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With the Senate’s passage of strict new fuel economy standards, it looks like gas-electric hybrids are about to become the next big thing.

I

All those battery manufacturers in those countries with much more accommodating environmental laws must be licking their chops. We are about to see a boom in battery manufacturing and consumption. Plug-in-hybrids are coming, and the Senate’s action yesterday means they’re not just coming to some weird looking granola-mobile, your Mustang may end up being at least a mild hybrid too. And your Corvette.

If every car and truck sold in the U.S. were converted to PIHs (Plug In Hybrid) tomorrow, there’d be no need for the 2020 deadline. We’d probably already be there. You’d have your combine 35 mpg fleet average.

Problem is you can’t do that. It’s going to cost a fortune to re-engineer vehicles, so now you can expect to see the Big Three lobbying for tax credits for research, manufacturing upgrades, and so on and so forth.

The hybrid era is here folks, more or less.

Hybrids are simply the easiest way by which automakers can meet these new standards. A lot of the ground work has already been done. While hybrid manufacturing is not yet profitable for anyone but Toyota (rumor has it, and rumor has it it’s not too profitable for them), it’s closer to turning that corner than hydrogen.

Are hybrids complex? Yes. Will they make it harder for mechanics to work on your car? Yes.

But then again, have you ever looked under the hood of a ‘56 Ford? Not much in there. Heck, all you needed was a good socket set for just about any repair you could think of.

Thanks to the Clean Air Act and the first round of CAFE standards, we got lots and lots of stuff. Electronic ignition, OBD, EGRs, PCV valves, etc. Without the push from the Clean Air Act & CAFE regs, it’s possible we’d still be amazed at overhead cam engines and fuel injection.

II

Of course there will be people talking about battery disposal, and electrocution (from the high voltage cables required on hybrids).

The battery disposal issue is non-starter, there’s profit to be had in Li-ion battery recycling, so you don’t have to worry about that problem.

On the high voltage thing, I want you to open up the hood of a car while it’s running some time… Do you know how much of that stuff can kill you? Maim you? Fricassee you? Cars weigh from one and a half to two tons on average (and they’re getting heavier). We routinely drive them at speeds in excess of 70 miles per hour. We are continually exposed to danger when we drive a car. The thing carries gallons and gallons of poisonous and volatile liquid, for cryin’ out loud.

The thing is that, over time, that danger has been managed. Cars are still far less safe than passenger jets, but they’re nowhere near as dangerous as you’d think, if you stop and think about how much dangerous stuff is in your car, and how fast you drive it. High voltage is just another thing to deal with. While I’m sure there will be fears of electrocution if the car floods, the reality is that we’ve been playing with electricity for far longer than we’ve been playing with gasoline. We have means of disconnecting power supplies from electrical wiring. They’re called circuit breakers. You probably have a whole panel of them somewhere in your house or apartment.

III

Looking back at the last major environmental legislation for motor vehicles, it really marked the beginning of the decline for the Big Three. Before that, when assorted changes popped up at least one of the Detroit automakers responded, with the other two managing to catch up in time.

Back in the 70s, the Big Three failed to respond to a major change in the market. They made excuses, they dodged. They failed to see that what was perceived (in Detroit) as ‘wacko’ legislation was overwhelmingly supported by a public tired of smog and concerned about gas supplies. The public, having voted politicians into office that made those changes, proceeded to vote Hondas, Toyotas, and Volkswagens into their garages.

Today, there is no chance that any of the Big Three will survive unless they react to this change.

Let’s take a look at some of the straw-men arguments:

“It’s all politics” It’s worth remembering that politicians are elected, and the overwhelming support that this measure received indicates that a lot of politicians are quite confident they’re supporting their constituents’ wishes.

“It’s not fair. Automakers are shouldering too much weight.” Sure it’s not fair. But this is politics. Americans are quite conscious about what they pay at the pump and concern about the greenhouse effect gives them an altruistic and fashionable excuse for wanting to buy less gasoline.

