The Catastrophe in Iraq: Are US Corporations Adapting to Survive?

December 3, 2006 – Vol. 11 No. 37

THE CATASTROPHE IN IRAQ:
ARE U.S. CORPORATIONS ADAPTING TO SURVIVE?

The publication of the Baker-Hamilton report this week - the Report of the Iraq Study Group - leads to one conclusion: If the US doesn’t change course in Iraq, the country will likely fall into chaos that could lead to a regional conflict. American interests, the world’s interests - the oil supply - would be threatened.

So far President Bush has decided to read the report and put it on the shelf for consideration.

An attack on the oil supply, or even the threat of attack because of regional war, would certainly mean extraordinarily high prices at pumps around the globe. There would be damage to the world’s economies. Think recession, possibly depression, with war at the same time.

All this could happen at time when the US economy is already slowing and, particularly, its homegrown auto industry is in trouble. People won’t buy gas-guzzling cars and trucks if gas is $5 or more per gallon. However, I think that behind the scenes, auto executives realize that they must change rapidly and shift to high fuel economy, or alternative-fueled vehicles as soon as possible just to keep sales, and their companies, alive if the situation in the Middle East gets worse.

Evidence of this possibility was GM’s announcement last week that they would offer a plug-in hybrid fairly soon, but with no official date. This in itself is an astounding turnaround for a company that crushed its fleet of electric cars just a few years ago.

Now this week Ford announced that its next generation Escape Hybrid - a 2008 model - would be available in the early part of 2007. (This would set some kind of record for the earliest next model year introduction.)

The new Escape Hybrid is really just a sheet metal freshening and interior change with minor performance improvements to the already good hybrid system. The Escape Hybrid, by the way, can be easily adapted to plug-in capability with a larger battery pack and a few electric bits. Its electric drive is already robust. Don’t think Ford isn’t already thinking about this in its shops.

If it’s true - with a gut feeling I believe it is - that the US auto industry is ready for a quick and dramatic change, it’s not alone. Other companies are stepping up to the plate to cut their reliance on imported oil and natural gas.

According to the US Environmental Protection Agency (EPA) more than 40 Fortune 500 companies belong to their Green Power Partnership program. Together their annual renewable power purchases total 2.5 billion kilowatt hours of electricity.

Now, through the EPA’s Fortune 500 Green Power Challenge, the agency wants those companies to double their green power purchases to more than 5 billion kilowatt hours of renewable electricity: enough to power more than 400,000 average American homes. While these green power purchases may be to show concern for environmental interests - global warming - they also indirectly help reduce the nation’s dependence on imported fuels. Wind energy can displace imported liquified natural gas used to fuel power plants, for instance.

Perhaps in the absence of petropolitical policy in Washington that preserves American companies for the long term - meaning a switch away from the perils of imported oil dependence - companies now realize that they must, in essence, make their own petropolitical policy. On the surface it may look like they’re trying to save the planet from climate change - and certainly that is a concern for them - but beneath it may also mean to save themselves from an increasingly unstable imported oil and natural gas supply.

Visit the EPAs Fortune 500 Green Power Challenge: http://www.epa.gov/greenpower/partners/fortune500.htm and Fords updated Escape Hybrid at http://www.fordvehicles.com/suvs/2008escapehybrid/