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Uh-oh, did the states in the Northeast screw up when they decided to adopt California’s CO2 regulations?

The Northeastern states have decided to adopt California’s stringent standards for automotive CO2 emissions. Now, a key way that California wants to see these standards met is by getting automakers to build plug-in hybrid vehicles.

But it turns out that in the Northeast, most electrical power is generated by burning coal or oil. That’s not the case in California, which uses a lot of natural gas or buys its coal-fired electricity from next-door Nevada.

The point is, if California begins using a bunch of plug-in hybrids its carbon footprint will go down. But if the Northeast states start using a bunch of plug-ins, their CO2 footprint is likely to get worse. And I’m not sure those states considered that when they adopted California’s standard.

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It could be the most dramatic retooling effort since the early days of World War II, when Detroit earned its nick name as the Arsenal of Democracy. Word leaked out yesterday that Ford is . . .

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The Ford Escape is selling pretty well, and the 2009 model gets some significant improvements.

Last year the Ford Escape underwent a redesign to the interior and exterior and this year they significantly improved the power train. The base four cylinder engine is now 2.5-liters up from 2.3 and the V6 engine now gets 20 percent more horsepower. The four-speed automatic has been replaced with a six-speed and despite the bigger engine and more power engineers were still able to get one more mile per gallon for all the models.

Moreover the Escape now offers popular conveniences like SYNC, Sirius Traffic Link, and a capless fuel filler. Safety features such as stability control and side curtain airbags are now available and of course these improvements don’t come for free, they also bumped the base price up to just over 20 grand.

Click an above image to see larger photos of the 2009 Ford Escape

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One of the challenges the auto industry is going to face in the next decade is a shortage of executives.

Demographics are working against the upper ranks of the auto industry, especially the American auto industry. While Baby Boomers dominate the executive ranks today, there’s a big shortage of executives trailing in their wake.

Part of it is due to demographics. Gen X is a smaller population cohort than the Boomers. But some experts say the American auto industry hasn’t done a good job of grooming a successor class of execs to take over in the coming years.

This is going to be a big discussion topic this summer at the Management Briefing Seminars in Traverse City. And I’d add this tidbit, if you think top executives make too much money now, just wait until there’s a shortage of them.

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Few nameplates have the same reputation as the Toyota Corolla. Reliability, efficiency and affordability never seem to go out of style. In fact over its 40 some years on the market it’s become the bestselling car ever built. But today the Corolla faces stiff competition as more and more automakers figure out how to build great small cars. That’s why for 2009 Toyota has extensively overhauled the Corolla. So, did they leapfrog the competition or have they lost their touch?

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When hybrids first came out they didn’t make much economic sense. But two things have turned that around.

When the Toyota Prius first came out gasoline was only $1.70 a gallon. And the Prius was nearly twice the price of the Toyota Echo, a car that was virtually the same size. It would take 38 years to make up the price difference between the two cars based on fuel economy savings.

But today, with gas around four bucks a gallon, the economics have changed dramatically. Moreover, the hybrid technology in that first generation of Prius cost about $6,000. Today, Toyota has whittled that down to about $3,000. And the next generation could shave another thousand bucks off that.

You’ve got to hand it to Toyota. It single handedly created the hybrid market, and made the economics work, when almost everyone else said it couldn’t be done.

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When hybrids first came out, some people, like me, feared the batteries would prove to be the Achilles’ heel of the technology. But that just never happened.

It’s amazing how long the batteries in hybrid cars are lasting. Unlike the lead acid batteries we replace in our cars every five years or so, the hybrid batteries are lasting twice as long as that, or for the life of the car.

One thing that kills batteries is running them way down, what they call deep discharge, and then quickly charging them back up again. In hybrid cars, they limit the damage by not letting them discharge all the way. They always keep at least 40 percent charge and don’t go below that.

Undoubtedly some used hybrids will need new batteries, just like some used cars need the engine rebuilt. But it’s been really impressive to me just how durable the hybrid batteries have been.

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General Motors has been the biggest automaker in the United States for over 80 years, but now it’s in danger of losing that title.

Last month, for the first time in history, import brands sold more vehicles in the American market than the American car companies did. As a slowing economy, a housing recession and soaring gas prices take their toll, they’re hurting the Big Three more than anyone else.

Even more ominous for Detroit, Toyota came within 11,000 vehicles of catching GM. We’ll see how this develops as the year goes on, but I believe it’s only a matter of time until Toyota becomes the number one automaker in the American market. If not this year, probably next.

It’s a pretty grim market out there. And unfortunately there’s no sign in sight that we’ve hit bottom yet.

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We’re seeing a big realignment in the automotive ranks, and the American market is never going to be the same again.

Last month, sales of new vehicles dropped off dramatically, and the Big Three were the big losers, more than half the American market is now going to import brands for the first time in history. Even more ominous, Honda sold more vehicles than Chrysler did. In fact, the best selling vehicle in America last month was the Honda Civic. The Accord placed fourth.

Honda seems to be in a class of its own. Even though almost all automakers saw a big drop in sales in May, including Toyota, Honda celebrated its best sales month ever!

There’s no question it’s perfectly positioned for the current market conditions and that’s why it seems pretty likely that Honda will emerge as the fourth largest automaker in America as it sails past Chrysler by the end of the year.

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Dodge is plowing headlong into the world of domestic, rear-wheel-drive high performance with its all-new Challenger. Currently the Mustang is the only “pony car” on the market, but this hot new Dodge looks like it’ll hammer the ‘Stang on its own turf. The Challenger offers the performance to match its bad-to-the-bone styling, but how does it drive?

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