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Last Updated: Wednesday, 10 January 2007, 22:13 GMT
Chrysler questions climate change
By Steve Schifferes
Economics reporter, BBC News, Detroit Motor Show

Chrysler Nassau car at the Detroit Motor Show
Many US firms are predicting that demand for bigger cars will pick up

Chrysler's chief economist Van Jolissaint has attacked European attitudes to global warming, describing climate change as "way, way in the future, with a high degree of uncertainty".

He was particularly critical of the recent Stern Report on climate change, which was commissioned by the UK government and calls for urgent action to tackle the problem.

His words are in sharp contrast to the green image that the US car companies have been trying to promote at this year's Detroit motor show.

Mr Jolissaint was speaking at a private breakfast where the chief economists of the "Big Three" US car firms presented their forecasts for auto industry sales this year.

Most of the audience - which was mainly made up of parts suppliers - seemed to nod in agreement with Mr Jolissaint.

Uncertain magnitude

Mr Jolissaint, a Chrysler veteran who was recently appointed the chief economist for the German-US DaimlerChrysler Group, said that since he started spending more time at the company's corporate headquarters in Stuttgart he had been surprised by European attitudes towards global warming.

In response to a question from the floor, he said that global warming was a far-off risk whose magnitude was uncertain.

He said that from an economic point of view, it would be more rational to spend lots of money on today's other big problems, and only make small and limited changes in policies relating to global warming, such as a slight increase in gasoline or carbon taxes.

Plane flying past factory chimneys
Airlines and factories are being urged to help cut global warming
Mr Jolissaint was particularly scathing about the Stern Report, which urged governments to take urgent action now, arguing that it would be much cheaper to act, rather than face a $10 trillion cost of climate change of not doing anything until later.

Mr Jolissaint said the report, written by a former adviser to UK Chancellor Gordon Brown, was based on dubious economics and did not include a discount rate. Until recently Sir Nicholas Stern was the second permanent secretary at the UK Treasury.

Chrysler's chief economist said his German colleagues at DaimlerChrysler's headquarters in Stuttgart and other professionals in Europe viewed global warming "with much more alarm than we do".

He called on Europeans to deal with climate change "in a step-by-step, rational way, and not play much Chicken Little", referring to the US children's story in which Chicken Little runs around in circles saying "the sky is falling".

If nothing else, Mr Jolissaint's remarks illustrate the yawning gap between mainstream opinion on climate change among the educated elites of Europe and America.

But they are also consistent with the cynical view held by some in the US environmental lobby that announcements by car companies about the future development of green vehicles are nothing more than window dressing.

A spokesman for DaimlerChrysler told BBC News that while the science of climate change remained "uncertain", the company supported "concurrent advances in climate science to ensure fuller understanding of the controversies surrounding this issue and to avoid inappropriate responses by government or the private sector".

The company was "committed to develop new advanced technologies to minimise any potential impact our vehicles might have on global climate or the environment in general," he said.

Bigger cars?

On Sunday, GM boss Rick Wagoner told the world's press that there was "now an irrefutable business case for producing green cars" and that the company recognised that fossil fuels would eventually run out, or be in such short supply as to force prices much higher.

At the same time, GM's chief economist - who last year forecast that oil prices would average $40 a barrel when in fact they topped $60 - was predicting that oil prices would fall this year as new oil supply came on stream.

Ford trucks in a parking lot
Will a drop in the price of oil boost demand for larger vehicles?
As a result, he argued, demand for big, gas-guzzling cars would recover.

Despite the fact that the chief economists have not forecast growth in US vehicle sales in 2007, after 16.5 million units were sold in 2006, they were more optimistic about their outlook than many Wall Street analysts.

One reason for their relative optimism was a remarkably sanguine view of the other economic risks facing the auto industry.

There is widespread agreement that the US economy will slow next year, partly because of a sharp drop in house prices.

But Ford's chief economist, Ellen Hughes-Cromwick, said there was little to link house prices and auto sales.

She also argued that the US central bank, the Federal Reserve, was likely to cut US interest rates by half a percentage point in coming months to prevent the US economic slowdown turning into a full-blown recession.

This has not been the consensus view in financial markets, and in fact many analysts have stated that Ford would suffer most if the US economic slowdown was more severe than expected.

And some, such as Sean McAlinden of the Center for Automotive Research, have warned that it could even push Ford close to bankruptcy.

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