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The General('s) Direction: GM Execs Speak

During the North American International Auto Show in Detroit this past January, we had the opportunity to sit down and talk with several General Motors Executives. Here is some of what they said--in as unmediated a way as is sensible-about where the company is...and where it is going.

 

Bob Lutz and the Pontiac Solstice: If you build cars that people want, then you can charge more for them (or at least minimize the amount of cash on the hood). When the Solstice comes rolling out, Pontiac should have no trouble moving that desirable sheetmetal. Robert A. Lutz - GM Vice Chairman Product Development and chairman, GM North America.

 

 

Robert A. Lutz: ON THE 2006 PONTIAC SOLSTICE
The Solstice, by virtue of the very small investment and the good margins on the car can be produced very profitably at 20,000 per year. [The vehicle will be produced at the Wilmington, Delaware, Assembly Plant, which is presently a Saturn plant.] That doesn’t mean we get the money back in a year, but over a two or three-year run it’s a very profitable program. Now that all of the bits and pieces are in place—the Ecotec four-cylinder engine, the rear differential, prop shaft, five-speed transmission, the automatic that will come the year after the introduction of the manual—all of those things being in place, lengthening the architecture to make a Nomad or Curve or something is really not an investment-intensive thing to do. [The Chevy Nomad and Saturn Curve are both concept vehicles based on the same rear-wheel-drive “Kappa” architecture that was developed for the Solstice.]

The Solstice has the primary purpose of helping with the revitalization of the Pontiac brand. It’s not so much the volume the Solstice does as the signal it sends about our intentions about where we want Pontiac to be in terms of brand character. But having said that, it’s a profitable car in its own right. The whole trick here is to overcome this old Detroit myth that you can’t make money on small cars. You can make money on small cars, but they have to be interesting small cars. If they’re commodity small cars, then basically nobody wants them because they’re not aspirational. Look at the BMW Mini. It’s a small car—and at current exchange rates I’m not sure that they’re not losing money on it—but under normal circumstances, when you look at what that car is selling for, it should be a very profitable car because people want it, as opposed to being willing to take it.

ON THE VALUE OF DESIGN—& DESIRE
If you look at the content on Kappa, the amount of metal, the so-called material cost, is really not much higher than a [2005 Chevrolet] Cobalt. The stuff is arranged differently. It’s rear-wheel-drive instead of front-wheel-drive. But they both have a transmission. They both have a four-cylinder engine. The Solstice has a folding top, which is more expensive, but on the other hand it only has two doors instead of four, it has two electric window motors instead of four, so roughly speaking, the material cost is not that different. [Note: the Chevy Cobalt is also available as a coupe.]

You’ve got the situation when you’re down in the small front-wheel-drive segment, the public expects those things to sell for about fourteen and a half. But when you package the same thing as a roadster, everybody says ‘Wow! Under 20? This is amazing.’

That’s why the Chrysler PT Cruiser was so profitable. It was basically a Neon plus a couple hundred bucks, but suddenly instead of selling for $13,000, it sold for $21,000. That difference in selling price makes those cars profitable.

We are emphasizing design because design is becoming a major differentiator in the market in that everyone is beginning to realize that J.D. Power quality is no longer a differentiator. Just when the American companies—especially GM—are really getting good at it, it really isn’t a big differentiator anymore. You can take the guy who is at the bottom at the J.D. Power ranking and the score is such that seven years ago he would have been better than the best Japanese. It is getting so compressed that anyone can go out and buy anything and they know that they’re going to have an impeccable, flawless, reliable car that can be driven for years and years, and nothing is going to break on it. So on cars that are more reliable, we’re starting to split hairs here, and I think the public is figuring it out.

Fuel economy is about the same in every category. Everybody uses the same technology, so no huge difference in fuel economy. Everyone has about the same level of aerodynamics. Everybody has about the same level of features. So really what it boils down to is: ‘Do I like the car or not?’ If all other things are equal, then picking on the basis of appearance is a completely rational decision. It wasn’t rational 30 years ago when you had to tell yourself, ‘Wait a minute. A car is more than a pretty face. I may fall in love with this car, but everything I read and hear from my friends is that the thing starts falling apart after six months, so I’d better go with old tried-and-true.’ That’s not the case anymore. You can with abandon go pick what looks best to you and you know you’re going to have a great vehicle.

It’s really depressing that there are no bad products any more.

ON SATURN
If you look at the history of Saturn—and it’s very easy for me to criticize because I wasn’t here—maybe we relied too much on the appeal of Saturn for people who really don’t care that much about the car, but they care about the dealership, the care they receive, the courtesy that’s awarded them. In other words, it was more the purchasing and ownership experience and there was less focus on ‘We want you to fall in love with the car.’ And that has resulted in a degree of blandness or absence of character for some of the Saturn models. That’s what we have to correct. We have to give Saturn vehicles that are compelling to where people who have never considered Saturn say, ‘Wow! That is terrific. I’m going to go to a Saturn dealer because I want to take a closer look.’ We really have to crank up the sex appeal of the Saturn product line. We can and we will.

