Auto Industry Prepares For High Fuel Prices (F, GM)

The automobile industry must prepare itself for permanently high-priced fuel. Depsite having a surge of automobile sales in February, the industry must make quick adaptations to the rise in fuel prices, which are likely to remain high. European carmakers seem to be focusing on developing hybrid technology, while American carmakers are concentrating on compact models with low fuel consumption. European carmakers are also under added pressure to make their cars more environmentally friendly because of European Union standards being ushered in through 2020. In preparation, BMW and PSA Peugeot Citroën are collaborating to develop new hybrid propulsion systems. Hybrid technology combines batteries, electronic components and internal combustion engines to save fuel and cut emissions. BMS and PSA intend to invest $138 million in the technology, in a venture called BMW Peugeot Citroën Electrification. BMW and PSA already collaborate on engines for smaller cars. This set up allows the two companies to share the cost of hybrid components and research. American carmakers feel confident in their ability to respond to a sudden spike in gas prices by constructing smaller cars with better fuel efficiency. The industry is not expected to be negatively affected by gas prices below $4 a gallon, but should the price rise to $5 a gallon, it could see adverse effects. Ford F is focusing on fuel economy and concentrating on smaller models in their 2012 line of cars, rather than hybrids. A new Ford Focus compact will hit the market this spring along with the B-Max, a smaller version of a minivan. Both vehicles are designed for low fuel-consumption. Last fall GM GM launched the Chevrolet Cruze compact, and will launch the Chevrolet Sonic subcompact and the Buick Verano compact this year.