06/11/2008 11:27 AM

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Getting Off Oil: Recent Leaps, Next Steps Page 1

by Amory Lovins

In mid-2005, Rocky Mountain Institute launched a three-year effort to implement the ideas in our book, Winning the Oil Endgame - our detailed 2004 roadmap for getting the U.S completely off oil by the 2040s, without needing new taxes, subsidies, mandates, or federal laws. We felt this $3.6-million effort could be led by business for profit, because saving or displacing oil would cost only $15 per barrel (in 2000 dollars)-far below oil's price.

It might seem foolish to expect to shift such gigantic sectors as oil and cars. But by taking markets seriously, we saw leverage in "institutional acupuncture": find meridians and points where the business logic is congested and not flowing properly, then stick needles into carefully chosen sites to get it flowing.

Some farsighted donors and foundations backed this ambitious experiment. Two and a half years later, it has exceeded expectations. Of the six sectors that must change to set the United States firmly on the journey beyond oil, I believe at least three, perhaps four, have already passed the "tipping point" beyond which the major efforts still required will become ever easier.

The hardest and slowest sector is cars. But building on 17 years of patient effort, our acupuncture is now driving big and accelerating shifts. The tsunami of "creative destruction" we foresaw in 2004 is now breaking over the industry and changing the managers or their minds, whichever comes first.

Our book urged Detroit to emulate Boeing's breakthrough competitive strategy, based on an efficiency leapfrog integrating ultra-light materials, advanced manufacturing, and whole system design. Matching our playbook, in September 2006 Ford hired Alan Mulally, head of Boeing Commercial Airplanes, as its new CEO. I now work with Ford's leadership team as a charter member of Chairman Bill Ford's Transformation Advisory Council.

In October 2007, Toyota showcased the industry's best-yet Hypercar®-class concept car- the 1/X (pronounced "one-Xth") at the Tokyo Motor Show. Many concept cars never get to market. But a day earlier, Nikkei reported that Toray, the world's biggest carbon-fiber maker, plans a $333 million factory in Nagoya to mass-produce carbon-fiber body panels and other auto parts for Toyota, Nissan, and others. Together, these two announcements signal strategic intent.

During 1987-2006, the average light-duty vehicle sold in the U.S. got 29% heavier; cars alone got 17% heavier and 12% denser; but only 30% of the fleet's weight gain (and none in recent years) was caused by bigger cars or by shifts to SUVs, vans, and pickups. Instead, the obesity came from materials and design.

Yet in recent months, strategy has begun to go lean: integrative lightweight design has emerged as an important trend. In November 2007, Ford led by announcing a 250-750-pound weight cut in all cars starting in Model Year 2012 (as soon as production can shift) to capture unexpectedly big design synergies (Mazda had already been quietly lightweighting.) Two months later, Nissan announced a 15% average weight cut by 2015, and China announced an auto lightweighting alliance aiming to cut 660 pounds out of the average car by 2010. Lightweighting is finally emerging as the hottest strategic trend in the industry.

Unlike traditional improvements, lightweighting can improve fuel economy, performance and crashworthiness. But this seemingly obvious solution had lacked two key ingredients. First, light materials looked costly. This barrier is rapidly falling due to manufacturing advances, both with familiar light metals and with newfangled carbon-fiber composites (led by RMI's spinoff Fiberforge, whose high-speed manufacturing technology recently entered industrial service).

Second, most automakers still count costs per part or per pound, yet customers care only about cost per car. Since 1991, we've shown how costlier parts or pounds can make cars cheaper to build. In 2000, our Hypercar ® spinoff (later renamed Fiberforge®) and its Tier One industry partners designed a 67-mpg uncompromised midsized SUV that proved how cheaper tooling, simpler assembly, and smaller powertrain could offset costlier materials.

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