Rob Cleveland

The media days preceding the 2010 North American International Auto Show in downtown Detroit kicked off to a pace that indicated far more optimism than the subdued, wake of an auto show that ran in 2009. At last year’s show, little did we know what was in store for us in the coming months – GM and Chrysler filing for bankruptcy, the lowest vehicle sales in 25 years – and it isn’t likely 2010 will be any less entertaining.

Optimism, though, seems to permeate through the show this year. Ford Motor Co., the only domestic automaker not to take bailout loans from the government, swept the North American car and truck of the year for the 2010 Ford Fusion Hybrid and 2010 Ford Transit Connect. Only two other automakers have taken the double header in the 17-year history of the award.

And GM’s chairman and CEO Ed Whitacre told reporters at the show that the federal government “had made a great investment” in effectively purchasing GM, and that he expected some $6.7 billion in loans to be paid back this year.

There still are sobering issues to deal with, though, and product will trump any good intentions as the year winds on.

For the Detroit show, GM unveiled two concepts: the Buick Regal GS concept car and GMC Granite concept crossover. Concepts are meant to show GM’s design direction on new product moving forward, but the final production models are what sells.

And Ford clearly has struck a positive cord with its new 2012 Focus due to go on sale early next year. If Americans are going to start buying compact cars from domestic automakers, this is it. The Focus has been referred to as “stunning” by some automotive pundits and I’m not inclined to argue. Ford says it is using a new 2.0-liter four-cylinder engine with direct gasoline injection with its Ecoboost system to boost performance while cutting fuel consumption. The combination of outstanding design and competitive fuel economy is likely to win some converts from foreign competitors like Toyota and Honda who have dominated the compact car segment for decades.

Chrysler Battles Back … Slowly

And then there is Chrysler. Still a mystery with its plot yet to unfold, Fiat executives who are now squarely entrenched in the day-to-day activities opted not to hold a press conference largely because the Chrysler stand did not have any significant new product. Executives insist the first big wave of new activity will come from Chrysler later this year. It remains to be seen if that will be soon enough.

That didn’t mean the Chrysler stand was empty – far from it. House Speaker Nancy Pelosi spoke to reporters from the Chrysler stand, effectively confirming the government’s decision to step in on GM and Chrysler, and saying she was returning to Washington D.C. “with great optimism.” It wasn’t clear if Ms. Pelosi ever finds herself behind the wheel of a vehicle, or has any real grasp of the auto market and the possible roadblocks ahead to recovery, but like a veteran politician her spin was upbeat and completely void of any facts.

Another politician arguably more in tune with the trials of the auto business also visited the stand. Michigan Gov. Jennifer Granholm took a few minutes to chat with Fiat CEO Sergio Marchionne and grabbed some photo opportunities.

But Chrysler made the most news off the show floor at a dinner during the Automotive News World Congress at the Marriott, where no less than three different individuals heckled Marchionne for a range of perceived transgressions, from a plant closing in Italy to a car-hauling deal gone sideways with the Teamsters, to a woman who blamed the company for the untimely demise of her spouse. Benvenuto a Detroit.

Other carmakers were more subdued – in particular the Japanese and Koreans, who are likely to wait until other auto shows later this year to unveil major product, given the immense focus on Ford, GM and Chrysler this year in Detroit. But they were far from silent. Honda introduced a new hybrid, the 2011 CR-Z two-door hatchback, designed to give a little zing into the otherwise staid hybrid sedan market. And Toyota looks like it may be expanding its hybrid/Prius line with the introduction of a FT-CH hybrid concept that, if or when in production, would come in under the current Prius as an entry-level variant.

From Germany, with Love

The Teutonic automakers appear to be embracing the concept of electric vehicles, despite their continued push to sell more diesels here and their long history of selling exceptional diesel powertrains all over Europe. BMW announced the ActiveE, an electric-powered vehicle based on its one series, following suit with BMW Group’s MINI-E introduction last year (BMW Group owns the MINI brand). The vehicle will use lithium-ion batteries and BMW says it has a cruising range of 100 miles.

And Audi rolled out the E-Tron “Detroit Concept,” which is a smaller variant of its E-Tron concept rolled out in Frankfurt last year. Nomenclature aside, the concept sports two electric motors to drive the rear wheels, putting out 204 horsepower. The car also is listed as putting out 1,995 foot-pounds of torque, representing more of a mathematical interpretation of a torque curve rather than the possibility of snapping your neck in two at every traffic light. But Audi insists these EVs will be rolling into production in 2012, getting 150 miles on a single charge.

