Pump money in the auto industry or go green?

My German heritage and close ties to friends and family in Germany allow me to stay in touch on topics regarding the issues of sustainability, business, and economics, besides other subjects. Every once in a while I receive some amazing documents (in German) that are worth translating and bring to the attention of my readers and followers.

Solar Roof of BMW-Welt

As we have heard over and over again in the media, the world is suffering from recession and a global economic crisis. The impact of this crisis is different from country to country, and region to region, mainly because the systems of commerce are different. When Americans can pile up credit card debt across multiple cards from Visa, Master Card, and American Express, purchases made with credit cards by German customers are paid in full directly from their bank accounts at the end of each month. There is no such thing like credit card debt.

Similarly, there was no real housing bubble in Europe, except for Britain, which uses a similar system like the United States. Still, economies across the globe are suffering and one of the biggest impacts has come to the auto-industry.

Double-Cone Munich

We have all read and heard the stories about GM and Chrysler. All the money that was provided by the US government ultimately didn’t avoid bankruptcy for both of these former giants. Now the question is: What shall we do and what should we safe? Where does it make sense to spend more tax payer money?

A highly respected German magazine (Focus Money) recently compiled a special edition looking into the impact of alternative energy industries, specifically solar energy. Compared to the sunshine state, or places like Arizona, Nevada, Utah, California, and New Mexico, among others, Germany is not particularly blessed with sunshine. Still it is dominating the world market in solar technology.

World Sunshine Distribution Map

Here are some perplexing facts from the special edition of Focus Money:

• While more than $11 Billion have been spend to support Opel (a GM subsidiary) and pay for new car incentive programs directly by German tax payers, government funds are provided to energy companies (similar to PG&E or Edison) to subsidize the generation of green power only when system actually produce.
• There are now more jobs in Green Technology in Germany (1.2 Million) than in all engineering firms (approximately 1 Million) and the automobile industry (about 760.000).
• The cost for an average household to pay for the government subsidies to green energy generation is 1 cent per KW/h on the utility bill.
• The prices for solar system installed on privates homes fall 8% - 9% per year while the companies providing the systems still keep a profit margin of 20% plus.
• The solar and green technology industry is growing, even in the current crisis, while all other industries are either contracting or stagnating
• Investments in technology and research pay huge dividends. While wages in Germany are high compared to competitors in China and India, the German systems have top market share because they focus on quality and efficiency versus lower prices.
• A recent test solar system at the cutting edge of research produced a world record efficiency of 41% while typical systems in use reach 15- 17% efficiency.

In comparison to what has been happening in solar energy research and system installations in Europe, the US market is still very small. Wind energy installations have caught up by annual installation standards, although they have been hampered by the fact that US banks don’t lend money but use government handouts to prop up their balance sheets, something that doesn’t just apply for alternative energy companies, but all businesses and even private home owners who want to get financing.

Today Market Watch reported that it has never been harder to receive a small business loan in the US than it is in the current environment.

We will need a modern and successful auto industry in the future. That makes it sensible to provide some funding for it, provided the money will be used to find new approaches, new technologies, and new systems to protect the environment. At the same time it is important to realize that we should pay way more attention to modern technologies like solar, wind, and others.

The regions and countries we have traditionally competed with, like Germany, Britain, Italy, etc. have a huge lead in these technologies, and they are joined faster and faster by countries like China, India, and Japan.

There is nothing wrong with having more people employed inventing new solar and wind systems, installing them, and providing all the services related to them, than will ever again work in the US auto industry. Yes, the workers in these companies will use cars and trucks to get to work and back home. If we want to be successful and competitive in the future, our focus should shift and our funds should be spend where the potential is high, like solar, wind, wave energy, etc.

Preserving the old industries is like hoping to regain economic leadership with steam engines and horse buggies. That wouldn’t have worked in the 20th century, and hoping to use the broken auto industry to restart the economy will not work now.

We will know that we are on the right track when the cars we drive generate part of the green, clean energy, that power our houses, together with solar panels and other suitable systems.