UAW and Obama: 100% of nothing or 75% of something?

The December 21, Sunday NY Times piece, “Downturn Will Test Obama’s Vision for an Energy-Efficient Auto Industry,” noted that the president-elect’s “writings and speeches on the auto industry suggest a keen interest in finding ways, including new technology, to improve the fuel efficiency of the cars and trucks that Americans drive.” These views, going back well over two years, have their roots in concerns over both climate change and competitiveness. The challenge faced by the auto industry, the government, and the unions alike, as the article points out, is how to fix decades of bad business decisions during a severe economic downturn and stimuli for the broader economy.

What happens next depends in large part on the judgment and resolve of the new president and the UAW. UAW workers average around $30 an hour plus generous benefits that bring the fully burdened number above $70 an hour, according to most accounts. Folks, that’s north of $140,000 a year.

At the same time, the UAW is resisting wage and benefit concessions. I’m not clear why the union feels so entitled, other than the fact that they’ve gotten away with it for a long time. Yes, their jobs are considered “skilled.” But, as one Harvard economist (a liberal Democrat, by the way) pointed out to me recently, it’s true that most of us could not do their jobs if we walked into an auto plant tomorrow. But, we could certainly learn to do those jobs pretty fast.

At the same time, the UAW – which stood by as GM, Ford and Chrysler management continued to design and offer less and less competitive products – is a major reason that these three manufacturers are uncompetitive. Their bloated compensation and lack of vision threatens the whole US auto sector. That sector, by the way, includes most major “foreign” car makers (your Honda was likely produced in Marysville, Ohio), as well as hundreds of second and third tier suppliers. Yet, the UAW seems unwilling to make the concessions needed to help their big three employers become competitive.

The powerful union backed the Obama election bid and feels they should have a friend in the next White House. So, I have two questions:

• Will President Obama hold the UAW’s feet to the fire, regardless of union campaign contributions?
• Does the UAW prefer to make 100% of nothing (if GM, Ford and Chrysler fold) or will they help themselves and the country by accepting 75% of something?

This country needs a viable US auto industry for both economic and environmental reasons.

– Posted by Tom Witkin

Intel Inside your car?

Andy Grove, former chairman of Intel, is reported to be pushing his old firm to become a manufacturer of electric car batteries. The December 12 WSJ report cites Grove’s advice as a potential solution to the microprocessor company’s “[struggle] to create another major business.” Apparently, current management is non-committal.

Why am I interested? Electric cars will become increasingly important to the economy and environment (let’s not get into what ultimately fuels the electricity). And, I used to be responsible for market strategy for a major US semiconductor maker.

There’s little doubt that the automotive battery business is going to be big. Sheer size, though, does not a strategy make.

The WSJ piece also states that Grove “believes that the principle of Moore’s law could apply to batteries . . .” It’s not clear to this one-time physics student that science and technology analogous to what drives Moore’s law could enable the same success in the chemistry and manufacturing of car batteries. Then again, unlike the Secretary of Energy designate, Steven Chu, I don’t have a Nobel Prize in physics or anything else.

Having the right partners and distribution channels are also key enablers for effective strategy. Intel is still the dominant designer and manufacturer of microprocessors. Cars these days do contain lots of semiconductors, both microprocessor-based CPUs as well as digital signal processors and other application-specific chips. I don’t know – maybe you do – what portion of these circuits are produced by Intel. But, the business process behind getting semiconductors designed into a car, then producing and delivering them, strikes me as quite different from what it takes to establish the relationship between a car company and a firm making batteries that provide the fundamental umph behind the vehicles.

You may already have “Intel Inside” your car. Will the meaning behind that great brand change? I’m skeptical.

– Posted by Tom Witkin

Airline industry more renewable than US auto?

I’m still not sure where I sit vis-à-vis the bailout of the three US auto makers. Years of bad decision-making in light of myriad technology options (like right-sized vehicles, lighter materials, smarter transmissions, diesel, hybrid, electric; the list goes on) paints a dismal picture. Unlike a Prius or Jetta, a hybrid electric or turbodiesel 747 isn’t a possibility.

It may come as a surprise that the airline industry – from airlines to aircraft and system manufacturers to NASA and the FAA – has been working on innovations to manage both energy costs and sustainability. Yes, there is government involvement and research. And no, these efforts won’t give us more leg room. But they may help assure the public of viable air transportation for the long-term that does its part to limit environmental impact.

