to consider a viable fuel you have to consider it in its entire context which isn't always easy.

Gary,

I think you are right about ethanol however wrong about corn being used as a commodity. I think the farmers just want to make more money from it and make sure they dont go out of business.

I think for ethanol there are better things to grow that will return a higher yield of energy. I'm thinking potatoes and sweet potatoes. They contain starches that can be turned into ethanold. But really almost any organic sugar or starch can, there is no good reason to target corn alone other then its political ties. Many of the crops we have could and should be used for ethanol. For that matter if we collected the organic waste (non fecal biomass) we could probably ferment that into fuel. There are many better ways to make ethanol. And certainly better ways to make other fuels, ethane, methane and biodiesel and diesel. In fact there are ways that you could probably maximize the production from one thing but transprocessing it into other things.

For instance if you started with starch for ethanol, then after that you took the waste products and fermented into compost, you could mix that with water to grow algae and extract both diesel and hydrogen (sulfar shock the algae to make hydrogen). From that the algae could be dumped on the fields as fertalizers. etc... I'm not sure how great a process that would be but its an interesting idea. Additionally they could tap the swamps for natural gas and even generate it with the fermentation of the aformentioned items.

There's also solar which is not very heavily talked about. There is plenty of land for solar electric and hydrogen.

At the end of the day it gets down to cost and convenience. If the US cared enough we'd have solved the problem 20 years ago. But we dont 'have the time or interest to really do something with it, but thats ok because it will probably happen as it needs to.

The US Gov't should have a competition out for alternate fuels. Or for that mater private industry to better promote these things. They need to offer prizes that make it worth it or provide initial start up mony to people interested in it. When it becomes important enough people will worry about it and you'll see change happening. HIstory shows this to be the case in the past.

Consumers purchase vehicles using a broad consideration set that includes fuel economy, performance, safety, functionality, styling, etc. GM is a full line vehicle manufacturer and we offer more vehicles over 30 mpg than any other OEM and that includes a wide variety of product offerings. It is important to have choice. - Mary Beth Stanek

Again, the GM company line of "We have a lot of 30 mpg vehicles." And, sadly, my statement "You don't have any that get over 40 mpg" is still accurate.

Why should I buy a car that gets 20 or 25 mpg on E85? How will that save me any money, especially when E85 is still more expensive? I want to use less fuel, period. Less fuel burned in my engine means more money in my pocket.

Even if E85 was completely carbon neutral and didn't use food stocks, pesticides and fertilizers, I'd still be avoiding all of GM's flex fuel vehicles because they don't get exemplary fuel economy, especially when they're running E85.

Yes, consumers as a whole purchase vehicles for a variety of reasons and fuel economy has traditionally ranked somewhere near number of cup holders in level of importance. But for me fuel economy is paramount. And, frankly, GM's current crop of vehicles and the ones I see coming down the pike just don't cut it.

Many thanks to all of your for your hard work and thoughtful analysis of this complex and confusing issue.

Whether I agree with anyone's viewpoint or not, the back and forth and discussion really illuminates the issue.

I have never seen anything approaching this level of discussion in the traditional media.

Well done to all of you, and happiest of Holidays to you and yours.

Nate said: "I think you are right about ethanol, however wrong about corn being used as a commodity. I think the farmers just want to make more money from it and make sure they dont go out of business."

Nate,

We don't disagree. Corn is a commodity crop, and what I meant was that the main concern of agribusiness is to be in favor of anything that will drive up the price of that commodity.

The farm bill, and the back room deals that Corn Belt politicians, Big Ethanol lobbyists, and agribusiness make have everything to do with increasing the demand (and price) for corn as a commodity, and almost nothing to do with the US achieving energy independence.

Regards,

Gary

Paul,

I agree with you GM needs to offer more cars with higher MPG. there's no reason that all their CARS don't get 30 MPG or better and no reason why the small cars like the Aveo, Cobalt and G6 don't have a diesel hybrid system that gets them over 40 MPG. GM seems to dragging its feet. E85 isn't the answer, its good to have cars that can run on it in case we have to, but honestly its a short term thing. I think there are two types of customers out there. Those that are cost minded and those that are environment minded and different combinations thereof. personally Costn't that big a deal to me but not burning more fuel then I need to is. In fact I'm looking at some of GMs competitors since the offer 35MPG plus cars with diesels in (yes VW and BMW in this case).

C'mon GM quit dragging your feet.

Ms Stanek,

Let me put the E85 availability from another perspective, the one from the 3rd world countries, down here in Mexico as in Brazil we have the sugar cane and another cultives where we can obtain the Ethanol, Biodiesel and other green fuels.

If the US wants to go alone trying to use corn ethanol sincerely I don't see how the US will full fill the demand.

From my point of veiw, the US needs to settle a regional plan with Central, Caribean and South American countries to develop an America's ( I'm refering the whole continent with the word America)renovable fuel trade, can you imagine for countries as Haiti, Nicaragua or Belize if they can export their entire production of sugar cane?, can you imagine countries as Argentina, Chile and Uruguay exporting their entire productions of soya?, all these countries will produce the raw material, another countries like Mexico or Brazil can help in the production of the green fuels and then export to the US at lower prices than any oil fuels.

Green renovable fuels can help to all the continent economies, develop the poorest countries and stabilize the regional trades.

The oportunity is out there, we need the goverments to be involve and our industry as one of the crucial motors.