Below is an unedited transcript:
GEOFF COLVIN: Thank you, Deb. That was really enlightening, and I much appreciate it. We all appreciate it.
General Motors has been through a lot in the last five years, and during that time not much attention by the general public and the general news media was paid to the environmental issues. They sort of fell back to the more immediate financial issues. But those environmental issues never went away, and in fact they are now being addressed in a big way at GM. And it’s fascinating to see what they’re doing. That’s what we’re going to talk about now.
So, please welcome the Chief Executive Officer of General Motors Dan Akerson.
Dan, we have three GM cars at this event. You’ve got a couple sitting up outside at the entrance, and you’ve got a Cadillac ELR sitting right outside in the courtyard over there. And heaven knows they get a lot of attention. You’ve got to meet by law a CAFE fuel standard of 54-1/2 miles per gallon by 2025. Now, what’s the mix of technologies that’s going to get you there?
DANIEL AKERSON: It’s pretty broad, as you might imagine. We were active participants in that dialogue, whereas previous management teams I think kind of ‑‑ I mean, I was very personally involved in it. They kind of delegated it too far down in the organization. And, as a result, there was kind of an institutional bias, and maybe I think we became more of a problem than being part of the solution. And that was one of the precepts I wanted to go in with.
So, actually I was in Europe. I got a call from then the manufacturing czar, and he says, we’d like GM (GM) to be a cornerstone. We were kind of a ‑‑ obviously, government ownership would have been embarrassing, I think, for both the company and the administration if we didn’t become an active participant, and, again, part of the solution, not part of the problem.
So, there were really things that the American people don’t know about. For example, when we agreed to the CAFE standards before, it wasn’t apples to apples. Because take an emerging competitor like Hyundai Kia, they don’t make trucks. And we make trucks. They’re not a part of what we call global platform, part of a global architecture. They’re more of a North American phenomenon. And they’re a disproportionate profit generator for us say vis-à-vis a small segment car.
MORE: GM’s Akerson: Next Chevy Volt should be profitable
So I said, by virtue of us having to compete with a different portfolio than a new entrant, or a foreign transplant like, say, Volkswagen, we thought we were at a disadvantage. So, I wanted those two split, and then let’s compete heads up over here, and we’ll commit to certain mileage requirements over here, and CO2 emissions. And we did. And that was a big advantage for us that put us in a better competitive position.
Secondly, we found that for example, if you’re a foreign competitor like Mercedes or BMW, if you produce 24,999 of a particular model, not 25,000, and they were very careful to hit that threshold, they weren’t subject to gas-guzzler taxes and whatnot. I said, that’s interesting, but we don’t get that same break in Germany. Yet again the Americans got duped, in my opinion. So we had to have those.
And then the second thing is, and I said with all due respect to the government, although you guys are political scientists, you’re really not scientists. We should really have someone who knows a little bit about engineering, science, physics. And in 2018 there’s a checkpoint to see if the technology kept up with the policy that we all want to support. And so you say in 2025 there’s a checkpoint, not just a good luck and ‑‑
GEOFF COLVIN: We’ll see you in 2025.
DANIEL AKERSON: So, there were some qualifiers in the dialogue that I thought helped us. So, we have to, to answer your question more specifically, we have to electrification is here. A lot of people don’t want to face that fact. We have to look at alternate propulsion, not only in electrification but compressed natural gas, biofuels, diesel, hydrogen fuel cells, we’re looking at all that and pursuing it aggressively. And, at the same time, we’re trying to use advanced technologies to lighten the car, make it more efficient.
We’re coming up with things. For example, the new Corvette ‑‑ which for those of you that don’t have one, you should lust for it ‑‑ it’s comprised of carbon fiber nanotechnology, and fiberglass. And when you look at it, we not only lightened it, we dropped the center of gravity. We put in all the new technology in stability and control and brakes that only Ferraris have. And so we have a better car that makes mileage that when it’s cruising, it’s making 26 miles a gallon. This is a car with a big engine, so how do you do that? You go in and you look at the basic thermodynamics and physics that underpins the gas combustion engine, and you look at everything from cylinder deactivation, direct injection, variable valve timing and turbos. And you don’t see those type of technologies unless you get to the $80,000 and $90,000 European imports. We’re putting that into our trucks now.
So, you can’t solve this by fiat, by policy from a political scientist. You have to get down and really reengineer from the ground up. To give you an idea, we just introduced a new Cadillac CTS. It weighs 200 pounds less than a BMW 5 Series. That was not an option ten years ago, five years ago, three years ago at General Motors. The new ATS Cadillac weighs less.