Concern about the environment is, I believe, pretty far behind “I don’t want to spend $3,000 a year on gasoline” when it comes to factors influencing the attitude of your typical consumer.

“We’ll go bankrupt” Not as idle a threat as in times past. However, it seems unlikely that the Big Three will be turned away if they come looking for some grant money, tax credits and other incentives for research and development. There’s no public outcry over corporate welfare right now so passage of credits and funding seems likely, provided the Big Three don’t get too grabby.

So welcome to tomorrow folks. Your world changed yesterday. How much and how soon are questions still to be answered.

“This company desperately needs focus in terms of preserving its capital and concentrating its management resources,” said John Casesa, managing partner of Casesa Strategic Advisors LLC in New York. “It currently has too many mouths to feed.”

“Ford has got some huge problems on their own, really huge facing survival really on their hands. They actually don’t have the management capability, never really had it, to make a success of Jaguar. And Jaguar could potentially be a great success story, as could Land Rover,” said Robinson, who was chief executive of Jaguar Cars in 1974-75.

You’ve seen these quotes before, you’ll see them again in the future as the sale of Jaguar and Land Rover are discussed. You’ve also seen this discussed with Mercury and Lincoln. ‘Too many brands. Not enough resources. Too many mouths to feed.’

Sounds plausible, doesn’t it? Ford lost a lot of money last year, and anyone with children, or a lot of responsibilities at work, can identify with the challenge of trying to juggle a lot of different tasks, of trying to keep a lot of people happy. It can be overwhelming at times, and therefore, it would seem that a company with six vehicle lines would have way more difficulty than a company with only two or three, right? I mean if you had 6 kids, you’d have way more trouble keeping on top of things than if you had just 2, right?

And that’s precisely where the analogy fails.

The issue with Ford is not whether or not they have the ‘resources’ to ‘feed mouths’, the issue is whether their structure is right for the tasks that it has been assigned.

Let’s start with a different analogy. When was the last time you thought about everything that’s required for your fingernails to grow? I mean it’s a pretty complex process. Same way with your hair, and that’s just the tip of the iceberg.

Your body’s various systems, most of them, work without your conscious input. Most of what is required to keep you alive from one day to the next occurs without any conscious effort at all.

With Ford Motor, insider reports reveal that many decisions are being ‘kicked upstairs.’ Decisions that should be handled collaboratively on a much lower level are being made at a VP or higher level. With such decision structures in place, it’s no wonder that Ford seemingly does not have the resources to manage its operations.

Additionally, there is a remarkable amount of duplicated effort in the Ford empire–even within Ford’s North American operations. Alan Mulally recently stated that Ford doesn’t even have a common hinge assembly for hoods.

There are other points from which to reason: Ford has, for years, successfully managed its credit arm. This radically different business has survived and generally flourished under Ford’s management, with few analysts suggesting that Ford Credit was a ‘distraction’. GE’s CEO oversees an industrial conglomerate that is far more diverse than Ford’s, as well as a sprawling capital services unit and an assortment of odds and ends (NBC, etc.), and it is not often suggested that GE lacks ‘resources’ to focus on its widely divergent enterprises. Why? Because GE is well managed. Ford Motor is not.

It is obviously not a question of whether or not Ford has the ‘resources’, it is a question of whether Ford is making proper use of the resources it has.

As to a sale of Jaguar and Land Rover, anything is possible. However, one should avoid reading too much into recent news reports, given the general failure of many journalists to do even the most basic research before rushing a story to print (how many “Ford selling Volvo to BMW” articles mentioned that Ford’s holdings in Volvo are part of the collateral in its loan package?).

Significantly, Jaguar and Land Rover were not included in the collateral package put together for Ford’s loans, therefore it would be unwise to rule a sale out completely. On the other hand, with Jaguar and Land Rover turning corners (Land Rover is profitable, and Jaguar has launched a well-received coupe with a sedan coming next year based on a concept that was the talk of the Detroit show), the interest we’re seeing now could be a bunch of vultures trying to get a potentially valuable asset at a bargain basement price.