Automotive 101: The Car Industry Exposed

By Jonathan Michaels

As one of the largest economic sectors in the world, the automotive industry touches us in a way unlike any other. With 263 million cars n the road, the U.S. leads the world in automotive registrations. Yet for an industry so large, relatively little is known by the consuming public. In 2010, Jonathan Michaels began a journalistic investigation into indiscretions in the automotive industry. This investigation let to 101 published articles that reveal much about the industry that few had previously understood. From the truth about lithium to the irregularities in the nation's recall system. Michaels' investigative work presents a probing, unvarnished view into an industry that impacts so many, yet is understood by so few.

• Language: English
• Publisher: BookBaby
• Release date: Aug 23, 2019
• ISBN: 9781543983005

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articles.

Sudden Impact

MAY 2010

Is Toyota’s widely-publicized gas pedal recall the appropriate remedy that everyone has been waiting for, or is this merely a quick-fix approach to cover up a deeper-rooted problem with its runaway cars? One thing is sure: With sales of eight models halted, and its pristine image for quality heavily dented, the manufacturer is desperate to get out of the death spiral that could shake its very core.

Good cause exists to question the manufacturer’s actions. Reports indicate that since 1999, Toyota and Lexus vehicles have been involved in 815 accidents related to sudden acceleration, resulting in 19 deaths – more than all other vehicle manufacturers combined. As the problem mounted, Toyota initially blamed the problem on poorly-designed floor mats, resulting in a recall of 5.5 million vehicles. Then, as the problem seemed to continue, Toyota changed its position and blamed a faulty gas pedal design for the problem, resulting in a recall of another 2.3 million vehicles and the suspension of sales for eight of its vehicles altogether.

But, CTS Corp., the supplier who has manufactured the gas pedals since 2005 and who is the primary recipient of Toyota’s blame, casts serious doubt on whether its products are to blame. As CTS points out, the sudden-acceleration problem dates back to 1999, years before CTS began supplying the gas pedal. It is also of note that CTS has been honored three times by Toyota since 2005 for exceeding quality expectations.

More doubt is cast on Toyota’s gas pedal fix by reviewing the U.S. vehicle safety records of the runaway vehicles. As reported by the Los Angeles Times, of the 2,000-plus complaints of sudden acceleration in Toyota and Lexus vehicles from motorists, only 5% cited a sticking gas pedal as the source of the problem. The Los Angeles Times further reports that the National Highway Traffic Safety Administration (NHTSA), the U.S. agency that governs federal vehicle safety, has conducted eight investigations into sudden-acceleration problems with Toyota vehicles over the past seven years, and found that none of the incidents were caused by a sticking gas pedal.

So, what is the problem? Some automotive safety experts fear that it is a latent defect in the vehicles’ electronic throttle system. And, this would explain why the problem is identified by vehicle owners as sudden acceleration, as opposed to the vehicle remaining at a constant speed when the gas pedal is no longer depressed. If a vehicle was traveling 65 miles per hour and the gas pedal stuck at that position, the car would continue traveling at that same rate of speed after the driver’s foot was removed from the gas pedal. A problem to be sure, but not the main issue complained of by motorists. Case in point is the August 2009 incident where off-duty California Highway Patrol officer, Mark Saylor’s, 2009 Lexus ES 300 accelerated to 120 miles per hour before smashing into the back of a SUV and bursting into flames, killing four occupants of the vehicle. One more important fact: The Lexus ES 300 is not one of the vehicles that are subject to the Toyota stop-sale.

If the actual problem is, in fact, a latent defect in the electronic throttle system, this could prove to be a much more costly and lengthy fix than simply adding a metal shim to the back of a gas pedal. Could Toyota be taking a course of action that puts economics ahead of human life? It would not be the first time a manufacturer has taken such a tact.

In the early 1970’s, Ford Motor Company was accused of knowingly allowing a dangerous gas tank design to be released on its popular Ford Pinto. After several Pintos exploded when struck from behind, resulting in numerous fatalities, Ford came under attack for not issuing a recall. However, concern turned to anger when it was alleged that Ford was said to have conducted a cost-benefit analysis, weighing the cost to repair the known faulty vehicles versus the cost of paying out the damage claims that were expected to arise. Nearly forty years later, the incident is still often referred to as an episode of great corporate malfeasance.