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We decided we were going to fight against foreign imports, all you Californians that are driving those ugly German cars, we actually have a great looking car that has better stability, control, better power, better transmission, and it’s lighter than the BMW 3 Series, which is the target. We didn’t want to compete against luxury small. We wanted to pick the best and go right it. And that’s what we’re doing. So, there’s a different focus from a competitive point of view, and we want to be part of that solution, and not part of the problem when it comes to sustainability.
GEOFF COLVIN: You mentioned a number of things, one of which fleetingly was diesel. Now here’s something that will strike many people as surprising, but you will soon be marketing a Chevy Cruise Diesel as a fuel efficient, clean, environmentally friendly car.
DANIEL AKERSON: Yes.
GEOFF COLVIN:: What’s the argument for that?
DANIEL AKERSON: Well, it’s clean diesel, 46 miles per gallon, and that’s if you drive it not like you should. It will be the best mileage per gallon for a diesel. We’re the only ones doing it, and down into the compact area of the market just to get us there. We’ve actually seen in our tests even higher than 46 miles per gallon. And so it’s a gamble. But I think coming out of bankruptcy there are a lot of things we’ve learned, not only from a sustainability and from a environmental point of view, but we also learned it from a competitive point of view. We’re going to have to take some chances, and we’re doing that.
GEOFF COLVIN: Right. Are people ready for that? Is the public ready for ‑‑ the American public in particular?
DANIEL AKERSON: Well, VW sells 80,000 down in the Jetta and Golf. So, why don’t we sell and give the American consumer some choice.
GEOFF COLVIN: Right.
DANIEL AKERSON: So they can buy American.
GEOFF COLVIN: Right. What about the role of electrification? You mentioned it, but it’s one of those things that gets a lot of attention in the media, arguably too much attention, because it’s not a large factor now. How large a factor is it going to be?
DANIEL AKERSON: Well, we hope by 2017 that we’ll have a half-million cars with one form of electrification or another. And we roughly have just between 10 and 12, I don’t know the precise number, I think it’s 12 when you consider the ELR, which you haven’t seen. It’s a great looking car. But, if we offer enough models in the four different brands that we have in some form or another, we think it will take.
Now, we have taken, I have, the company has, it’s the Obama Car. The Volt was conceived well before President Obama was in office. It just came to fruition, to the market, while he’s been in office.
This car, ladies and gentlemen, is on a technology scale off the charts versus what you’ve seen. And people don’t really understand what a great car it is. But, essentially, think about the marketing and the market application here, 80 percent of Americans drive 40 miles or less per day, 80 percent of Americans drive 40 miles or less per day. And this car, I have one, I own it, this isn’t a company car. I’ve had it for about a year-and-a-half. We have 10,000 miles on it and I haven’t put 10 gallons of gas in it.
The average user fills up every 900 miles, every 900 miles. And so this car, you essentially get a charge on it when it comes down. We never let it charge all the way up. We give a warrantee on the battery of eight years. It gives you 16-kilowatt hours of power. And you can drive, I would say I get generally a charge ‑‑ it’s very interesting. It’s very temperature sensitive. So, the lowest when it’s 10 degrees, I get about 35 miles on a charge. And in the summer you get as high as 40, 45.
And so when it’s out, when you exhaust, and we never let it go all the way down, because we want that battery to have a long life, down about 15 percent charge it automatically takes on the gas and there’s never what I would, in engineering terms, there’s never a mechanical drag on the combustion engine. So, all it does is charge the battery, which you create direct current, versus alternating. We have to go through an inverter. And you run the electric motor with high torque on that electric motor.
When that’s done ‑‑ I’m sorry, when you’re on the gas engine you can drive from California to New York and back, you don’t have to have range anxiety as you do on an all-electric vehicle, an EV as we call it. This is an EREV, Extended Range Electric Vehicle. So, if you have to drive form here to Portland and back you can do it. If you want to drive around town, you’ll probably be on a charge all the time.
So, this will take out ‑‑ there have been 150 million miles driven on electricity now in the U.S. We’ve sold about 26-1/2 thousand of them. There’s nobody else who has done as many plug-in electric miles as we have. And the car is safe. It’s a five-star rated safety car. It’s shown durability and we’re losing money on every one of them. But, this is the first generation. So, the first year it outsold when Toyota came out with that ‑‑ what’s the name of that funny car they have?