Why should I have to choose between exciting cars in a normal dealership or uninteresting cars in a dealership that treats me well? That’s like a restaurant that says, ‘What do you want—clean tablecloths or good food?’ ‘Could I have both, please?’ I think that’s where the error in the thinking was: That Saturn doesn’t need exciting cars because people go there for the experience.

ON TRUCKS
The march toward more and more truck-like vehicles is unstoppable, I think. It’s unstoppable on both sides of the Atlantic. You see the same thing happening gradually in Europe, where there are more and more SUV-like vehicles of various sizes and minivan-type vehicles, as well. It’s unstoppable.

ON CARS
We certainly realize that while we have made a very successful investment in upgrading GM’s truck presence, we have possibly not neglected cars—but we couldn’t do it all at once. We lost some position in the passenger car business and we need to stabilize or regrow General Motors’ position in passenger cars. If we don’t grow numerically, I would hope that at least we grow it qualitatively. If with a much more appealing passenger car lineup that’s much more competitive, I would hope that we can lower the level of incentives that it takes to move the cars. If we could get the average midsize passenger car off of a $4,000 rebate to something more like a $2,000 rebate, the whole effort will have been hugely worthwhile. If you take two or three million and multiply it by $2,000, it ends up at a large million-dollar figure very quickly.

ON THE EFFECT OF 2005 EUROPEAN PEDESTRIAN SAFETY REGS ON DESIGN

The 2005 pedestrian protection legislating in Europe is just going to radically change the look of automobiles in Europe post-2005.

Cars like the Mercedes 500SL or the McLaren Mercedes—all of these are going to have to be radically reconfigured in the next generation because you need 10 cm between the sheet metal and the first hard spot under the hood. If you can imagine the Nomad, Curve or Solstice with the hood higher, I dare say it would spoil the design concept considerably. Which is one reason why I think the Volkswagen roadster that was shown as a concept in Frankfurt was mid-engine. That way the front end is empty. That is a huge enabler to meeting the law.

The next generation of European cars is going to look different. You can see a precursor to that in the Audi design: very horizontal hoods and then sharp, flat front end. A little bit like the new Chryslers. The 300C and Dodge Magnum. I asked Dieter Zetsche [president and CEO of Chrysler Group], ‘Did you guys do this front end because of pedestrian protection? It looks like they would meet European pedestrian protection.’ Dieter said no, they don’t quite meet it. But that is the kind of styling you will see a lot of until people come up with the active devices, but that’s years away. It takes all the sensor technology and you also need a 20 cm band around the front of the car that’s absolutely flat so that if you hit a person’s leg there’s no stress concentration. They want the impact stress spread over as large a surface as possible so that the pedestrian legs get swept out from under him without breaking. They want the pedestrian to rotate and hit the soft hood that would absorb the impact.

ON GENERAL MOTORS
Are we as good as we want to be? No. Is our product lineup to where we will reachieve market dominance in a very short time? The answer is also no. But I will tell you this: I think we are in the best relative position compared to the rest of the industry, foreign or domestic, than the company has been in the last 10 or 12 years. The company is definitely marching in the right direction. And don’t forget: There’s a lot more ammunition in our magazine that will be revealed.

We’re in the best relative position, and our position relative to the rest of the industry is vastly better than it was 3, 4, 5, 2 years ago.

ON HYBRIDS
Hybrids are an interesting curiosity. We will do some because you can’t stay away from a trend like that, but do they make economic sense at $1.50 a gallon? No, they do not. Even if some of our competitors say ‘We’re in mass production, the cost is coming down.’ Of course it’s coming down, but it’s still going to be way more than a conventional car because you’ve got the internal combustion power train, the electric power train, the battery pack and all the computer controls that cause the whole thing to blend together. They’re significantly more expensive than a conventional car.

If you start with a vehicle that consumes 27 liters per hundred kilometers and get it to 18, now you have saved 9 liters for every 100 km driven. Then take a car that consumes 6 liters and take it down to 4. You save 2. Why wouldn’t you want to get the percentage improvement where the fuel is really saved and where the people really want the cars as opposed to little cars that people really don’t care that much about?


We do have CAFE legislation on light trucks. With the continuing desire on the part of the public to buy large V8 sport utilities like Suburbans, Denalis, Yukon XLs, and so forth, if everybody starts buying those, we would have a huge problem making the truck CAFE numbers. So what do you do?

You could make some smaller, lighter trucks to try to compensate for the big ones and get the average right, and we are going to pursue some of that. Or you introduce some expensive technology into your big SUVs which would drastically reduce fuel consumption. You can sell far more of them before you get into the CAFE-bind situation. Plus, up there you have some margins to where you can take the hybrid system. If we had to, we could probably eat the cost and still have a margin.

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Through the implementation of the GM Global Manufacturing System, Gary Cowger points out that when it comes to quality and productivity, the company is on a roll—despite the fact that he believes many in the public would still think that GM isn’t as good as its Japanese competitors.

