Originally Posted by Villages Kahuna

Do you realize that even if the U.S. auto companies got re-structured and became competitive, and then made quick steps towards the development of hybrid or electric cars, that the U.S. would still be dependent on foreign energy? It would be battery power instead of oil, but we would still be dependent nonetheless.

There are a number of battery makers thruout the world, a few in the U.S. and others in Asia. But other than two companies--Panasonic and Sanyo--all of the others are tiny by comparison and many are nothing more than start-ups. That includes a couple U.S.-based start-ups.

Guess what? Very quietly Panasonic announced that it is acquiring Sanyo before the end of the year. The merger hasn't gotten much attention, other than in Detroit. I guess there have been a few other newsworthy stories that have dominated the news.

The merger represents Panasonic’s bid to corner a technology and product patents essential to the worldwide auto industry's future: batteries for hybrid and electric vehicles. A combined Panasonic-Sanyo would dominate the field not only for nickel-metal hydride batteries but also for next-generation lithium ion batteries. Both companies have been concentrating on battery design and engineering for more than a decade. Both Japanese companies are well ahead of any other company in the field and have carefully protected their product and manufacturing process developments with worldwide patents. Those familiar with the automotive battery industry say that any of the remaining companies would pale in scale, expertise and ambition to a Panasonic-Sanyo juggernaut.

At this point, both the Japanese companies have well-established supply chain relationships with the Japanese car manufacturers. The American hybrids are all using Japanese-made batteries, but they are in short supply with the Japanese car companies having their contractual orders filled before the U.S. car-makers are served.

We don't need much more bad news this morning, but I suppose it is worth noting that America’s reliance on imported oil will be replaced by reliance on imported batteries, even if the U.S. car companies are re-structured and quickly begin making hybrid or electric vehicles.

Will the foreign battery makers be replaced by new U.S. companies or alternative sources of power in time? Sure, but accelerated development of such products will be extraordinarily expensive, certainly not affordable by any individual company. Without significant government funding of research and product development, experts believe it would be decades before the U.S. could reach the stage that the Japanese companies have already achieved. The Panasonic-Sanyo combination has a huge head start in terms of design, engineering and manufacturing capacity. It will be a long time before we become truly energy independent, even if all the cars sold suddenly relied on batteries for power.

I might note that the federal government had voted a $25 billion package to fund alternative automotive fuel research and development by U.S. companies. But $15 billion of that amount has now been re-allocated as the result of demands by President Bush in the bill passed by the House yesterday for use in funding of the re-structuring of the U.S. auto manufacturers. We won't even begin the process of "catching up" our alternative fuel capabilities for a long, long time. I suppose if there's any good news in all of this it might be the opportunity presented by an investment in Panasonic. I bought some earlier this week.