So, what of Toyota’s decision to lay blame at the doorstep of the floor mat and gas pedal? Well, it’s highly questionable. While this may address the situation, much of the evidence points to a contrary – and potentially much more costly – problem. The question remains whether this is really a genuine effort to correct the problem, or whether it is an effort to show some kind of wide-scale solution that will enable the company to start selling cars again. This would certainly not be the first time Toyota has distorted the facts in favor of economic gain.

Whatever the case with the gas pedal fix, one thing is certain: If Toyota gets it wrong, it could very well turn a significant problem into a catastrophic one. One can only hope that all the evidence pointing to this being an inappropriate wrong fix is wrong, and that this dark episode in consumer safety will be closed forever.

Big Brother is Looming

JUNE 2010

In some of the most sweeping legislation to hit Capital Hill in years, Senate Financial Reform Bill S. 3217 is about to change the financial industry’s landscape for good. And, that’s not welcome news for everybody.

Acting in response to the 2008 financial market meltdown, the Senate is set to begin voting this week on S. 3217, which would create the Bureau of Consumer Financial Protection – an agency to be charged with overseeing virtually all consumer-related financial products. The new agency, or the BCFP as it will likely become known, will be given total oversight to stomp out unfair, deceptive or abusive lending practices, and will apply to industries far and wide. As President Barack Obama proclaimed, he will block all efforts to exclude from the new agency banks, credit card companies or nonbank firms such as debt collectors, credit bureaus, payday lenders or auto dealers.

If the intent was to create an 800-pound gorilla in the financial markets, the bill succeeds. In addition to having unfettered oversight to halt any practice the agency determines to be unfair, deceptive or abusive, the BCFP will be required to conduct examinations of persons it considers to be larger participants of a market. For auto dealers who fall into this category (the BCFP will be left to define what a market is, and who is a larger participant of that market), they would have to register with the government, and their principles, officers, directors and key personnel may have to undergo background checks by the government.

The intent of the proposed legislation appears to be pure: provide important oversight to the financial industry to prevent a repeat of the 2008 debacle. But, in the haste to prevent this situation from ever reoccurring, one has to wonder whether the current legislation is being driven by reason or by fear. History is replete with hastily-made decisions that appear appropriate when made, only to later cause us to cringe when reminded that we ever engaged in such rash conduct. If there is any doubt on this, just ask any of the 110,000 Japanese Americans who were whisked away into internment camps during World War II.

With the auto industry employing, in one form or another, one out of every six persons in the United States, the question of whether the legislation should apply to the nation’s 17,000 auto dealers should not be taken lightly. This is particularly true at a time when the auto industry sold 300,000 fewer vehicles in the United States in 2009 than in 1965 (10.6 million in 2009 versus 10.9 million in 1965), and when goliaths such as General Motors and Chrysler – once thought impenetrable – are toppling under the weight of insurmountable debt. A misstep with this industry could have a dramatic impact on our nation’s ability to climb out of our economic freefall.

While the proposed legislation may be appropriate, or even necessary, for the mammoth institutions of Wall Street, the same cannot be said for the auto dealers of Main Street. Auto dealers are already one of the most heavily regulated segments, governed by the Federal Trade Commission, the Federal Reserve Board, the Fair Credit Reporting Act, the Truth in Lending Act, the Federal Consumer Leasing Act, and the Gramm Leach Bliley Act. Adding yet another layer of oversight, such as the BCFP, to an already over-burdened process would only serve to require further infrastructure in dealerships and result in higher prices for consumers.

The legislation would also undoubtedly spawn further consumer litigation against dealers, the cost of which also gets passed on to the consumer. Whether it is a violation of Business and Professions Code Section 17200, the Consumer Legal Remedies Act (Civil Code Section1780), or the single document rule (a requirement that all terms of a loan be contained in a single document), dealers are uniquely positioned to receive attacks from consumers for what are often times hyper technical applications of law. Readers may recall the event in the early 2000s where a southern California law firm filed more than 2,000 lawsuits against auto dealers and repair shops in California for trivial violations, such as abbreviating the words on approved credit (O.A.C.) in a print advertisement.

As the bill has been making its way through Congress, at least one Senator has recognized the chilling effect that S. 3217 will have on the auto industry. After the Senate offices received floods of letters and visits from concerned dealers, Senator Sam Brownback (R., Kan.) drafted an amendment to S. 3217 that would exempt nearly all the nation’s dealers from the new consumer protection law. This carve out – what has become known as the Brownback Amendment – is set to be voted on by the Senate in the upcoming days. If the Amendment passes, auto dealers will escape the grip of a frightened Congress, and be permitted to rebuild their industry without the added weight of additional governmental oversight. As the vote takes place, one can only hope sound judgment will prevail.

