General Motors appears to genuinely “get” the need to build more sustainable and forward-thinking vehicles. Can they deliver before the clock runs out?
The clock is ticking. Will GM revamp its entire product line to more fuel-efficient models? Will the line include viable alternatives to petroleum and internal combustion? Can all of this happen before GM either runs out of cash or gets acquired by the Chinese?
Sounds like a comic-book climax, but General Motors is in a tough spot. We acknowledged that GM heeded the wake-up call. Now we’ll muse over the many challenges the company faces while also highlighting a few bright spots: a production version of the Chevy Volt and the new “Project Driveway” hydrogen fuel-cell program.
Today we get a glimpse–and we literally mean a glimpse–of the production 2011 Chevy Volt, a plug-in hybrid that can run entirely on battery power for many miles. The photos show a more polished and GM-ish grill and trunk lid than the original concept vehicle.
Evidently, several working models will be making their way around Detroit for testing in the not-too-distant future.
Of course, the Volt is essentially a sequel to the EV1 electric car that GM produced more than a decade ago as a lease-only test program. As documented in Who Killed the Electric Car?, GM called them all back and crushed them into oblivion…much like what’s happened to its stock price, market share, and market cap. Does one have to do with the other? Absolutely.
If you thought the whole New Coke vs. Classic Coke made for a great MBA lesson-in-what-not-to-do case study, GM’s trashing of the EV1 will go down in history as one of the single worst decisions ever made by a major company. Because the damage spread to every part of GM, and it continues to this day. Only with the benefit of another decade of hindsight will we get a full tally of the damage. Hopefully it will be post recovery rather than postmortem.
By killing its electric-car program, GM ceded an entire, global market to Toyota. It destroyed untold brand equity, which carries through to the present, since few give GM the benefit of the doubt on its “gas friendly to gas free” campaign. And it set the company back a decade or more in terms of R&D. More on this in a bit.
GM is also forging ahead on hydrogen fuel cells with its Project Driveway program.
A new campaign, called “Project Driveway,” is putting fuel cell technology to practice in the largest market test ever. As part of the project, Chevrolet is loaning 100 Equinox Fuel Cell electric vehicles to select families across the country. The pioneering drivers will give feedback on the overall operation and feeling of the car, while generating public awareness and exposure to fuel cell vehicles.
We have our doubts about hydrogen as a fuel alternative, in part because it’s not a source of energy but rather a method of storage. It doesn’t seem as though the energy required to capture hydrogen, such as through electrolysis, would not have been better utilized directly. In other words, why use electricity to capture hydrogen to feed it into a fuel cell, when that juice can go directly into a battery at a much higher rate of efficiency and without all of the new fueling infrastructure?
It seems to us that GM might be placing one too many gas-free bets with hydrogen. The new, low-carbon energy infrastructure will consist of a patchwork of technologies including wind, solar, geothermal, nuclear, and biomass among others. But it makes more sense for our low-carbon transportation infrastructure to pick the single best technology and focus on it. We think that’s electric and plug-in electric hybrids. This way we focus on upgrading our power grid for both buildings and transportation (double the fun), while advanced biofuels fill the need for liquid fuels in hybrids. (Natural gas may play a short-term role.) In fact, considering the state of America’s Big Three automakers, it might make sense for them to work together. After all, each is in the same boat for largely the same reason: hubris.
The next chapter of that MBA what-not-to-do case study about GM will also include Ford and to a lesser degree Chrysler. A bit of history from our friend Terry Tamminen, author of Lives Per Gallon:
A poll released in 2002 found that voters in Michigan, the birthplace of the U.S. auto industry, support increasing fuel economy standards. Surprisingly, the poll also showed that United Auto Workers members are even more likely than other voters to favor tougher fuel economy standards. When the auto industry has repeatedly said that such regulation will kill U.S. jobs and force plant closures, why would autoworkers favor such measures? The poll found that autoworkers and other Michigan residents don’t believe the corporate scare tactics, but rather believe that improving fuel economy will help U.S. automakers sell more cars, thereby securing jobs and helping the local economy.
