Diesels Won’t Do, Lutz Says

January 28, 2008
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Modern diesel engines are unlikely to appeal to Americans despite rising fuel prices, General Motors vice chairman Robert Lutz predicts.

Lutz emphasized GM is developing a full range of diesel engines for use around the world. However, overall diesel penetration is likely to remain in single digits for the foreseeable future, Lutz said, dismissing claims by European automakers and suppliers that diesel has a bright future in the U.S. as fuel prices increase.

"Frankly in the United States, with diesel fuel the same price as (gasoline), I don't think that many Americans are going to pay a $3,000 or $4,000 premium for a modern diesel engine," Lutz said.

"On top of the normal diesel premium, you now have advanced emission systems. Unless we decide to eat the cost, which unfortunately we can't afford to do, I think customers are going to say, 'Wait a minute. At equal fuel prices I'm paying $4,000 more for this,'" he said. "It will not be like Germany," Lutz said during the question and answer period following a speech at the Automotive News World Congress in Detroit.

Consequently, the vast majority of Americans will continue to favor internal combustion engines that use gasoline, which are significantly cheaper than diesel engines, he predicted.

The penetration of diesel-powered passenger vehicles in will be "more like it is in Switzerland," 8 percent to 10 percent, at best, added Lutz, noting the tax system in the U.S. simply does not favor diesel power the way it does in Germany. In Germany and other parts of western Europe, the taxes on gasoline are much higher than on diesel fuel, which skews demand towards diesel motors, he said. In the U.S. gasoline and diesel fuel are taxed basically the same and thus cost the same at the pump. The emission standards in Europe also are not as strict as they are in the U.S., Lutz said.

"In those European markets where diesel exceeds 40, 50 percent or 60 percent penetration, you have to know there is a tax differential. Gasoline is $8 per gallon, diesel fuel is $4 per gallon," he said. "With that kind of price disparity everyone is going to buy a diesel.”

"In the countries where gasoline and diesel is about the same, percentages are much lower. They're much higher than they are in the States but they are down around 10 percent or 12 percent.

"I'm not advocating taxes hikes or calling for higher fuel prices," Lutz said. "I'm just explaining the difference between the European fleet and our own.”

"In America instead of raising fuel prices, we'll wind up raising new vehicle prices because of the increased use of lightweight material and fuel-saving technology. By the way, clean diesels do not come for free especially not when they are emissionized [to meet new standards], which mean thousand of dollars per vehicle and that in turn is going to cause people to hang on to their vehicle," he said. "People are going to say,'Whoa a $35,000 Chevy Malibu. I think I'll hang on to the one I've got for a while.”

Lutz also said the use of flex-fuel vehicles running on ethanol represents the best way to address the issue of U.S. dependence on foreign oil and the chronic insecurity it breeds. The wider use of ethanol as motor fuel could reduce U.S. dependence on imported oil, he said.

"Nothing we can do in the next five or 10 years gets even close to that kind of impact," he said.

Ethanol also is cleaner than gasoline and adaptable to the current re-fueling infrastructure, he said. It also doesn't require a major shift in consumer behavior, Lutz said.

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