The Tesla Business Model

JULY 2010

Last week marked an epic event in the automotive industry when Tesla Motors launched its ambitious effort to raise $185 million through a public offering of 11.1 million shares of stock. The IPO was historic in that Tesla is now among the ranks of only a small handful of U.S. auto manufacturers to have ever had a public offering (General Motors, Chrysler and Ford, to name a few); the offering was notable in that this is the first time an all-electric car company has ever graced the annals of Wall Street. But the event was remarkable for a much more subtle, and much more important, reason. Tesla’s launch signifies the first time in U.S. history that an auto manufacturer of any significant scale has rejected the much-embraced franchised dealer sales system, in favor of company owned stores.

Although some may not recognize it, or perhaps have just never given it much consideration, the neighborhood Ford dealer down the block is not a Ford store at all; it is a separately owned business that enjoys a dealer agreement with the manufacturer. This franchise system is as old as the manufacturers who use it, dating back to the early 1900s when Ford and General Motors forged partnerships with budding entrepreneurs who were able to penetrate the local communities in ways that the manufacturers couldn’t. Throughout this time, the franchise system gained strength as the accepted way to sell and service automobiles, and to occasionally address other social issues such as the minority dealer development programs, where the manufactures assist minority groups in becoming dealers.

Now, some 100 years later, the franchise system is taken for granted as the way cars are sold in the U.S. –until now.

Tesla’s attempt to reinvent the way cars are sold is bold, pioneering and stimulating – and for Tesla, potentially problematic. As the franchise system evolved in the U.S., state legislatures began to recognize significant disparities in the bargaining power between large auto manufacturers and independently owned dealerships. These concerns grew as manufacturers were at times put in the position of having to take back independently owned dealerships (for instance, when a dealer was terminated or gave back the franchise), or when manufacturers just tried to open up competing factory-owned dealerships altogether. Because of this uneven playing field, several states developed bodies of law intended to protect dealers from unfair competition from their manufacturers. For instance, California prohibits manufacturers from owning dealerships if there is another franchised dealer within 10 miles; New York prohibits factory owned stores if there is another franchised dealer within the state; and Colorado bans manufacturers from owning more than one dealership altogether.

While the dealer laws originated to even the playing field between manufacturers and franchised dealers, it is not difficult to imagine that legislatures might have an interest in expanding the statutory schemes to protect the sanctity of the franchise system. For instance, in March 2010 Colorado passed House Bill 10-1049, which expanded the state’s statutory dealer laws to prohibit manufacturers from owning multiple dealerships in the state. Hence, an attempt by Tesla to open two dealerships in Colorado would be deemed unlawful.

With the inroads that the dealer bodies have had with the legislatures, it is not difficult to imagine that a widespread factory-owned dealer system, such as the one being implemented by Tesla, would be deemed unlawful. Arguments could be made that such a system would enable unfair competition with dealers of other line-makes who were not as well-capitalized, or that the system would be against the public interest because dealerships would not be as plentiful, resulting in a diminished ability of the factory-owned dealers to handle maintenance, warranty and recall issues. And, then of course, there is the erosion of the minority dealer development program, which would likely invoke a response from the National Association of Minority Auto Dealers.

Such arguments sound crazy? Think again. In the early 1970s petroleum producers, such as Exxon and Shell, began shedding their historic franchise system in favor of company-owned retail stations. The movement was met with resistance, with dealers claiming that the company-owned stations were unfairly competing with the dealers and that the existence of the stores was against public policy. The Maryland Legislature agreed, and in 1974 Maryland enacted a statute prohibiting any producer or refiner of petroleum products from owning and operating a retail station in the state. Exxon, Shell, Gulf Oil and Ashland Oil challenged the law as an unlawful restraint on trade and a violation of the due process, resulting in U.S. Supreme Court review. In [Exxon Corp. v. Governor of Maryland], 437 U.S. 117 (1978), the Supreme Court upheld the law, stating that the law bore a reasonable relation to the state’s legitimate purpose in controlling the gasoline retail market; that the statute did not impermissibly burden interstate commerce; and the fact that the statute might have anticompetitive effects was not in itself a sufficient reason to invalidate the law.