If 2009 is remembered as a disaster for the auto industry, perhaps 2010 will mark the beginning of the recovery from that disaster, with the byproduct being a better industry with new, innovative models that reduce the auto industry’s footprint on the environment.

Or it will be the year where the industry misses real opportunities to change for the better, and the status quo simply comes back as sales volume rises. If that’s the case, we can expect another catastrophe somewhere down the line.

Editor’s note: The 2010 North American International Auto Show runs through Sunday at Cobo Center in Detroit.

About the author: Rob Cleveland is CEO of ICON Creative Technologies Group and a co-owner of Grange Kitchen and Bar in Ann Arbor.

Ann Marie Sastry, CEO and co-founder of Sakti3, at her company's booth at the Detroit auto show. (Photo by the writer.)

But Sastry and her company, Ann Arbor-based Sakti3, is far from “out in the cold.” They are in the auto business for the long haul and do not plan on being relegated to a basement booth forever. Eventually, if all goes well, her company’s battery technology will be powering the cars upstairs on the main show floor’s Electric Avenue.

What is it about the “Eureka moment” in her UM lab that prompted her to help found a company two years ago? What is it that turned the heads and opened the wallets of the Michigan Economic Development Corp. and cleantech venture capitalist Vinod Khosla, who chipped in $2 million out the gate? What exactly is her company’s battery technology?

Here’s her answer: “We’re interested in both materials and manufacturing technologies at Sakti3. So, we’re sort of looking at the intersection of those things.”

She pauses. She grins slightly, then says somewhat apologetically: “Sorry, I know that’s not good enough.”

This is Sastry’s polite way of saying that any further information is proprietary. She will only add that, “We are working on a manufacturing technology, and we think that’s one of the bottlenecks.”

It’s not surprising that she is guarded. The future of the auto industry is electric – at least, so says Michigan’s governor – and the future of electric plug-in vehicles depends on some big technological leaps in battery technology. If you think you have the secret sauce, you’re not going to tell everybody. Eventually, Sastry says, “We’ll all duke it out in the marketplace.”

Technology Transfer: From Academia

That kind of unabashedly capitalistic tough talk would have been practically unheard-of coming from a university professor in eras gone by – when academics were supposed to be in research for purely academic reasons.

David Cole, who heads the Center for Automotive Research in Ann Arbor, remembers the ’70s, when it seemed like a dirty little secret for an academic to commercialize a technology he or she developed. In some cases, Cole says, it’s about academic purity. In other cases, it’s jealousy. “Some people work on technologies that can be commercialized, others do not.”

Sastry says the technology developed in her lab could have gone a number of ways, but in the end she chose automotive battery development rather than pure academics.

“When the founders looked at some results we had, some technology we were looking at, they thought, ‘OK we could absolutely write more papers on this subject and go down that road and try to really focus on this as an academic exercise or we could really go down another road, which is to take what we have and see if we can build it in the steps required for commercialization.’ Both things are difficult. They’re just different.”

Sastry is fortunate enough to work in an academic culture where commercialization is not only no longer frowned upon, but actively encouraged – especially by UM President Mary Sue Coleman.

“The culture has totally turned around,” Sastry says, and not just at UM but in academia broadly.

“There is this space between what we do in our laboratories and getting into commercialization that we have to address,” Sastry says, speaking of a disconnect between the basic research done at universities and their transitions into tangible benefits for consumers. “And we have to help address it. It can’t be all just (marketplace) pull. There has to be some (academic) push.”

Sastry credits Coleman for pushing this cultural turnaround at UM. “Our president has been very specific. She believes that we need to enable tech transfer, and has funded more offices and centers to do that.”

But, she says, no matter how much help a company gets, it’s tough out there.

“It’s a high degree of luck, there’s a high degree of naïveté, there’s a high degree of optimism,” Sastry says, of founding a company.

“In our case, we want to put batteries in cars, so we have a lot to learn about cars.”

The university did not push her in the direction of automotive, she says. The University of Michigan has to rely on the “passion and vision of researchers” to determine where things are going to go. The university, as a whole, starts up very diverse types of companies, from nanotech to biotech to energy and materials.

Cole says that most technologies emerging from blue-sky research can go in multiple directions.

Technology Transfer: What Direction?

“I don’t think Sakti3 would see themselves as … a battery manufacturer,” Cole says. For that to happen, it takes extra push – a combination of public and private funding, in Sakti3′s case – to transition from idea to an actual company that makes things. And Sakti3 is still early stage.

