Green Tech Gets a Big Leg Up

The EE Times reports that IBM is planning to spend $1 billion on energy saving technologies that are designed to cut power usage 42%. This is potentially a much larger savings than it might seem at first blush, because IBM's technology is critical to many data centers. These data centers, which drive the digital economy, are power guzzlers that have been growing exponentially. Saving more than 7000 tons of carbon emissions per year would be good if IBM alone could do it, but IBM's technology will be leveraged across many companies.

Google is one of the world's largest users of data centers. With a presence in 13 states, Google is expanding geographically into areas with cheap power. This can most clearly be seen in Google's move to Council Bluffs, Iowa. The key to Google's methodology is hooking thousands of low-cost boxes together to create the essentially instantaneous search results that the world has come to rely on. The upshot is that as the individual machines wear out or break, they are constantly being replaced. If IBM can achieve significant power savings, these power savings will likely be implemented immediately.

In the money hungry technology world, one billion dollars doesn't last as long as might be hoped. The so-called "burn rate" required to keep up will the bleeding edge is frighteningly large and rising all the time, but IBM's outsized commitment to green technology is a sure sign that the movement is achieving real change.

While the environmentalist movement's mindshare is indisputable, many people still question the case for global warming. Yet even if global warming is the greatest hoax since time began, the business case for reducing power consumption is quite strong. The power infrastructure in the United States is very old and running at nearly 100%. Achieving more computing power with less energy is a sure way forward. It takes decades to get power plants out of the planning stages and into everyday production, and it has become clear that the pipeline of power plants ready to come on line tomorrow is empty.

More energy means more pollution, but it also means more money. IBM plans to spend money to make money, but in the process they will save everyone else a great deal more.

Ford in Free-Fall

Reuters reports that Ford's April sales numbers fell 13 percent from a year ago. This might be easily dismissed as just the next chapter in the ongoing saga of Ford's difficulties, but the breakdown of the results yields some surprising results.

Ford's Expedition, a monster SUV, saw its sales rise 27%. And the Navigator, another leviathan, had sales that rose 13%. In contrast, the F-series pickup was down 12% and car sales were down over 23%. Clearly, Ford's car sales were hurt by the end of fleet sales to car rental companies that Ford decided weren't generating any profits.

Now, SUVs saw tremendous declines the last time gas prices went way up, and oil is heading back up again. But this time buyers aren't buying gas guzzlers without realizing the possibility of a tank of gas costing $100 is quite high. Rather, these affluent buyers don't seem to care. Given the social force of the global warming driven "carbon footprint" movement, it is all the more remarkable that consumers would choose to buy SUVs.

Detroit automakers in general are facing the music these days as Toyota has finally climbed past GM to become the world's number one automaker. But Ford seems to be suffering disproportionately. Chrysler's sales actually rose in April, albeit an anemic 2%.

Ford's saving grace up until now has been the strength of its F-series pickup. These trucks have been the best selling trucks in America for decades and their loyal buyers are among those most suspicious of foreign competition. But with sales on its flagship product falling 13%, the writing is now on the wall.

Something major needs to happen at Ford for a turnaround to work. Ford's management is hardly unaware of the problem. Ironically, Bill Ford was one of the early American proponents of environmentalism and his signature achievement was building one of the most environmentally conscious auto plants in the world. It's going to take more than incremental improvements in salesmanship and design to fix things.

Ford needs to completely re-brand itself around an innovative new design. Ford has admittedly been trying this for a while now, but the new designs really haven't caught on. Ford needs a sea change in leadership at the very top of the company to finally put all of its top talent on the products of the future. Ford finds itself in the awkward position of being a horse company competing against early auto companies. For a significant period, Ford is going to need to sell both horses and cars, but the company would be penny wise and pound foolish if it put any of its top people on its horse operations. Ford needs to put its top talent on the wave of the future, because if it doesn't the company may get put out to pasture.

Are More Nuclear Power Plants in Our Future?

CNN reports that TXU, a utility company acquired by two private equity firms earlier this year, is working to build the largest nuclear power plants in the country. Something big must be under way in Texas, because the Wall Street Journal suggests that at least three other utilities are considering building nuclear power plants in Texas.

No new nuclear power plants have been built in the United States in decades, but TXU has apparently been consulting with Mitsubishi Heavy Industries of Japan who would build the reactors, so there might actually be fire at the bottom of all this smoke.

The global warming debate has cast nuclear power into a sudden environmentally friendly light. If people are really more worried about global warming than nuclear accidents or terrorism, then the country might follow the French model which derives the vast majority of electrical power from nuclear energy.

The more capitalistic angle on this renewed interest in nuclear power questions what impact private equity has had on TXU's priorities. If private equity's ability to focus on long-term profits has allowed TXU to finally act on long simmering plans, this could have major repercussions for the economy as a whole. In a world where private equity is capable of even considering spending $50 billion for Dow Chemical, no public company is safe.

Greater willingness to take on spectacular risks will undoubtedly result in higher eventual payoffs for everyone in society, but the financial disasters will be larger too. Society just needs to make sure that the risks remain purely financial and not allow private business to avoid appropriate technological safeguards.