Would a state’s attempt to regulate the automotive industry lead to a similar result? Probably. Consider the 1978 U.S. Supreme Court case of [New Motor Vehicle Board v. Orrin Fox Co.], 439 U.S. 96 (1978), where California’s dealer protection laws were upheld as constitutional. The Court held that the California Legislature was constitutionally empowered to enact a general scheme of business regulation that imposed reasonable restriction upon the exercise of the right, stating the due process clause is not to be so broadly construed that the Congress and state legislature are put in a strait jacket when they attempt to suppress business and industrial conditions which they regard as offensive to the public welfare.

So, what will become of the Tesla business plan? Tesla describes one of its strengths as the fact that it operates in a fundamentally different manner and structure than traditional automobile manufacturers. Judging by the response to the IPO, where the stock price nearly doubled in the first few days, Wall Street seems poised to embrace the plan. One can only wonder if the legislature will be so kind.

Somebody Tell Them the Party’s Over

AUGUST 2010

For a nation founded on innovation and deeply rooted in the entrepreneurial spirit, one has to wonder how they got it so wrong for so long. The Big 3 that is, now recognized by their new name, the Detroit 3. It is an odd paradox in a way, but just mentioning the names GM, Ford and Chrysler conjure a vast array of thoughts and emotions. Is it Henry Ford’s invention of the assembly line? Is it the enormous pride that one exhumed in the 1950s when the family got its first Cadillac? Or is it the long, slow slide the Detroit 3 have endured over the past several decades from world domination to accepted irrelevance?

Looking at the Detroit 3 today, it is hard to imagine that when Bruce Jenner carried the United States to victory in the 1976 Olympics, 86 percent of all new cars sold in the United States were from the Detroit 3. Today, that number has been cut in half, replaced by companies that are leaner, better able to adapt, and better managed. Natural selection has taken over, leaving the once impenetrable stumbling toward extinction.

What is more disturbing than the situation they are in is how they got there. As the Detroit 3 were slipping into the abyss, those in command were celebrating glory days gone by, giving each other attaboys on a job well-done and passing out undeserved paychecks. Consider this. In 2008 – the year before the Detroit 3 flew to Washington D.C. in their private jets, looking for handouts – GM paid its CEO Rick Wagoner $14.9 million in compensation. His accomplishment? Presiding over a company who had just posted a three-year loss of $82 billion and whose market share had dwindled to a mere 19 percent.

Now, the country has given GM and Chrysler over $85 billion of taxpayer money to help them escape their self-created mess. For those wanting to keep score, that is $52 billion to GM, $15.5 billion to the privately-owned Chrysler, $15 million to GMAC and Chrysler Financial, and $5 billion to GM and Chrysler suppliers. So, the future of these companies has turned from an issue of national pride to one of genuine concern, as one wonders whether the United States will ever see a return on this enormous outlay of capital.

The answer to this question, and to a large extent the question of whether Ford can also be saved, hinges on whether the Detroit 3 will wake up from their decades-long slumber and begin to actually compete in the new marketplace. To be sure, the Detroit 3 have turnaround plans. But, this is nothing new, and no one should be fooled or surprised when Turnaround Plan 2.0 is just as unsuccessful as the many plans that have come before it.

Some of the prior sure-fire turnaround plans that have been laid to rest: In 1979, Chrysler took a $1.5 billion handout from the government under the Chrysler Corporation Loan Guarantee Act. It was seeking to salvage its market share that had declined to a mere 11 percent. Yet, after implementation of the plan, its market share continued to decline, and today is only 8 percent. In 1985, GM rolled out its Customer Satisfaction turnaround plan that was sure to save it from continued market erosion. GM’s market share at the time, 40 percent. Its market share today, 19 percent.

Even as recently as five years ago, the Detroit 3 had new turnaround plans that were sure to fix the damaged brands. In 2005, Ford rolled out the Way Forward Plan, in what it called a historic moment for the company, where it committed itself to reinventing the Mercury brand and building cars that people wanted to buy. Five years later, Ford announced that it was eliminating Mercury and that its market share was down to 15 percent. In 2005, GM introduced its plan, called the Four Point Turnaround Plan, where it committed to strengthening its current brands and aggressively targeting key markets. Five years later, GM terminated three of its brands, Hummer, Saturn and Pontiac, and was surpassed by Toyota as the world’s largest manufacturer – a title it held for nearly a century.

So, can the Detroit 3 escape the morass and return to world domination…or at least remain viable? Not likely if it is business as usual. At GM, Rick Wagoner was replaced by Ed Whitacre who has been making a variety of cuts. But, are those changes enough? Not according to one GM market executive who had the following to say: The removal of managers and executives so far has been mainly at lower levels, thinning ranks and taking out layers. It's not replacing people who made the mess and created the culture.

