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Honda's Diesel-Powered Dreams
The automaker says that while hybrids may be the best mileage booster for small cars, it is embracing diesel engines for larger cars and SUVs
by David Welch
With both General Motors (GM) and Toyota (TM) throwing the hefty weight of their engineering dollars and public-relations efforts behind hybrid-electric cars, you might think the alternative energy debate would end right there. Hybrids, not diesel-fueled cars, will be the mileage booster of choice for every major car market except Europe.
Well, Honda isn't convinced. Honda (HMC), known as one of the world's premier engine makers and a pioneer of hybrids, is getting more interested in diesel. Honda Chief Executive Officer Takeo Fukui says that hybrid systems are the better choice for small cars, but larger cars and sport-utility vehicles may be better suited for diesel. In an interview at Detroit's North American International Auto Show, Fukui told BusinessWeek.com through an interpreter that starting in three years, Honda will begin to roll out diesel engines, and they will probably be employed in its larger vehicles. In fact, he says Honda has not yet decided whether the next-generation Accord family sedan will get a hybrid system when it hits the market late this year. It could get a diesel eventually, he says.
Honda will first launch a four-cylinder diesel engine by 2010 and a V-6 will soon follow. "Civic and smaller [models] will be hybrid," says Fukui. "I'm not sure if it's the best match for light trucks, so we might think of different solutions. We think we can find a better, less expensive solution than hybrid." One of those solutions, he says, would be diesel.
Signal to the Market
That's a big shift for Honda, especially considering the company has tried to go toe-to-toe with Toyota for hybrid leadership. The company launched its first hybrid, the two-seat Insight, in 1998. Since then, Honda has pushed the technology in its Civic and Accord models.
Pushing diesel will give the fuel a boost in the U.S., since currently the only companies selling it here are Volkswagen and DaimlerChrysler (DCX). And their marketing efforts have been more whisper than scream. "Honda is the premier engine maker globally," says CSM Worldwide Vice-President Michael Robinet. "If Honda is talking diesel as a viable alternative throughout its product range, that should be a signal to the market."
Fukui says Honda's hybrid technology is still an important piece of its strategy, but the company thinks its new diesel engines—which it boasts are both quiet enough for consumers and clean enough to meet tough air regulations in California, New York, and several New England states—are a smart option.
U.S. Regulatory Obstacles
If Honda delivers what it promised last September, its diesel technology could be a game-changer. The company says it will be affordable and will meet all new emissions rules without using urea.
Several automakers are using the ammonia from urea as a catalyst to chemically remove oxides of nitrogen, or NOx, which is a component of smog, from diesel exhaust. The system turns NOx into harmless nitrogen.
Urea systems work. But the U.S. Environmental Protection Agency is still weighing how to regulate them. To be effective, they need to be kept full of urea, so the EPA wants to make sure there is a way to ensure that consumers keep the tanks full. Otherwise, the technology will lay fallow in the car, and diesel motors will continue belching smog-causing NOx. Mercedes-Benz currently has a urea-cleaning technology already tested. It will be able to meet all requirements in 2008.
Changing Consumer Perceptions
Honda's system generates its own ammonia and cleans the exhaust without needing to fill any kind of tank. That means the government wouldn't need to mandate anything, and consumers won't have to worry about filling it.
If Honda's technology works, the only remaining hurdle would be convincing American consumers that the latest engines aren't the sooty, belching, and sputtering motors of the '80s. These days, only a few die-hard diesel fans buy Mercedes and VW models. Last year, just 6,900 of Mercedes' 247,000 sales had diesel engines.
Part of the problem, says Mercedes-Benz USA President and CEO Ernst Lieb, is that not all filling stations sell diesel. "If you put a big marketing push behind it, you send customers to the gas station and they can't find the fuel," he says.
Korean carmaker Hyundai is also on a diesel kick. It sells diesel engines successfully in its home market and plans to bring stateside either the 2.2-liter 4-cylinder or 3-liter V-6 diesel and sell it in either the Elantra or Sonata sedan to start, says John Krafcik, vice-president of product development and strategic planning for Hyundai Motor America. He wouldn't put a date on the launch, though. Says Krafcik: "I'd love to have them here as soon as possible."
Honda's presence would definitely help clean up diesel's image, not to mention get the attention of a different kind of buyer. Hondaphiles tend to be interested in high technology, and they are often exactly the kind of consumer who would view diesel as Old World. "The more competitors who put marketing money behind diesel, the better for us," says Lieb.
There are serious doubters. GM Vice-Chairman Robert Lutz, a newfound proponent of electric vehicles and hybrids, says diesel engines cost twice as much as gasoline engines. Add in the price of the technology to clean emissions, and they just aren't economical, he says. When confronted with Honda's promise to develop a clean diesel engine that could be reasonably priced, he says: "We'll see."
Even if Honda delivers, the company will have to convince buyers to take a look. "Consumers need to drive Honda's new generation of diesels," Fukui says. "Then they will understand."
It's tough to bet against Fukui. Honda makes few promises, but when the company says it will deliver, it usually does.