It begins with a P I think.
DANIEL AKERSON: I’m not going to give them a free plug. Anyway, for the first two years we outsold them, first year, second year, and this year. We sell a couple of thousand a month in the U.S. We’re exporting them to China. We’re exporting them to Europe. But, this is a car that from a physics, from a thermodynamics point of view, from an engineering point of view, is probably the most complicated car. But, it’s been incredibly well received. To give you an idea, in a consumer report two years running in a row, you know they ask for your rank at 5 for great, 4 for good, three average, down the line. They’ve never had a car; they’ve never had a product that’s ranked 92 percent either a four or a five. No threes, and all these tens of thousands of customers, no twos, no ones.
So, we’ve got a lightweight this car, which is important, that the battery in it alone is 400 pounds. So, we’ve got to lightweight it in other ways. But, in this next generation we think we can decrease the price on the order of $7,000 to $10,000, without decontenting. That’s very important to us. And at that point in time I think you’ll see the second generation be much more, hopefully, profitable. I think it will be profitable. And we took a gamble, and we put the same technology, enhanced a bit. It can actually regenerate while you’re driving now. And we’ll put it in the Cadillac, what you see outside, which is obviously upgraded in terms of the interior and that sort of thing. But, we’re not giving up on this.
And we just introduced the Spark, which will be available in this market, California and Oregon, this summer. And it gets 82 miles on a charge, but then it’s out. And for those of you that are my age, remember, you drove a car and you always kept a gallon in the back, a gallon can. And if you ‑‑ it happened to me when I was in high school. You thumb a ride to the nearest gas station then you get taken back, fill it up, then you get back in there. You’re not doing that with an electric car. That’s range anxiety.
GEOFF COLVIN: Right. You mentioned ‑‑
DANIEL AKERSON: No purple pills for that.
GEOFF COLVIN: Right.
DANIEL AKERSON: Somebody caught that joke.
GEOFF COLVIN: Yes, that’s why I waited, because I was confident people would if you gave them a chance.
Natural gas is going to revolutionize America’s energy situation generally. Is it going to be a significant vehicle fuel as Boone Pickens among others has been urging?
DANIEL AKERSON: Well, I think we have a moment in time to really change the calculus for this country on so many dimensions. There are many in here who don’t remember this, but in the late ’70s we had an oil embargo. It was a signal that we all missed. A very flawed president at the time named Richard Nixon said we needed an energy policy. Of course, we didn’t get it. President Carter had another oil crisis and he told us all to drive 55 miles an hour and put a sweater on. That’s not an energy policy. And subsequently no president, no political leadership in this country has articulated a national energy policy, and ladies and gentlemen, our competition is. And our competition isn’t in this country. It’s globally.
So, we’ve been given a gift called shale. And there have to be safeguards in my opinion, to make sure that the shale can be extracted without polluting our ground water, et cetera, et cetera. I’m not a petroleum engineer, or a gas engineer, but hopefully that can be done. If it can, we sit on more BTUs of energy than Saudi Arabia does. It’s in a different form. It’s in gas, not oil. And our energy industry is built around oil. It’s going to have to transform and there has to be an integrated, national policy where there’s political leadership that brings the manufacturing and the energy industry together. And it’s clear to me ‑‑ I’m not sure the oil industry would appreciate my point of view, but what has to be done.
And we have that moment and it can be done. But, everything from distribution to retail sales, refining, et cetera. I was in the oil industry for four years when I first got out of the service. So, I have enough knowledge to be dangerous. But, we have this moment. It has to be grasped. And the engines are built today. We have natural gas engines that exist today. And we’ve committed to them into a three-quarter ton truck into our panel trucks, because you have to go to a central fueling station location. And that’s okay, but it’s not for you and me.
So, one of the ideas I have is that, remember back a couple of 20 years ago, a couple of decades, and we didn’t have double-walled underground storage tanks for our gas stations? If you wanted to sell gasoline then you had to go to double wall. They had to go dig them all up, break up the concrete, dig them up, put them in new. I’m sure that cost a lot of money. Well, but an environment is really important. So, there’s natural gas. I’ve moved around a lot in my life. I think we’ve owned 16 homes, and I’ll bet you 15 of them had natural gas. So, you know that there is ubiquity of natural gas all through residential and industrial areas. Why not have one out of four, one out of three gas stations that has a natural gas fueling station, because today we actually produce a car that will take either liquid gasoline, gas as we call it, petrol, and it will also burn natural gas.