Similar problems can be seen with how the Detroit 3 are approaching their product lineup and distribution systems. Take the following example: Lexus, a brand that was only introduced during the first George Bush presidency, outsells Cadillac by a margin of 2 to 1. But, what’s even more surprising is the way it does it. Cadillac sells through a dealer network of 1,316 dealers; Lexus does it with 230.

Upon exiting bankruptcy last year, GM announced that part of its turnaround plan was to have Cadillac emulate the Lexus model, stating that it was looking to close 922 Cadillac showrooms and build a new sales and service network centered around urban coastal regions. However, only months into the plan, GM abandoned the effort, agreeing to keep the same Cadillac network that we have come to know.

If the Cadillac situation appears bad, GM’s other brands are actually worse. Take Buick for instance, which has a dealer network of 2,369 showrooms, and which considers itself a competitor to Honda. The average Honda dealer in the United States sells 1,013 new Hondas a year. The average Buick dealer sells only 41. That is 41 new Buicks [per year].

GM is not alone in its brand struggles. Ford, whose CEO Alan Mulally was famously quoted as saying that his Lexus LS430 was the finest car in the world, is in an equally precarious position. Ford claims that the elimination of the Mercury brand will enable it to focus more clearly on its older sibling, Lincoln. Yet, one must question whether the Lincoln dealers can survive without Mercury. Until now, most of the 1,221 Lincoln dealers have been paired with Mercury franchises, and Mercurys have been responsible for about half of the dealers’ sales. Now, with that sales volume gone, the dealers will have to meet their same debt burden, yet with a substantially reduced revenue base – and these are dealers who were barely viable with the Mercury franchises.

As bad as it sounds, all hope is not lost, as the Ford, Chevrolet and Dodge nameplates still enjoy healthy sales. The United States buys about 1.4 million Fords every year, 1.3 million Chevrolets and 500,000 Dodges. These are very respectable numbers, considering that Toyota, the U.S. market leader, sells 1.5 million units. The problem is not that the Detroit 3 cannot build cars; it’s that they can no longer support the multi-branded lineup that they enjoyed in years past. A Chevrolet-Cadillac-GMC-Buick lineup diverts precious resources away from what is viable and contributes them to endeavors that are not.

As one who spends a significant amount of time representing dealers in manufacturer-related litigation, it is painful to suggest that the Detroit 3 need to do considerably more to remain viable. But, this is a situation that has been 30 years in the making, and one which is now inescapable. If drastic measures are not taken now, there may not be another opportunity. As Albert Einstein said, We can’t solve problems by using the same kind of thinking we use when we created them.

Electric Shock!

SEPTEMBER 2010

Last Wednesday, the latest entrant to the burgeoning electric car market went on sale, the cleverly-named Nissan Leaf. Rallying around claims of saving the environment and helping the nation rid itself of its dependence on foreign oil, consumers lined up in droves to buy the new commuter car. In fact, it seems like just about every car manufacturer is coming out with a hybrid or electric car. Toyota has the Prius, GM has the Volt, and Tesla has the…well, the Tesla.

So what’s behind this movement toward electric cars? Good corporate responsibility? Auto manufacturers responding to consumer demands? Well, sort of. The truth is that in 2007 President George W. Bush signed into law a comprehensive overhaul to the U.S. energy policy, which sets forth new fuel economy standards that auto manufacturers must meet over the next decade or face stiff penalties. The new fuel economy standards will be enforced through the Corporate Average Fuel Economy, or CAFE regulations, enacted in the mid-1970s. This has auto manufacturers jumping.

For those old enough to remember, in 1973 the United States was shocked to its core when the OPEC (Organization of the Petroleum Exporting Countries) nations responded to U.S. involvement in the Israeli-Arab War by imposing an oil embargo against the United States. The embargo resulted in an immediate shortage of oil, and in an instant, a nation that had become accustomed to having all the oil it could consume started to panic. As the price of oil quadrupled overnight, consumers were limited to the days on which they could buy gas and how much they could buy, and oil-dependent businesses scrambled for alternative sources of energy. Even Santa Claus was forced to stay home, as states banned residential Christmas lights and just about every other type of non-essential use of energy.