Stunning, no? The factory worker at Ford and GM has proven himself and herself smarter and more forward thinking than the C-suite executives. But this is just the start. Congress passed the first CAFE law in 1975, giving auto makers 10 years to plan and comply with new efficiency standards. The field was effectively leveled. Chrysler invested $5 billion to comply and proved that it was possible. However…
GM and Ford knew how to play political hardball, and they went on the attack. In the summer of 1985, Ford told the Reagan administration that it would connect layoffs to the CAFE standard and blame the administration for the loss of U.S. jobs. The Regan administration blinked and rolled back the CAFE standard from 27.5 mpg to 26 mpg for model year 1986 cars. Then GM and Ford pressed for more rollbacks through their lobbyist Jeffrey Conley, executive director of AutoChoice. He told the Washington Post that the rollback allowed his clients to “breathe a sigh of relief,” but added that the “same kind of adjustment is necessary for future years to avoid economic hardship to the domestic auto industry. One year of relief is not enough.”
Is this not supremely ironic, even poetically so? GM’s market share is in the crapper precisely because it didn’t comply. They are laying off workers because they didn’t listen to Congress and their own workers. But one American auto executive had it right.
[Chrysler chairman] Lee Iacocca seemed prescient when he predicted America’s future. “We are about to put up a tombstone,” Iacocca mused. “Here lies America’s energy policy.” He then paid for ads exposing the CAFE rollback for exactly what it was then and remains today, a threat to U.S. national security.
“[D]ialing back fuel standards on cars will set up the American people to be energy hostages again and again,” the ads read in part. It’s worth reading that line again. This ad wasn’t placed by an environmental organization. Iacocca made that statement [more than] two decades ago, and it is certainly fair to say that subsequent events have borne out his warning.
Iacocca was speaking circa 1986, and Lives Per Gallon was published in 2006, when oil had barely touched $70/barrel! The level of incompetence by GM and Ford during this period is rivaled only by the current Bush administration…its prosecution of the Iraq war, it’s handling of Katrina, it’s handling of the credit crisis, and its energy policy. The parallels are just astounding. And you can’t even say it was conspiracy or greed, because they’re bleeding billions! It was plain ol’ incompetence.
Meanwhile, Toyota prepared for the CAFE standards and developed hybrid technologies. But if you think the Prius was borne of any other motivation than the company’s own self-serving strategies, you’re wrong. Toyota acknowledged the CAFE standards but also read the same writing on the wall as Michigan residents and autoworkers. They knew that efficient cars would be good for business and good for the bottom line, both short- and long-term. Toyota also proceeded to build the Sequoia and Tundra to capitalize on our artificially low oil prices, which effectively subsidized large SUVs and trucks. The subsidies have vanished, and even Toyota is now suffering (though nothing compared to Ford or GM).
With all of that having been said (and it needed to be said), we do believe that GM is getting its act together. Is it going green and trying to save the planet? Of course not, and that’s not what we expect. What we expect is for them to make good business decisions in the interests of every stakeholder: customers, employees, communities, and shareholders. How can they do all of that? By building great, forward-thinking products that people want to buy and that take into account the realities and demands of the 21st century. Is that too much to ask?
It might be considering the company’s financial state. According to reports, GM has $8.7 billion in the bank and desperately needs to raise more cash (debt), while cutting costs. It needs to survive until 2010 when new policies will free it from some of its financial burdens. As it’s been said, GM is really a healthcare company that makes cars. It cannot survive like that. Which is also why affordable healthcare should be a key issue in the upcoming election. Our broken system puts American companies at a significant disadvantage to their foreign competitors because healthcare costs are out of control. It’s like making each company pay for its own police and fire departments.
We’ll continue to cover GM and other green automotive innovations. We’re not afraid to say that we’re pulling for GM to be successful. As the old saying goes, what’s good for GM is good for America. And while that may no longer be as true as it once was, there’s truth to it nonetheless.