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4 Program Overview

THE CHANGING CONTEXT

The purpose of the PNGV program is to improve substantially the fuel efficiency of today's automobiles and enhance the U.S. domestic automobile industry's productivity and competitiveness. The primary motivation for this effort came from a rising concern for the nation's rapidly increasing energy consumption, the threats to economic and political security from supply disruptions and price spikes in oil, and the increasing competition in the automotive industry from foreign companies.

Three specific goals of the PNGV followed directly from the overall purpose at the start of the partnership in 1993: (1) improvements in national competitiveness in the overall enterprise of manufacturing vehicles, (2) rapid implementation of innovations in conventional vehicles, and (3) development of marketable vehicles with up to three times the fuel efficiency of comparable 1994 family sedans.

However, since 1993 significant changes have occurred in the context surrounding the partnership. While not unpredicted, the U.S. automobile population has increased by 17 percent, the number of miles traveled has increased by 18 percent, the petroleum used in highway transportation has increased by 20 percent (DOT, 2000), and between 1995 and 2000 the percentage of the U.S. petroleum demand supplied by imports has increased from 44 percent to 52 percent (EIA, 1998). Also, the developing awareness of possible climate change from additions of greenhouse gases to the atmosphere has brought on a strong desire in some quarters to decrease carbon dioxide emissions to the atmosphere. These changes have greatly increased the incentive for the nation to conserve petroleum



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Page 78 4 Program Overview THE CHANGING CONTEXT The purpose of the PNGV program is to improve substantially the fuel efficiency of today's automobiles and enhance the U.S. domestic automobile industry's productivity and competitiveness. The primary motivation for this effort came from a rising concern for the nation's rapidly increasing energy consumption, the threats to economic and political security from supply disruptions and price spikes in oil, and the increasing competition in the automotive industry from foreign companies. Three specific goals of the PNGV followed directly from the overall purpose at the start of the partnership in 1993: (1) improvements in national competitiveness in the overall enterprise of manufacturing vehicles, (2) rapid implementation of innovations in conventional vehicles, and (3) development of marketable vehicles with up to three times the fuel efficiency of comparable 1994 family sedans. However, since 1993 significant changes have occurred in the context surrounding the partnership. While not unpredicted, the U.S. automobile population has increased by 17 percent, the number of miles traveled has increased by 18 percent, the petroleum used in highway transportation has increased by 20 percent (DOT, 2000), and between 1995 and 2000 the percentage of the U.S. petroleum demand supplied by imports has increased from 44 percent to 52 percent (EIA, 1998). Also, the developing awareness of possible climate change from additions of greenhouse gases to the atmosphere has brought on a strong desire in some quarters to decrease carbon dioxide emissions to the atmosphere. These changes have greatly increased the incentive for the nation to conserve petroleum

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Page 79and added emphasis to the PNGV purpose to reduce passenger-car fuel consumption. On the other hand, during this time the demand for sport utility vehicles (SUVs) and pickup trucks has increased to 46 percent of new light-duty vehicle sales. Due to their larger size and weight these vehicles have reduced the average new light-duty vehicle fleet fuel economy from 25.9 mpg in 1987 to 24 mpg in 2000 (EPA, 2000). There is also an implication that, if these lower-fuel-economy vehicles continue to dominate market share, the fleet average fuel economy will continue to decline. Also, the promulgation of Tier 2 emission requirements by the EPA potentially increases fuel consumption of all new cars and will postpone or possibly preclude the widespread use of diesel engines in light-duty vehicles in the United States. During the past several years foreign and domestic competition in the automotive industry has become ever more difficult to define. Foreign companies (including DaimlerChrysler) produced about 45 percent of the new cars and light trucks sold in 1999 in the United States (U.S. Business Reporter, 2001), and GM and Ford both have added numerous overseas subsidiaries and collaborators to their corporate structures. This new context for the PNGV makes it timely to consider whether the original goals should be altered to fit the changed situation while recognizing the substantial accomplishments already gained in pursuing the program so far. PROGRAM PERSPECTIVES Goal 1 Goal 1 relates to national competitiveness in manufacturing of vehicles. Improvements in manufacturing are clearly needed in order to make high-efficiency vehicles affordable and therefore marketable. In some cases manufacturing innovations are needed simply to make certain that new technologies are technically feasible. Thus, many PNGV activities in response to Goal 1 are easily justified as addressing critical barriers to success in Goal 3. On the other hand, in today's context the broad issue of U.S. vehicle manufacturing competitiveness is very complex and unlikely to be seriously impacted by a program with the size and characteristics of the PNGV. The USCAR participants spend huge sums on developing manufacturing technologies as a part of their core business activity. It is true that these companies are in serious competition with foreign auto companies in the market, and manufacturing cost is an important element in that competition. But today all the USCAR participants are global marketers, all have foreign subsidiaries, one is a foreign-owned company, and there are even R&D collaborations with foreign companies aimed at the development and manufacture of major vehicle components (e.g., GM and