“You see, the one thing that is true with intellectual property is that it’s actually fairly inexpensive,” Cole says. “It’s when you go to commercialize it, put in manufacturing capabilities, that it becomes a different story.”

To help move the “story” along in 2008, the MEDC designated Sakti3 as a Michigan Center of Energy Excellence and awarded the firm $3 million to accelerate its efforts to move to a prototype and to partner with the University of Michigan. This was added to an initial $2 million in financing from Khosla Ventures, led by Silicon Valley venture capitalist Vinod Khosla. Khosla has his hands in many alternative energy and automotive enterprises, including Fisker Automotive.

“We were really lucky to engage with Khosla Ventures almost as soon as we decided to do a company,” Sastry says. “There’s a real similarity in approach there, which is great.

“Working with KV is incredible because they really know what they’re doing. They really know a lot about building businesses. We think we know something about building batteries, so that’s really good,” Sastry laughs.

It’s a marriage that works out because there is only so much a bunch of academics can do. You need expert venture capitalists to take it to the next level. “In terms of the mechanics of a business, how to raise funds, how you price real estate, these are things that venture capitalists know a lot about,” she says.

Technology Transfer: Timing

So, when will Sakti3′s materials, or manufacturing technology, or process, or combination of all of them – she is still vague on that “proprietary” stuff – actually see the marketplace?

“We’re a few years off yet,” she says.

Five years? 10 years?

“A few years off,” she repeats.

Then Sastry decides to be somewhat more charitable with her information.

“To be very honest, it depends on a lot of things,” Sastry says. “Depends on how fast we run, depends on the dollars that come in, it depends on how successful and, sometimes, how lucky you are in doing the technology. So, there are a lot of variables. You know, starting a business is very risky.”

It also helps that Sakti3 has a development agreement with GM and – with her university hat on – she runs a development center called ABCD (Advanced Battery Coalition for Drivetrains) to help the automaker develop next-generation batteries.

Sakti3 currently employs fewer than 20 people in Ann Arbor, but Sastry expects that number to grow. And it will grow in Ann Arbor.

But what if, say, a Boston-based company eventually wants to buy the business, she is asked.

“It’s a fair question,” Sastry replies. “I mean, what we decided to do is to start a company to advance our technology to get it into vehicles. And so, where we’re at as an entity five or 10 years from now, I hope that we’re kicking out a lot of batteries that are going into really good cars. There’s a lot of steps between now and then.”

So, at this stage of the company’s development, Sakti3′s goals match those of the University of Michigan to commercialize its basic technology and the goals of the state of Michigan to make the state a center for next-generation automotive battery technology and manufacturing.

“The thing that’s nice about our situation is that the government of the region that’s most important to us – where our customers live – is also strongly supportive of what we’re doing,” Sastry says. “How often does that happen?”

Veteran journalist Howard Lovy has focused his writing the last several years on science, technology and business. He was news editor at Small Times, a magazine focusing on nanotechnology and microsystems, when it first launched in Ann Arbor in 2001. His freelance work has appeared in Wired News, Salon.com, X-OLOGY Magazine and The Michigan Messenger. His current research focus includes the future of the auto industry.

Rob Cleveland

If you’re one of the many Prius owners in Ann Arbor and enjoy lording your environmental sensitivity over other drivers on the road, look in the rear-view mirror. The Big Three are unveiling new concepts and new plans to put some of the most environmentally sensitive vehicles out to market, meaning Prius owners may have to trade in for a Chevy, Ford or a Chrysler if they want to continue to hold the automotive moral high ground.

New model announcements made at this year’s Detroit Auto Show (also known as the North American International Auto Show in deference no doubt to the NAFTA agreement so loved by the UAW) were prolific, despite a pall created in the wake of December’s brutal and sometimes embarrassing executive testimony in Washington D.C. Most of the green news generated came out of General Motors, Ford and Chrysler, who all tried their best to put on a positive face as U.S. auto sales continue their free-fall.

GM arguably is the furthest along in new tree-hugger-technologies with its Chevrolet Volt – an all-electric vehicle designed to run only on advanced lithium-ion batteries powering an electric motor. Hybrids, on the other hand, employ both electricity from batteries and an internal combustion engine coupled to the wheels, using different modes depending on the power demand. The Volt does burn gas, but only to gin up some electricity via an onboard generator if you exceed the vehicle’s 40-mile range and find your orange extension cord just won’t reach to the shoulder of M-14 from home. (Note that GM says 40 miles is the typical commute for Americans, so send a memo around at work asking where you can plug in your new EV and watch the executive team start wringing their hands about utility costs. It will be fun.)

