U.S. automakers oppose raising the blend of ethanol in gasoline from the current 10 percent, saying cars won't run as well on higher blends, but Brazil's experience shows their arguments are weak.

Brazil, a model in the biofuels industry, began its ethanol program in 1975 after the world oil crisis sent its economy into a nose dive. The country was importing about 80 percent of its crude at the time.

It now mandates 20 to 25 percent ethanol in all gasoline and its auto industry adapted engines to the more corrosive fuel in 1979. Ethanol now holds equal market share as gasoline and sales of cars that run on it are booming.

The U.S. Environmental Protection Agency and Energy Department are studying the potential impact of an increase of ethanol in gasoline to 15 percent.

U.S. ethanol producers say this would expand demand and improve the health of the industry, suffering from a glut of the biofuel typically made from corn in the United States.

But the U.S. Alliance of Automobile Manufacturers has lobbied against raising the blend, saying it would affect vehicle emissions, performance and durability.

Emissions are complicated as there are many gasses and particulates produced to varying degrees depending on the blend and the quality of gasoline and type of ethanol. Some are worse than others for humans and the environment.

But as for performance and durability, Brazilian engineers say local cars that run on E20-E25 gasoline are in no way inferior to their North American counterparts.

From the technical point of view, this could be done without any difficulty (in the United States), former Brazil Chief Executive for Ford and current Director of the Center for Automotive Studies Luiz Carlos Mello said.

He noted that U.S. automakers were instrumental in designing the 100 percent ethanol car that started rolling off Brazilian factory floors three decades ago.

But it's not an easy decision, for if it were just a matter of economics, they would have already made it, he said, adding that there were broad political implications with the U.S. economy, which is heavily geared toward petroleum.

For years, some car manufacturers have been producing parts and vehicles in the United States with more corrosion-resistant metal alloys, such as stainless steel to handle higher blends of ethanol.

I'd say that some manufacturers already can handle 15 percent ethanol, so I think they would have to do very little, said Fernando Barata, an engineer who was instrumental in the development of Brazil's flex-fuel car that runs on any mixture of ethanol or gasoline.

But the U.S. industry overall is likely to have to invest in the reworking their production lines, parts and testing.

It would be impossible to speak of costs, beyond a true shot in the dark, but it could be something more or less significant, Heymann Leite, an engineering professor at various universities in Brazil.

The necessary part design and technologies for E15, however, are already being used in Brazil by the very same automakers operating in the United States, such as General Motors, Fiat, Volkswagen and Ford.

Mello added that the U.S. auto industry's additional costs of modifying their production lines for higher blends would be diluted by the massive scale of U.S. production.

OLDER CARS

The U.S. auto manufactures' arguments about vehicles' durability and performance on higher levels of ethanol, however, will hold true for many existing cars, as they did for Brazilian cars when ethanol was first introduced here.

Owners of older U.S. cars will grapple with this problem.

I had a motorcycle at the time and the extra ethanol in the gasoline ate my carburetor, ate a hole right through it, Leite recalled.

It took the Brazilian auto industry four years to adapt to ethanol by lining fuel systems and engine parts. Owners used to put in lead additives when they filled up to prevent corrosion. There were no catalytic converters, which would have been ruined by the additive and lead in fuel is no longer permitted in the United States.

Many cash-strapped U.S. drivers of older models might need to refit parts that come in contact with higher levels of the biofuel or risk shortening the life of the car.

If car owners don't stimulate the secondary car market by upgrading parts under an E15 scenario, they will become new car buyers sooner as their old rides wear out faster.

Above 10 percent, the manufactures know that some pieces of the motor need alteration, such as the type of fuel pump, injector valves, fuel filter and gas tank, said Joao Alvarez, a director at Brazil's Society of Automotive Engineers.

FLEX MODEL

In Brazil, the 100 percent ethanol car is no longer produced. It has given way to flex-fuel technology in engines that allow motorists to fill up with any blend of ethanol or gasoline depending on the price advantage at the pump.

Flex-fuel cars, which began production in 2003 in Brazil, overtook regular car sales in 2005 and now account for 95 percent of all new light vehicle sales. (Graphic link.reuters.com/maj33m)

The technology is equivalent to the so-called E85 vehicles that run on a special 85 percent ethanol blend in some regions of the United States.

Brazil now has over 30,000 filling stations that offer 100 percent hydrate ethanol from sugar cane as well as the E20-E25 gasoline blend.

Some engineers in Brazil wonder if U.S. manufacturers wouldn't be better hedged against the vicissitudes of the U.S. fuel market by adopting flex-fuel models that could fit into any future fuel mixture in North America.

(Editing by David Gregorio and Lisa Shumaker)

Energy