The U.S. government has pumped more than $100 billion into Detroit over the past year to keep automakers General Motors and Chrysler alive. But some of the sector’s remaining capitalists are having a hard time stomaching a $25 billion Department of Energy loan program intended to spark new developments in electric cars. 

Start-ups Fisker Automotive and Tesla Motors have won about $1 billion in combined funding, while longtime players Ford and Nissan have received substantially larger loans from Washington to work on vehicle electrification — a technology the White House and many in the industry hope will reduce the United States’ dependence on imported oil and lower emissions of carbon dioxide, a leading greenhouse gas. 

Funneling federal money to new entrants to the automaking world does not sit right with Tim Leuliette, chief executive of parts supplier Dura Automotive. 

“If there’s a real market for electric vehicles, the OEMs will do it,” Leuliette said, using industry jargon for automakers. “We don’t need to have people who have never built a car in their life take $1 billion of our tax money and say ‘I can do it too.’” 

Government funding muddles market signals, Leuliette argued at the Reuters Autos Summit in Detroit.

“When government writes a check, it says the smart money investors are hesitant to fund it,” Leuliette said. “When markets say it’s now wise enough … there’s more than enough money.” 

For his part, the founder of Fisker Automotive — which aims to build plug-in hybrid cars at a former GM plant in Wilmington, Delaware — said government funding is a logical way to kick start a technology that private U.S. companies have been slow to focus on. 

“Do we just sit and wait for the Chinese and the Japanese or Europeans to develop this and then we join later? Or do we actually this time around, try to take the lead?” said Henrik Fisker, whose plug-in hybrids would be able to travel for short distances on just the electricity stored in their batteries, which can be charged off the electric grid. 

“This is a moment in time, we cannot let this pass. We already let the hybrid pass - Toyota in the consumer’s mind, invented the hybrid and owns the hybrid - the average consumer doesn’t know that GM has more hybrids than Toyota,” Fisker said. “If an American company comes first with a plug-in hybrid, and we will be followed closely by the Chevy Volt in another segment, I think that is where America then has a chance in the consumer’s mind to take the lead, and not only in the U.S., but worldwide.”

One of the big challenges for French carmaker Renault, which ranks third in the world with Japanese partner Nissan and Russian ally AvtoVAZ, is that it is too complex, chief operating officer Patrick Pelata told the Reuters Automotive Summit.

“Renault is a complicated company,” he said and explained how many carmakers had embraced a matrix organisation to deal with their international expansion. “We’re definitely more complicated than Nissan,” he said.

He should know, he worked several years with Carlos Ghosn at Nissan and found met his wife in Tokyo.

Pelata, who was born at the feet of the Pyrenees mountains in Les Pujols in 1955 before studying at the prestigeous Polytechnique and Ponts et Chaussees schools in Paris, is in charge of diminishing this complexity and eking out costs. 

But while fixed costs were reduced by 17-18 percent in the past few years, the car markets collapsed at the same rate and the company needs to find more cost reductions.

Not just in France, where the firm is making some adjustments to its plants around Paris, but also in Latin America and South Korea where benchmark studies — against Volkswagen for instance — showed that improvements can be made.

The alliance with Nissan — set to become the second-biggest car group in the world after Toyota if GM decides to sell Opel/Vauxhall later this week — is also a lever for further cost cuts and Renault and Nissan have changed the command structure in the alliance so that it becomes more difficult for managers in the two companies to stop or delay alliance efficiency measures.

“In the allliance there were a lot of brilliant ideas, but the implementation was sometimes problematic,” Pelata said.

Pelata interview with Reuters Financial TV

Would you buy a car that only goes 100 miles (160 km) on a tank of fuel?

That’s the range of Nissan’s 5-seater electric car planned for sale in the U.S. and Japan in 2010 – a similar size to Nissan’s Primera or VW’s Golf.

A full tank in a petrol-driven car will take you around twice that distance so the new technology that Nissan hopes will leapfrog current hybrids won’t be for those who disappear up the mountains each weekend.

But 90 percent of car users drive less than 100 miles each day, says Andy Palmer, Nissan’s senior vice president and head of product planning.  So if you’re OK with a town or city run-around, you can plug it in to recharge once you get home.

And future generations will have more range, Palmer told the Reuters Japan Investment Summit, as battery technology improves.

Nissan has the car under wraps until it unveils a final prototype on August 2. Palmer says driving it is quite a surprise — with torque akin to a 2-litre gasoline engine and acceleration with zero noise.

But lack of noise has itself become an issue. If other drivers and pedestrians can’t hear you coming, how can they stay out of the way?

That, Palmer says, is relatively straighforward to fix.

“Starting with zero noise, it’s very easy to add noise. Normally automotive engineers have the opposite problem.”

Annoying beeps are probably out, so what would you like your new electric car to sound like?

Photo credits: REUTERS/Gil Cohen Magen and REUTERS/Kim Kyung-Hoon