GM has been talking about the Volt for a while now, insisting it will be available next year in showrooms – if the company can make it through 2009, of course. At this year’s auto show, GM had a spate of related announcements, from partnerships with Korean-owned LG Chemical for battery cell technology to a new facility for battery pack manufacture in southeast Michigan. GM also announced a cooperative agreement with local star battery expert Ann Marie Sastry from the University of Michigan to train engineers to enhance their automotive lithium-ion battery knowledge. And GM unveiled a new Cadillac concept based on the all-electric Volt, the Converj. Despite the underwhelming name choice, the vehicle itself was a hit at the show.

If GM manages to get through the next 12 months and can actually bring these vehicles to market, only the most hypocritical senators and hybrid owners will shun what is an evolutionary change in automotive technology, after years of berating GM for only producing gas guzzlers. Costwise, GM says the Volt’s gasoline equivalent is about eight cents a gallon, provided you don’t dip into that onboard generator. But wait, there’s more: zero emissions. If you have a problem with air quality standards after the Volt hits showrooms, you’ll have to take it up with DTE Energy and anyone else producing electricity from coal or natural gas, not Detroit.

Of course, batteries are the new flavor of the month in the auto business, after brief courtships with hydrogen and then ethanol before the economy went off the rails. Plans for a hydrogen infrastructure or an ethanol economy will have to be put on hold as few people are looking to put money into even their 401(k), let alone trying to ramp up a new ethanol distillery. Luckily, not all of the eco-tech unveiled this year represents such a radical and expensive departure.

Ford’s new Lincoln C concept vehicle, a confusing attempt to luxury-up an entry for the box-truck-crossover market made hip by Toyota’s popular Xion XB, isn’t likely to win best in show for design. Underneath the hood, however, lies Ford’s true inspiration – a gasoline-burning 1.6-liter turbo-driven “EcoBoost” engine with a dual-clutch six-speed transmission and stop/start technology that cuts the engine when you are idling, waiting for that intolerable light to change. All of that boosts the engine performance to 43 mpg. If just 20 percent of American cars and trucks hit this fuel economy standard, President Obama could send a note to both Iran and Venezuela saying “Thanks, but we’re good on oil just now.” With that out of the way, let’s talk foreign policy.

Ford also says it is working on an all-electric vehicle, although they haven’t announced which vehicle specifically they might use and even in the best of circumstances, that car probably won’t materialize until at least 2012.

Even the diminutive Chrysler still is barking about its electric vehicles, insisting – however unconvincingly – that it will be first to market with an EV. Sadly, as Chrysler leans against the ropes and suffers the twin body blows of a cash crisis and consumers who “just say no” to spending, the company’s new 200C concept electric is not only battery driven with a generator on board like the Volt, but also one of the design highlights of the show with the potential to make a great midsize sedan regardless of what is under the hood. It would be grand indeed to see this perennial underdog rally in its darkest hour to bring this electric to market, if for no other reason then to let Bob Nardelli, Chrysler’s CEO, drive it to Washington D.C. and double park in front of the Capitol Building. Let the Capitol Police service tow it away and they’ll have enough PR to sell 50,000 units in the first year. America loves a comeback. Just ask Kurt Warner.

Dyed in the wool importophiles still want to insist that the Big Three are lagging in quality, a perception built up over decades, with the production of each scrappy car shedding parts like dandruff over its brief life to 70,000 miles. But the latest JD Powers surveys have many domestic models at the top of the quality scale now, and even the hardliners at Consumer Reports, who for years have trounced the Big Three in their reviews, have a domestic vehicle in their 2008 Top 10 for the first time since 2005. Big Three executives have been talking for some time about “closing the quality gap.” According to the data, that might just have happened.

Sadly, the drop in gasoline prices, coupled with the incredibly short memory demonstrated by most American consumers, could take some of the zing out of the all-electric car market. The good news: oil companies and oil-producing countries are greedy and thus gasoline isn’t likely to stay cheap. How ironic that GM now may be hoping gas prices actually go up.

So while “Buy American” is a fairly hollow rallying cry these days, with GM’s recent investments back into Michigan, and the possibility of an all-electric in showrooms next year, tomorrow’s Prius may look like today’s domestic sport-ute. We the people already own some of GM and Chrysler anyway and people are talking about the importance of buying local these days. So if things go to plan, look for me in my new Chevy Volt next year…pulled along by my high horse when I can’t even afford to pay the electricity bill.

About the author: Rob Cleveland is CEO of ICON Creative Technologies Group and a co-owner of Vinology Restaurant in Ann Arbor.