What is your evaluation of GM’s strategy and organization for developing fuel cell technology?
Environmental pollution is a current issue affecting the motor vehicle industry. There has been increased pressure for firms and the public to be concerned about the environment and promote environmental conservation in every activity. The motor vehicle industry is one of the industries that contribute to environmental pollution in several ways such as exhaust fumes emission and noise pollution among others. Petroleum companies have established ways of reducing environmental pollution such as the establishment of fuels that produce less carbon when used in cars. However, the efforts are not enough because vehicles remain some of the largest environmental pollutants.
Following this need, automobile firms have established ways to maintain the environment while maintaining a competitive edge. While some companies have sought other means of environmental conservation, GM motors sought to use the fuel cell that utilizes hydrogen to generate energy for its vehicles. This is a green strategy because its cell does not produce harmful elements to the environment. According to Fijalkowski (2010, p. 26), the company identified the product and its impact on the company’s clients. For the firm to be a technology leader, it had to pioneer developing and selling a million hydrogen fuels–cell vehicles by the year 2010
According to Hordeski (2009), GM’s organizational purpose for developing cell-fuel vehicles has been to enhance better performance, environmental conservation, and safety. The company has invested heavily in the achievement of these objectives by developing an Autonomy model to make a cell-fuel vehicle a reality. Towards the development of this model, the company has been faced with technical challenges such as the performance of a cell-fuel engine in cold weather. Other challenges include the cost of developing the new model and acquiring hydrogen raw materials, commercialization, and hydrogen infrastructure.
One of the firm challenges in developing fuel-cell technology is the availability and storage of hydrogen gas. Hydrogen is a very essential component of fuel-cell technology. One strategy to use in obtaining this raw material for this new engine will be through a reformation. In this process, hydrogen is obtained from hydrocarbons through electrolysis and by reforming the oil and extract hydrogen from it. An alternative approach to the future customer obtaining the needed fuel for the prototype vehicle will be achieved by the development of a gas station that will have electrolysis interface or reformers to provide the needed hydrogen to run the fuel-cell vehicle (Hordeski, 2009).
The company had plans to produce fuel cell vehicles in the mass vehicle by the year 2010. The production of hydrogen 3 and Hy-wire models of vehicles that will create the necessary test for fuel cell technology will achieve this. In spite of the efforts to utilize fuel cell vehicles as a competitive edge, GM is facing various issues that are affecting it’s maximizing the strategy. The dilemma however in the company strategy was indecisiveness concerning the project funds.
The firm failed to allocate substantial capital for the project to take off. Due to this issue, the project did not fully take off because of the inadequacy of funds for the creation of the autonomy model and the hybrid vehicle. Therefore, the project is good for the company because it is able to enable the firm to establish a competitive advantage in the industry besides conserving the environment. However, it has not been fully utilized by the firm and other competitors are increasing their competitiveness over the firm (Fijalkowski, 2010, p. 27).
What explains the different approaches to this technology among GM’s competition in terms of technical choices, make/buy decisions, levels of investment, and overall enthusiasm?
The different approach to this technology is being influenced by business strategy, product development, and technological development. General Motors’ policy was to invest heavily in fuel-cell technology was the need to provide environmentally friendly and equally high-performance vehicles. The technical choice for the company was motivated by the increased efficiency and market potential of the fuel cell. The fuel cell cuts emission by half and the vehicle developed from this technology is light in weight and has less noise, unlike the internal combustion engine vehicle. Fuel-cell-based technology on vehicles enables the chassis of the vehicles to completely separate through the use of drive-by wire technology.
The Autonomy model is a result of a radical rethink of traditional automobile technology. The model is made up of chassis also know as skateboard that contains the vehicle’s main systems. The vehicle combines fuel-cell power and drives by wire technology. However, the new model faced numerous challenges. First, the cost of commercializing the vehicle was too high i.e. about 10 times the cost of an actual fuel cell. There also was the storage of hydrogen in the vehicle as a backup source of power. Finally, there arose a problem of having hydrogen-refueling infrastructure.
The economic reasons to invest in a fuel-cell vehicle that will determine make or buy decision is the cost of producing the vehicle. The cost of obtaining hydrogen infrastructure, commercialization, and hydrogen storage are some of the cost factors that will determine the decision to make or buy decisions by the company (Steele, 1989, p. 10).
The economic approach to the adoption of fuel-cell technology lies in the intention to face out hybrid vehicles, which are seen to be inefficient, and of higher cost to sell to customers. The hybrid vehicle has a gas cost of 1.5 dollars a gallon with an additional cost of a battery of 3000dollars. Fuel-cell technology offers a better alternative to these extra costs by hybrid and internal combustion engine vehicles in terms of efficiency and performance.
The fuel cell was the largest innovation in GM company history. The project has a cumulative cost of nearly 1 million American dollars extending for a period of six months. The program to develop the fuel cell involved over 500 engineers and massive resources. Therefore, in order to realize substantial output, the firm must sell hydrogen fuel-cell vehicles in high volumes.
Should Burns pursue the approach to fuel cells embodied in autonomy, or adopt a more incremental approach. Why or why not?
Mr. Burns should adopt an incremental approach this is because of challenges such as storage problems brought about by fuel cells embodied in Autonomy. For example the fuel cell to obtain300 miles, one needs to store an equivalent volume of six kilograms of hydrogen. Other options to solve this problem would include the use of compressed gas, which had a public perception of safety risk while using the vehicle model (Mitchel, 2010, p.45).
The second option to store hydrogen in its liquid form that will require the gas to be maintained at -250 degrees centigrade. Another challenge was to develop a refueling station that supplied a prototype vehicle model with hydrogen. Due to all these challenges, it is rather difficult to pursue the approach to fuel cells embodied in the Autonomy model. The adoption of a more incremental approach would be viable, as it will ensure that fuel cell technology is proven first before it can be effectively utilized. In this approach, production costs need to drop significantly and the necessary adjustment provided before the model can be adopted. This process will involve the Hy-wire and HydroGen3 model that will be used to study the effectiveness of fuel cell technology (Hordeski, 2009, p.14).
Should Burns divert money from its fuel cell program to invest in hybrids? Why, Why not?
The burn should divert some money to invest in a hybrid project since hybrid vehicles are seen to be transitional models before fuel cell technology can be fully developed. The fuel cell projects still lack major components to be operational. Investment in fuel cells was considered a long-term future portion of GM investment. The focus was to be placed on improving hybrids and engine technologies. Mr. Burn as an interim solution that existed between the internal combustion engine and fuel cell viewed hybrids models.
The economics of hybrid was excessively expensive to adopt. The battery alone had a high cost of about 3,000 U.S. dollars with an additional cost of 1.5 dollars a gallon. The reasons for investing in fuel cell vehicles was that the technology would make the hybrid model obsolete. Honda for example admitted that it barely made profits with the highbred model. This was because of the low volume of vehicles purchased and the high cost of production incurred. For these reasons, Mr. Burn should divert the project money intended for the fuel cell to invest in hybrid. However, a significant amount should be left to develop the fuel cell technology as it holds potential.
List of References
Fijalkowski, T 2010, Automotive mechatronics: Operational and practical issues, Springer, Poland.
Hordeski, F 2009, Hydrogen and fuel cells: Advances in transportation and power, The Fairmont press, Florida.
Mitchel, J 2010, Reinventing the automobile: Personal urban mobility for the 21st century, MIT press, Massachusetts.
Steele, W 1989, Managing technology: The strategic view, McGraw-Hill, Michigan.
Zuckerman, A 2002, Managing technology, John Wiley & Sons, New York.