Bailout after bailout after bailout...what to make of this financial crisis? I do know of one opportunity that should come out of this financial mess, with fingers crossed.

Automotive manufacturers have essentially been given a free ride by Washington for three decades when it comes to fuel efficiency. The Corporate Average Fuel Economy (otherwise known as CAFE) regulations were put in place in the mid-70's in response to the oil crisis of the early 70's. The intent of CAFE is to regulate improved fleet fuel efficiency over time, essentially, the average fuel efficiency of all vehicles manufactured by any given company. However, there was a catch that kind of bit us in the backside - trucks were exempt.

SUVs didn't really exist 30 years ago, but up until recently they have accounted for about 50% of vehicle sales. As far as CAFE is concerned, SUVs are trucks, so they got a free ride. No one saw that coming in 1975.

So, today, Ford, GM and Chrysler have showed up on the doorsteps of DC asking for $50 to $75 Billion. What to make of that?

Their poor collective financial performance has a few contributing factors, not least of all is the dramatic decline in SUV sales in the last year or so. Detroit lobbied hard to not improve fuel efficiency and Washington folded. Those days are (hopefully) behind us.

North America needs the Big Three; they are the economic engine that fuels our economy (no pun intended). But the time has come to trade in the SUVs for hybrids, electric vehicles and 50 MPG plus vehicles. Their survival is important to millions of people who rely on selling 15 million or so vehicles every year in North America.

Now Washington holds the trump card. I hope and assume that Washington will only help Detroit if they agree to much more aggressive fuel efficiency standards for two reasons. One, it is the right thing to do for the planet and two, it is the right thing to do for the economy. 

I spent twelve years in the automotive manufacturing industry, including four years as the Environment Director for the Canada Automotive Parts Manufacturers' Association (www.apma.ca). It is a great industry in which to learn continuous improvement, creativity and how to make car seats with moody robots.

I have commented recently on the demise of Detroit, but today's news really makes me worry more about Detroit than ever before. I want Detroit to survive and thrive, but they have to turn it around very fast!

GM and Chrysler recently announced that they are getting out of the leasing business. Why? Because the after lease residual value of their vehicles have plummeted recently. Why? Because no-one wants to buy a four year old SUV today. Why? Because the price of gas is very high? Why? Because demand is going up on the other side of the Pacific. Why? Because North Americans are buying lots of stuff from the other side of the Pacific. I think that is enough why's.

Automotive leases have been attractive for years because they reduce the cost of use for consumers. Lease payments cost less than loan payments because at the end of four years, you essentially give the vehicle back to the dealer. The trouble is that the lease you signed in 2005 assumed a residual value of $15,000 on a vehicle which is now only worth $11,000 - the car company is left holding the bag.

When I heard the news today I did a less than scientific study of two four year old vehicles - a Prius and a Ford Explorer.

A brand new Prius today costs a Canadian $27k to $30k (yes, I know they are much lower in the U.S.). A quick trip on Autotrader.ca tells me a 2004/2005 will fetch $24k to $28k; that is more than a brand new Prius in the U.S. In other words - if you leased a Prius in 2005, you got great gas mileage and when Toyota gets it back, they are going to make a good margin flipping it again.

Now let's look at a 2005 Explorer. My less than scientific study brings up a cost of about $15k for a four year old Explorer. A new Explorer will set you back $38k to $50k. Do the math...how much is Detroit losing on bringing back after lease SUV's? It has to be in the billions! Ouch!

I promised myself that I am going to start writing about solutions to climate change - useful information, focused on solutions. But...this subject really bothers me (can you tell).

One more thing before I sign off...have you seen the ads on TV and billboards at some vehicle dealers - guaranteed $2.99 per gallon of gas or $1,000 worth of free gas with your vehicle...argh, did you think you would ever see the day that vehicle dealers would do something like that!

To quote one of the greatest philosophers of our time, Forrest Gump, "That's all I have to say about that".

Please Detroit - turn it around, start manufacturing vehicles that will take on the Prius and Civic Hybrid; you will sell a whole bunch of them. Competition is good.

Remember Henry Ford - he built and priced cars that his employees could afford to buy - brilliant. Let's hope, one hundred years later that Detroit continues to manufacture vehicles that North Americans can afford, will want to drive and most importantly, respect the environment.

Have you read the news today?

Honda just announced a record quarterly profit of $1.7 Billion and Ford announced a record loss of $8.7 Billion ($8,700,000,000). Turmoil in the automotive industry - you bet! Are all of the manufacturers losing money? Apparently not.

Honda is the home to the fuel efficient Accord, Civic and Civic Hybrid. Ford is home to the Expedition and Lincoln Navigator. In Ford's defence, they have been proactively green for a number of years, such as dictating minimum percentages of recycled content in their vehicles from their suppliers. But in reality - how well has that Focus (no pun intended) translated into sales?

I would like to think that the people leading Ford in Detroit should have and would have seen higher gas prices and raised consumer awareness of climate change coming. Why didn't they? Profit margins on SUV's 3 or 4 years ago where high, now they can't give them away. I bet they are thinking that the margin on a hybrid Focus (which doesn't exist yet) would be looking a whole lot healthier now than the margin on an Expedition today.

Who gets hurt in this scenario? Not the consumer - they can go across the street to Honda or Toyota, or even GM (by the way, check out the new fuel efficient Camaro - who'd a thunk it!). My heart goes out to the Ford employees who are losing their jobs. I have visited a few Ford plants - these are people that should still be working today if upper management wasn't asleep at the wheel (ok, another pun).

There is a lesson here for companies in other sectors - please take note. The times they are a changin'...look ahead and figure out what your new 'greener' products and services will look like one year, two years and three years from now. If you don't, your competition will.