Now, that’s not an easy engineering task. You have to adjust the lifters, the valves and what not. And you have to have two energy reservoirs, also known as a tank. One for natural gas, 10,000 PSI, and then a regular gasoline like you’re used to in your ordinary car, today’s cars, conventional cars. But, it’s the same thing. You have two energy reservoirs just like you do in the Volt, because you have this inflection when you transition from one power, one technology to another. But, wouldn’t it be great if we had the ubiquity for natural gas that we have for gasoline, and think what that could do to our trade deficits, our current account deficits, and what not.
GEOFF COLVIN: I want to invite questions, comments on anything we’ve talked about, or many things we haven’t yet talked about. And it’s hard to see a thing.
QUESTION: Hi, I’m Namrita Kapur from Environmental Defense Fund. I’m going to tell a little bit of a tale out of school about you, which reflects well on you, so hopefully you won’t mind. A few years ago when you were still at Carlisle, we had a meeting with you, not just with you with the senior management team there at Carlisle. And unprompted by us, pleasantly surprised, you said something to the effect of we can’t afford not to be addressing environmental, social and governance issues on the boards we sit on.
And so I’m curious, first of all, if you remember the comment in terms of what prompted it? And then, second of all, how that’s influencing what you’re doing at GM?
DANIEL AKERSON: Well, I would say that sustainability specifically ‑‑ thank you for remembering that, usually people remember the dumb things I say. Sustainability is woven into our global strategies. It is what will sustain this company over the longer term. And not to criticize prior managements, but I think we were too short in view. Every decision we make is I want to know what it’s going to do to us in 2023, 2033, 2043, so that somebody isn’t looking back to me like I kind of in my weak moments look back to prior management and say what the hell were they thinking?
So, as it pertains to the environment and whatnot, and it’s not a regional strategy, it’s a global strategy for us. So, we try to export our knowledge and our experience and our perspective, because when I arrived I actually met a former senior executive member of the board and I was asked in the first public exchange I had with the press and someone said, “Do you believe in global warming?” And I said, “It’s kind of hard to refute it.” Man did I get a blast. And you can’t argue opinions without facts. And it’s pretty hard not to be convinced that something is going on in the world. And if it’s not climate, it’s the impact that humans are having on society.
So, for example, what’s happening here? How many of you put trash out at the curbside this week to be picked up? Anybody put a bag out there? Well, you all just filled and polluted the earth more than 105 plants of General Motors. We recycle, reuse to the tune where 105 of 125 plants produce no landfill, none, not a drop of paint, not an ounce of steel. It’s reused, recycled, and it makes good business for us.
To answer your question, does it make good business? We generate a billion dollars in revenue a year out of about $150-60 billion globally comes from reuse of material. And we cut about $90 million a year just in the U.S. in how we save. So we’re getting revenue on one hand, and we’re saving about $90 million just in the United States from our plants. Three of our plants in the U.S. produce anywhere from 17 to 25 percent of their total energy needs from landfill methane gas that we pump in and use it. And two out of the five largest solar arrays in the world are General Motors’. Those solar arrays, and when you look at it you’re very proud of it.
We have plants, so you understand, I grew up in the Midwest where if you have two or three hundred-acre farm, it was a big deal. Well, we have 200-acre plants. They’re under roof. And we’ve got to heat it for the employees. We’ve got to produce energy. And we make cars and trucks. And we’re proud of the product we make. But it’s important that from solar arrays to reclaimed gas to the use of our product, and we push it down into our suppliers.
For example, they might have a piece of sheet metal and pump it out here, and cut out a piece here. And we say, no, no, no, we can change the arrangement of the geographic footprint on that panel of steel or and we’ll take what’s left over, melt it down, and reuse it. We are, I think, and nobody is doing what we’re doing in this area. And I think it’s smart business. It’s good for the environment. It’s good for the company. And we can make money at it. So, it’s really good.
GEOFF COLVIN: What’s not to love?
Unfortunately, we have to wrap up. But what you have told us is a lot of perspective that frankly we don’t hear very much, even when we’re reading about environmental efforts going on at General Motors. There’s still a lot going on that we just don’t hear about very much. And you have put all of this in a perspective, a larger perspective that’s really, really helpful.
So, like I say, we’ve got to keep on time, but I really appreciate your time here. Thank you, Dan.
DANIEL AKERSON: Thank you.