Recognizing that dependency on foreign oil made the United States vulnerable to oil rich countries, Congress sought to reduce the nation’s oil consumption by regulating fuel economy standards in the automotive industry. In 1975, Congress enacted the CAFE regulations, which set forth minimum fuel economy standards that manufacturers had to meet or pay a gas-guzzler tax to the U.S. government. In 1978, the year the law went into effect, all manufactures had to meet an average of no less than 18 miles per gallon. This minimum was increased each year until 1985, when it was set at 27.5 mpg.

While the initial implementation of the CAFE regulations was aggressive, by the mid-1980s the sting from the oil crisis had begun to fade. Fears of OPEC had been replaced by new concerns, and the once stringent CAFE regulations stagnated. From 1985 through the late 2000s the minimum fuel economy remained at 27.5 mpg, despite quantum developments in automotive technology. What’s more, auto manufacturers began to exploit the distinction the CAFE regulations made between passenger cars and light trucks, leading to the development of the minivan and the SUV, both of which fell in the more lenient light truck category.

All of this changed on Dec. 19, 2007, however, when President Bush signed into law the Energy Independence and Security Act of 2007. Under this Act, the CAFE regulations received their first major update in nearly 25 years. The law requires fuel economy standards to begin increasing again, starting in 2011 with a standard of 30.2 mpg, through 2020, where it will be set at 35 mpg. Those who fail to comply will be hit with harsh penalties.

With this, the car of the future became the car of today, as auto manufacturers made a concerted effort to steer consumers toward fuel efficient hybrid and electric cars that would increase manufacturers’ average fuel economy. But, is this necessarily a good thing? On the surface, it would seem that this is an obvious yes, as hybrid and electric cars consume less fossil fuel and emit fewer pollutants than traditional combustion engines. But, does the analysis end there? Perhaps not.

Hybrid and electric cars are powered by one of two battery technologies, either lithium ion or nickel metal hydride. GM’s Volt uses lithium ion technology, while the Toyota Prius uses nickel metal hydride. If the names assigned to the batteries sound more like a Chemistry class and less like Autoshop, it is because battery technologies in general are derived from either rare earth elements or trace metals that are pulled straight from the Periodic Table of Elements, and the batteries being used to power hybrid and electric cars are no exception. Lithium ion batteries use the trace metal, lithium carbonate, and nickel metal hydride batteries use the rare earth element, lanthanide. Both elements are found in the earth’s crust, but where and in what quantities?

Geologists estimate that the world has about 6.2 million metric tons of usable lithium carbonate, the valuable trace metal used to produce lithium ion batteries. Currently, the world consumes about 80,000 metric tons per year, the majority of which goes to consumer products such as laptops and cell phones, with consumer demand increasing about 25 percent per year. If consumption were to remain static at today’s rate (which it likely would not), the world’s known resources would be depleted in about 75 years.

What happens when hybrid and electric cars are factored in? Initially not a lot, but given that the battery for an electric car weights about 400 pounds, this changes quite dramatically as more hybrid and electric cars are produced. The world currently produces about 60 million vehicles each year, a very small portion of which are hybrid or electric. If each of these vehicles were to use lithium ion batteries, this would increase the annual consumption of lithium carbonate to about 550,000 metric tons per year. At this rate, the world’s known resources of 6.2 million metric tons would be depleted in just a little over 10 years.

But, there are larger problems. Unlike oil, which is generally subterranean, usable lithium carbonate is located almost exclusively in salt flats, and its extraction involves an invasive strip-mining process that is neither politically nor ecologically sound. Then, there is the matter of its location. Nearly 80 percent of the world’s lithium carbonate is located in the South American countries of Argentina, Bolivia and Chile, whose governments would enjoy an oligopoly over the rest of the world in a manner far greater than that of the OPEC countries.

The other battery technology used by hybrid and electric cars, nickel metal hydride, is perhaps more concerning. Its rare earth element, lanthanide, is more plentiful than lithium carbonate, but it also comes with significant drawbacks. Because lanthanide is found mostly in massive rock formations, the procedure to extract it is costly and destructive. Then, as with lithium carbonate, there is the matter of its location. Ninety-seven percent of the world’s supply of lanthanide is produced by one country: China. This is a fact that has not escaped China’s attention. As former Communist Party leader Deng Xiaoping has stated, There is oil in the Middle East, there is rare earth in China.

Despite these concerns, manufacturers are presenting hybrid and electric cars as the definitive solution to the fossil fuel problem. Could it be that it was easier, and hence less expensive, for auto manufacturers to expand upon established battery technology that has been in existence for years, rather than develop new alternative fuel technologies that were less mature? Whatever