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Page 80Toyota). On this basis it seems inappropriate to justify the broad PNGV manufacturing R&D charter as addressing U.S. competitiveness. It also should be recognized that today foreign car companies market over 40 percent of the passenger cars sold in the United States. This fact, too, makes the Goal 1 competitiveness concept difficult to justify. In order to reduce the nation's petroleum fuel consumption it is desirable that all vehicles have reduced fuel consumption. For this to occur, the high-efficiency PNGV technologies and their associated manufacturing processes will have to be incorporated in cars sold in the United States by foreign manufacturers as well. Notwithstanding these questions of scope and definition, the committee believes that the Goal 1 activities in the PNGV to date have been quite successful as detailed in earlier reports (NRC, 1999, 2000). Several manufacturing improvements actually have been implemented in production, and a number of others are well on their way. Many new projects to resolve some of the manufacturing challenges presented by the Goal 3 concept vehicles have been identified and ranked in cost/benefit order. It appears that there may be too few manufacturing people and financial resources in the program to pursue the bulk of these projects. Thus, the committee believes that the PNGV manufacturing goal should be tied closely to the fuel-efficiency objective of the program. Manufacturing R&D is vital to assure that the required new components can be produced with appropriate quality, cost, and predictability and can ultimately result in marketable vehicles. In today's context this focus seems more appropriate than a broad charter to impact overall U.S. vehicle manufacturing competitiveness. Goal 2 Goal 2 requires that whatever desirable technologies are developed in the PNGV program and are ready for production be implemented in conventional vehicles as soon as possible without waiting to be applied in the production-prototype cars in 2004. The committee believes that there has been outstanding progress toward this goal. Several manufacturing and engineering innovations have already been put to use by the industry (NRC, 1999, 2000). Lightweight materials have found many new applications in current vehicles. And most importantly, as noted above, all three automobile companies are planning in true competitive fashion to introduce vehicles with HEV power trains and substantially reduced fuel consumption before the end of 2004. Goal 3 The specific stretch goal to build a prototype, marketable, near-80-mpg mid-size car has served to provide the program with focus and a set of challenging but realistic research targets. The result has been the creation of industry-government R&D teams that have investigated a wide variety of potential technologies,

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Page 81selected and advanced the most critical of these, and enabled the construction of advanced, well-engineered concept cars in only six years. The automobile companies have invested many hundreds of millions of dollars in achieving this result, and this activity has led each of them to HEV product marketing plans. General Motors has announced plans to produce an HEV Silverado pickup truck in 2004 and has indicated that its ParadiGM HEV system would be available worldwide across a variety of market segments from compacts to SUVs starting in 2004. DaimlerChrysler has announced that its Dodge Durango HEV will be introduced in 2003. Ford plans HEV Escape and Explorer vehicles in 2003. All these will be gasoline engine hybrids rather than diesel; they will not have fuel economies of 80 mpg, but will be 10 to 30 percent better than comparable current vehicles. As sales increase, these vehicles will have a substantial impact on fuel consumption in high-volume, high-use market segments. In terms of the objective to decrease fleet fuel consumption, the production of these vehicles is especially significant. A 20 percent improvement in miles per gallon of a light-duty truck starting at 15 mpg would save about 155 gallons of fuel in a year, whereas the same percentage improvement of a mid-size sedan at 28 mpg saves only 83 gallons. Clearly, applying PNGV HEV technologies to light-duty trucks, vans, and SUVs will save more fuel per vehicle than applying them to mid-size sedans as currently specified in Goal 3. As noted in Chapter 3, Goal 3 calls for a production-prototype mid-size sedan to be built by 2004. Early in the program it was decided that each of the automotive companies would build its own Goal 3 production-prototype vehicle, since this activity could not be performed in the context of precompetitive research. It seems clear now that an affordable mid-size sedan with three times the fuel economy of its 1994 counterpart cannot be a part of the foreseeable product marketing programs of any of the manufacturers at the present time. While performance, comfort, cargo space, utility, and safety targets can be met, the combination of 80 mpg and affordability appears well out of reach. Furthermore, it would be wasteful at this point to develop a production prototype for a vehicle that could not be marketed. The immense resources required to build and validate such a prototype can be justified only if the vehicle is part of the manufacturer's forward product marketing plan. In light of the above facts, the committee concludes that it would be more appropriate for the program vehicle-efficiency goal to be based on fuel consumption and total fuel savings instead of miles per gallon. Fuel consumption more directly measures the resulting decrease in the use of petroleum-based fuels that would result if the improved vehicle-efficiency targets were achieved. If the program goal were refocused on reducing total new light-duty vehicle petroleum consumption, this would encourage emphasis to be placed on those vehicles that offer the greatest potential for achieving this societal goal. For better public understanding, the overall fuel consumption reduction could be translated into a