There were two relevant pieces in Aviation Week magazine’s November 24 issue that put auto’s lack of leadership and creativity in an even starker light. On December 8, “An Air New Zealand Boeing 747-400 is scheduled to take off from Auckland . . . on the first flight to use a sustainably produced replacement for petroleum-based jet fuel . . . a 50:50 blend of conventional Jet A-1 and a biofuel derived from jatropha . . .” Jatropha and other biofuel feedstocks that meet sustainability criteria are of huge interest to aviation simply to assure fuel availability. Sure it’s self-interest, but it’s enlightened.

The second story pointed up straightforward approaches to conservation, something rightfully getting more and more interest among clean energy investors: “A United Airlines Boeing 777 Saved 1,564 gal. of fuel and cut its carbon dioxide emissions by 32,656 lb. on a single flight . . . from Sydney to San Francisco on Nov. 14 . . . [using] a tailored approach to [SFO] with a continuous descent at near idle power from cruise altitude to final approach.” This was part of the Asia and South Pacific Initiative to Reduce Emissions (Aspire) program that includes United, Boeing, the FAA, Airservices Australia and Airways New Zealand. The flight used 11 fuel-saving techniques.

Pretty slick.

— posted by Tom Witkin

Marketing and renewable energy start-ups

A smart venture capitalist I’ve known for some time introduced me to one of her clean energy portfolio companies. As I transition from the enterprise software / Web 2.0 world to renewable energy, she has been incredibly helpful.

Then I heard back from the founder of that energy firm: “Marketing guys will be the last to get hired in this economy.” Maybe that seems true, even obvious, to many. But, let’s think about this.

There’s a problem I see among renewables start-ups; in fact, many early-stage companies dominated by scientists and engineers. Their scarce financial resources (getting scarcer by the day) are allocated predominately to on-going research and product development. Why? They are comfortable with R&D as opposed to the black magic (I could use two different words) world of marketing. And, there’s the perception that you can’t move forward unless your product or service is fully baked.

A client and founder of a company with a really compelling, web-based business-to-business service continued to fund software engineering with limited seed capital and just one small paying pilot customer. My perspective is summed up in my dissenting assessment of his path: “You are going to have the best web platform in the world for [XYZ] when you close the doors.” Their precipice is perilously close.

It’s never too early to sell the story. A tough economy may be the best time to prime the pump. In this period of bleeding cash and non-existent credit, organizations aren’t likely to buy today or tomorrow. But, if your offering is top-of-mind when things loosen up, you’ll be in great shape. People will be willing to pilot your not-quite ready primetime stuff because you’ve had them chomping at the bit.

The choice is simple: the perceived great product that will be available soon or the completed widget they’ve never heard of?  In all of high tech, the choices are myriad. Similarly, the alternatives for customers’ energy portfolios are getting broader and broader.

Tell your story now. Do some marketing.

— posted by Tom Witkin

Where do social networks go from here?

In the December 1 NY Times, Andreas Stavropoulos, the Draper Fisher Jurvetson (VC of Skype and Hotmail fame) managing director who led the investment in Power.com, raised a valid issue: “We’ve been looking at this overarching question of where does social networking go in the longer term . . .”

From where I sit, part of the answer has to do less with the ”martini” side of social things and more with the impact that networking can have on social policy. If the right people - large groups of smart, well-informed people – can get connected in useful, collaborative ways, important policy initiatives can accelerate in ways that will outstrip the slow iteration of formal, governmental policy change.

Energy policy is at the top of my list. WSJ reported today that “By tapping General James Jones as his national security adviser, President-elect Barack Obama is indicating that the great energy debate will take place at the epicenter of U.S. national security . . .”

Want to see social networking have an impact light years beyond writing on your friend’s wall about a party? Knit together the entrepreneurs, academic scientific and economic wonks, non-profits, journalists, and corporate Katzenjammer Kids who have a deep interest and knowledge about energy and all its alternatives. And, use for the knitting needles an environment that enables them to discuss, work and build across all sorts of voids. Policy might just evolve, grow and solidify into the hard, effective realities that Obama and Jones envision.

— posted by Tom Witkin