Remarks by Elizabeth A - Automotive News



Remarks by Elizabeth A. Lowery

Automotive News World Congress

Hyatt Regency Hotel

Dearborn, Michigan

January 17, 2006

Good morning, ladies and gentlemen.

It’s a pleasure for me to be with you today, on the first full day of the World Congress, sharing the morning segment with such distinguished speakers.

The theme of this year’s event, as you know, is “The Road to Prosperity: The Right Strategies in a Shifting Landscape.” Sounds good to me! We could all use a little prosperity…

But what really hits home is that “shifting landscape” part. This industry has always been about as dynamic and fast-paced as you can imagine. And it seems even more so these days.

I would submit that no facet of this business is shifting and evolving as quickly as advanced technology and alternative propulsion.

It’s an area where you really do need the “right strategies” – strategies that keep customers needs top of mind. And although “prosperity” is one heckuva good motivator, there’s more at stake here than the bottom lines of our companies.

The companies that best figure out how to devise the “right strategies,” execute their plan and get their message out there, will have the best shot at heading down the road to prosperity at the same time.

At GM — surprise! — we think we have the right strategies. You heard a lot about them last week downtown at the auto show, most notably during our hybrid press conference last Sunday.

I’d like to elaborate on some of our strategies a bit more today.

Of course, everything we do is in the context that there is no one solution to the challenges we face, no magic bullet, so we’re concentrating our energies on a number of different fronts.

In 2005, we had important discussions and made some progress in Washington on both the energy bill and reform of CAFÉ standards. We’ve witnessed a tremendous level of support on critical issues in the area of research on game-changing technologies such as hydrogen and fuel cell vehicles.

And, despite impressions that you may get from reading the papers on issues such as CAFE and CO2, GM and the industry do not oppose every idea and fight every regulation. The reality is that GM’s policy team and our engineers have worked in partnership with regulators and policy makers at the state and federal level for years and have made remarkable gains in safety and cleaner air.

Day in and day out, we’ve seen exciting developments and advancements that the industry is making to improve fuel economy, efficiency and performance from advanced gasoline engines, hybrids and alternative fuels such as ethanol and biodiesel.

Earlier this year, Peter Hart and Associates conducted a survey of Americans and found that reducing dependence on foreign oil and diversifiying our energy supply are top priorities. Additionally, the survey showed that Americans support the same goals that are at the heart of GM’s overall advanced technology strategy for improving efficiency.

We are committed to driving the transformation of the auto industry, and confident in its ability to make our vision of a hydrogen economy a reality and deliver its many benefits to our consumers, economy and society.

As I think many of you would acknowledge, at GM we have a long history of technological innovations with positive environmental impact — the first catalytic converters, the first extensive emissions control systems, and among the first unleaded fuel systems, to name but a few. Our goal is to play a proactive role in bringing advanced technology vehicles to markets around the world, in high volumes.

To give you an idea of just how important this initiative is, it’s estimated that by the year 2020, there could be as many as 1.1 billion vehicles on the planet. That’s enough to circle the earth 125 times!

It’s pretty clear we must find solutions to the energy, environmental and congestion impacts of automobiles. All the while, we must enhance the passion, fun and affordability they offer.

Many of the solutions lie with the vehicles themselves – yet to really make the changes needed -- will require an integrated approach including not just new vehicle technology, but enhanced transit alternatives, cleaner fuels, infrastructure required to produce and deliver them and more efficient roads.

Automakers and fuel providers have much of the responsibility – but it will take the engagement of governments and individual consumers, as well.

So let’s start with what we’re doing to be a constructive part of the solution….GM has an advanced propulsion strategy to increase vehicle fuel economy and reduce emissions by executing a comprehensive technology plan that includes advanced internal combustion engines, new transmissions and hybrids in the near term, and hydrogen fuel cells in the long-term.

Beginning with the near-term strategy, our advancements in internal combustion engines have been well documented.

These include improved variable valve timing systems, six-speed automatic transmissions, and active fuel management, formerly referred to as Displacement on Demand, and advancements in diesel technology.

Here in the U.S., our focus on fuel economy has provided results. For 2006, GM has more models than any other manufacturer that achieve 30 miles per gallon or better on the highway.