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Page 82goal of miles-per-gallon improvement for vehicles that start from various base fuel economy levels. Events have shown that any restructuring and refocusing of the program should consider the merits and problems created by choosing a specific target vehicle type to use in measuring efficiency improvement. A specific vehicle target does provide a clear objective that can be simply stated. In the PNGV program to date the mid-size car target has resulted in concept vehicles that illustrate three different approaches to meeting conflicting program goals. However, choosing just one target vehicle type can also result in a narrower search for new technology and thus may be counterproductive. Clearly, the PNGV program intends that the promising marketable technology it develops be applied to all types of vehicles that can have a significant impact on total fleet fuel consumption. Furthermore, the committee believes that it is inappropriate to include the process of building production prototypes in a precompetitive, cooperative industry-government program. The timing and construction of such vehicles is too intimately tied to the proprietary aspects of each company's core business to have this work scheduled and conducted as part of a joint, public activity. The success of the year 2000 concept cars suggests that perhaps second generation concept vehicles, still aimed at a stretch goal, might provide a suitable milestone in place of production prototypes. SUMMARY The overview and retrospective look at PNGV reported above led the committee to try to capture the essential factors that have created successes in this endeavor and note opportunities to enhance the future effectiveness of the program. In the committee's view the PNGV program has been a success largely because: 1. It set a deadline for a specific, focused, measurable stretch goal that was publicly visible, was judged to be important by government, and could motivate substantial industry support. 2. It required cooperation between industry and government organizations working on precompetitive research and development projects that were oriented toward the established goal, and it established an organizational structure that involved these key potential contributors in a truly collaborative manner. 3. It resulted in better use of the national laboratories and their tremendous resources to help resolve many of the very difficult issues. The committee believes that, in the future, this activity would benefit substantially from:

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Page 83 1. A clear statement of the societal need being addressed and an exposition of the desired result that is subscribed to by the Administration, Congress, and industry partners; 2. Funding from the government at an overall level appropriate to the potential societal payoff, with the government-industry funding distribution set according to the risk level associated with individual projects; 3. Continuation of the program beyond the current 2004 termination date; 4. Deadlines appropriate for the tasks of major projects, subject to revision based on a rigorous, constructive review by the partners together with an independent outside body; 5. The construction of a series of concept vehicles and a review at agreed-on dates of technologies developed in the program that have been applied to production vehicles; 6. Creation of a high-level forum among the partners to discuss trade-offs among conflicting societal demands being addressed by the program and to recommend tactical and policy options; and 7. Emphasis on fundamental R&D for high-risk, high-payoff technologies. The committee believes that, overall, the PNGV program is an excellent example of how long-range societal goals can be effectively addressed by the efforts of a collaborative, precompetitive government-industry R&D partnership. It is hoped that future activity will build on this program's success and enhance its effectiveness with lessons learned from the past several years. Recommendation Recommendation. Taking into consideration the successes, degree of progress, and lessons learned in the PNGV program to date, government and industry participants should refine the PNGV charter and goals to better reflect current societal needs and the ability of a cooperative, precompetitive R&D program to address these needs successfully.