And, in terms of model-to-model comparisons based on Ward’s segmentation, GM wins 66 of 116 segments for cars and trucks in combined highway and city miles per gallon. This is 57 percent of segments where GM competes and is more than any other manufacturer.

I’d be remiss if I didn’t stop here to talk a moment about the new fullsize sport utilities. This has been correctly portrayed as a critical product launch for GM. And, we’ve heard some voices commenting that GM is bringing a fullsize SUV to market just when gas prices have been increasing.

We paid very close attention to fuel economy from the start. These products, which already lead in fuel economy in their segment, will gain close to another 10 percent improvement.

The new 2007 Tahoe, Yukon and Escalade feature the lowest aerodynamic drag of any fullsize SUV in the world, with the Active Fuel Management system, you can carefully manage when and how often you go on four cylinders and you can do better than the EPA ratings.

Turning to alternative fuels, we’re also increasing the number of vehicles we have worldwide that run on bioethanol-based fuels.

In North America we currently have 9 FlexFuel vehicles equipped to run on E85, including the Tahoe and Yukon. E85 is 85 percent bioethanol and 15 percent gasoline. We have a million and a half such vehicles on the road right now, and current plans call for the addition of more than 2 million more through the 2010 model year.

E85 is clean-burning, reduces hydrocarbons; and it’s a domestically sourced and renewable fuel, since it’s typically corn or sugar cane-based. The real future here will be with cellulosic ethanol production.

If you compare a vehicle using E85 to a typical hybrid vehicle, the hybrid may get better gas mileage but the E85-powered vehicle saves hundreds more gallons of petroleum per vehicle per year, because only 15 percent of what you put in the tank is petroleum-based, compared with 100 percent in the hybrid’s tank.

On a global basis, we also have a large fleet of vehicles that run on ethanol in Brazil.

In fact, just last month in Brazil, where ethanol is the most available fuel, 78% of vehicles sold by GM do Brasil were equipped with Flexpower, which provides capability to run on 100% ethanol.

In Europe, the Saab 9-5 Biopower is Sweden’s best-selling environmentally friendly vehicle, and accounts for 80 percent of all 9-5 sales there. What’s more, it was also recently named to Popular Science magazine’s “Best of What’s New” list. 

In addition to the obvious benefit of a renewable fuel, performance of the vehicle is actually enhanced. For example, the Saab Biopower gets 180 horsepower while running on E85, compared to 150 on gasoline.

Turning back to the U.S., we need to expand the infrastructure, because the potential benefits are staggering.

That’s why, at General Motors, we are partnering with government and fuel providers – anyone who shares our common interest on ethanol. For example, at the LA Auto Show we announced a partnership with the State of California, Chevron and Pacific Ethanol to study the feasibility of making E85 more widely available in the State of California. The State is considering the purchase of 50-100 E85 General Motors cars and trucks to place them in their fleet. Chevron will work with Pacific Ethanol to provide the fuel.

Worldwide production of ethanol has risen steadily — and dramatically — in the last 25 years, as this chart shows.

It’s expected to triple between now and 2020, and the sooner this country gets the infrastructure in place, the sooner we can put more of these vehicles on the road in huge volume. Don’t get me wrong, our high volume products such as Chevrolet Silverado and Impala and GMC Sierra, to name a few, are E85 capable. However, as an industry, there are more opportunities when it comes to E85.

If market conditions supported unconstrained ethanol supply and infrastructure … we could save 45 million barrels of oil annually, and reduce greenhouse gas emissions by 6.9 million metric tons per year.

Right now, ethanol represents just 2.5 percent of our fuel supply, but is predicted by some to increase tenfold in the next 10 or 15 years.

Such an amount could help offset future growth in oil demand, act as a hedge to future oil supply and price shocks, and help diversify our transportation energy supply.

In fact, we are so serious about ethanol that we are in the midst of launching a significant consumer education effort focused on E85 and General Motors products. I brought a sneak preview of the new advertising campaign. These are a couple of the print ads ….

E85 is just one element of the near-term component of GM’s multi-pronged energy strategy.

As I said earlier, the whole point of our strategy is that we see a number of solutions to the energy equation, and we’re planning for all of them, so that we will be ready when the market decides which way to go. No single technology will resolve the environmental and energy challenges we face.

Hybrids are an important part of that strategy. We’ve had them on the road since 2003, when we launched our two-mode hybrid system for buses.

Since then, we've delivered more than 380 hybrid systems for transit buses, operating in 29 cities in the US and Canada.

And today I’m pleased to announce that a consortium of 11 transit agencies spearheaded by the San Joaquin Regional Transit District in northern California. The consortium has awarded a contract for up to 157 hybrid buses powered by our two-mode diesel-electric propulsion system! It is the second largest purchase order for buses equipped with GM’s hybrid system since deliveries began in 2003. The San Joaquin consortium busses will be spread across three states from California to Nevada to New Mexico.

In addition, we're close to delivering our first hybrid bus system to Shanghai, China.

Our hybrid buses are off to a strong start this year with an additional 203 hybrid-powered buses scheduled for delivery to six U.S. cities.

Now, as far as light-duty vehicles, we have targeted traditionally higher consuming ones, to maximize the benefits for the environment and make the fuel savings equation more attractive to the consumer.

For instance, for the Saturn Vue Green Line we unveiled last week, we forecast a 20 percent improvement in fuel economy. The system will sell for less than $2,000 – allowing us to offer the VUE Green Line at a starting price around $23,000 – some $4,000 less than the nearest competitor. Simply put, the Saturn Vue Green Line will offer the best real world fuel economy of ANY SUV – hybrid or non hybrid – and we did it for substantially less money.

In 2007, the new fullsize SUVs -- Chevorlet Tahoe, GMC Yukon, and the 2008 Cadillac Esclade -- will be available with our patented next-generation two-mode hybrid system increasing their composite fuel efficiency even more, about 25 percent, while maintaining SUV-like performance.

As we explained last week, the Two-Mode hybrid system features two hybrid drive modes, each separately optimized for city and highway driving, which maximizes fuel efficiency, and reduces the need for large electric motors found in typical single-mode systems, making it adaptable for use in a broad variety of cars, trucks and SUVs.

To achieve economies of scale and associated cost advantages, we have entered into a collaboration with DaimlerChrysler and BMW to efficiently develop the Two-Mode hybrid system.

The combined development and market power of this group of companies — each with its own significant and unique strengths — is moving the two-mode hybrid system into the technology-of-choice for the industry.

And we may add some more companies to the partnership before all is said and done…

OK, before I conclude I’d just like to mention that we remain committed to our long-term strategy, the hydrogen fuel cell. That’s the logical next step to reinventing the automobile… and to transforming our entire industry.

We have recently developed a novel stack concept that enables an additional 50 percent reduction in size over the stack that debuted in our Sequel show car. That 50 percent reduction represents an improvement by a factor of 14 in just seven years.

We are also making excellent progress on durability, cost reductions and hydrogen storage.

We are on the cusp of breakthrough technology. We are going to get this new mode of propulsion developed to the point that it provides the same performance, range and cost as today’s internal combustion engine, which is the key to realizing high volume sales.

Our concern at this point is that we’ll be all dressed up for the party with nowhere to go. We need continued cooperation from government and industry to get the world’s infrastructure ready for the hydrogen economy.

There are some positive examples of engagement on both sides of the Atlantic, but here in the U.S. we have partnerships with DOE, with Shell Hydrogen, a hydrogen refueling station in Washington, D.C., and in California’s Hydrogen Highway initiative and its Fuel Cell Partnership.

GM is committed to making the hydrogen economy happen and we’re prepared to go even further by being open to partnerships with other automakers, suppliers, oil companies, governments and universities -- whoever and whatever it takes, to develop the technology and implement the change more quickly, and more broadly.

More research and development funding is needed, focused on improving performance and reducing the cost of hydrogen storage, especially in the areas of how to best deploy, store and dispense hydrogen.

Obviously, the development of both vehicles and infrastructure will take a joint effort between governments and industries that will need to be as carefully coordinated as a lunar landing.

But if that’s what it takes, that’s exactly what we’ll need to do. And we’ll do it in such a way that provides a solid business case, too.

Our vision is to provide sustainable transportation and to leave the planet in tact for generations to come. Our reality dictates that we need a little bit of prosperity to go along with the vision, or else we won’t be able to get any of it done at all.

I think the industry, GM included, is on the right track to getting it done. Thank you for your kind attention today.

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