Gary L. Cowger - President, GM North America

 

 

Gary L. Cowger: ON THE CHANGE IN GM MANUFACTURING
People keep saying,’GM— what happened? Over night!’ I say this is a 12-year ‘overnight miracle.’ You saw how long it took us. How many years did we go to NUMMI in just complete denial? That is the issue. Who has the profound knowledge? I look back on all those dinners I had with Dr. Deming when he said [smacks the table], ‘Gary, you can’t walk through a plant and understand someone’s profound knowledge, do you understand that young man?’ I’d go, ‘Yeah,’ but I didn’t have a clue what the hell he was talking about. But I do understand it now.

You cannot walk through and understand the Toyota Production System. You’ve got to experience it, learn it, and understand what it’s driving. This whole idea of focus on the operator was the way that I finally interpreted it so that it got some legs for people to understand: If the operator adds more value and can’t make a mistake because you sit there and do something 60 times an hour, even the best person can make a mistake. That starts driving the system, the profound knowledge, the batch size of one, poka yoke, work placement, work movement—all of that comes last, not first. You’ve got to have that in mind. The good news is that once you get it, the improvements just start exponentially. The GMS system [Global Manufacturing System] is now in every factory we have worldwide. When you look at our direct run rates, we’ve got direct run rates that are better than our Asian competitors in some plants. You can tell the difference. You walk through five years ago and walk through today—it’s just like a machine today. That’s the profound knowledge you get with the manufacturing system put in place.

When you look at our production schedules today, we don’t vary a percent. You used to look at them and they were all over the map—throughput, quality, productivity are all measures of how well your manufacturing system is working.

ON QUALITY
The perception out there today is that Japanese quality is better than everybody else’s. Not true. Look at all the data. In many of the categories, the domestics lead, but you wouldn’t believe it by reading the newspaper. Eight of the top 10 plants in quality in North and South America are GM plants. If we went out and gave the public a test on that, I don’t think they’d believe it.

ON LOWER PRODUCTION RUNS
I’m not sure 20,000 [is the right number for a production run]. The break even is coming down dramatically. You can make 20,000 at the right price point, but under $20,000 is probably not the right price point. But if you drive enough derivatives off that, it will be a very profitable architecture [e.g., Kappa].

50,000? Absolutely. One of the big capital requirements we had was that every time we did a new model, whether it was a little one in low volume or a big one in high volume, you went in and spent $300-million to $400-million on a body shop. Today, in Lansing Grand River Assembly [where the Cadillac CTS and SRX are built], we can have a major change—a completely different car—for $40-million. You’re talking a factor of 10X here. It has improved dramatically. As for technology, as we take C-Flex [a programmable body shop tooling system that replaces body style-specific tooling and related equipment. It allows multiple body panels (floor pans, deck lids, hoods, engine compartments, etc.) to be welded with the same set of programmable tools and robots. Model specific tooling is not required.] and move it to Tru-Flex [a body shop enhancement that features a flexible underbody marriage assembly system and utilizes both C-Flex and multi-robot cooperative welding] and as sensor technology continues to improve and you really get mechanical-electrical systems to actually work in harmony with each other, it will keep coming down. As you utilize suppliers more effectively, as you get integrated builds and more integrated subassemblies—continuous improvement.

ON THE AUTO COMPANIES THAT CONCERN HIM They all do. I believe in Andy Grove’s book Only the Paranoid Survive. Trust me. I’m paranoid about all of them. I really am. You walk around the show, and everyone’s got good products. You’ve got to worry about all of them.

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Hogan and the Kappa architecture. This was a fast product development—part of Hogan’s mandate (and objective) as they work toward getting more products to market sooner. Mark T. Hogan - GM Group Vice President, Advanced Vehicle Development

 

Mark T. Hogan: ON WHAT HIS ORGANIZATION DOES
My operation is responsible for taking the product development portfolio and making sure we can execute it from an engineering and business case standpoint. The prior process had that responsibility diffused into a number of different areas. Now we have one group, clearly responsible and empowered for doing that. That allows us to pull engineering resources up front. So when we get to what we call ‘clay freeze’ or ‘vehicle production intent,’ we’ve got a 70% engineered solution, which allows us to go faster to start of production. It’s a multifunctional, empowered staff that runs on a matrix that reports to me. We have all of the decision makers and functions represented. There is a lot more timing rigor in the upfront process.

ON ADVANCED PRODUCT DEVELOPMENT: TIMING & SPEED
The first fruits of our process are the Kappas. We are optimistic that the process development program as we’ve laid it out two years ago is moving along. We’ve taken time out of our development cycle. We’re down, on average, to about 30 months. When I got into this job it was more of a 36-month average, from design freeze to start of production [Hogan assumed his position in February, 2002]. We call it VPI: Vehicle Production Intent. We’ve gone as fast as 16 months with H2. Some could be longer. Solstice will be 24. The faster the better. We definitely want to improve over 30.

It’s dependent on how much carryover architecture you’re using. If you’ve got a carryover powertrain, an architecture with common suspension design solutions or steering system solutions, you can go real fast because then it turns into a body program. And a body program now, with die development going as fast as five or six months, it’s not out of the question you could do a 12-month program.

For the long lead items—powertrain development, fascia or bumper sys-tems, and headlamps—they take longer to accommodate in the new architecture.

ON THE IMPORTANCE OF MATH
From a technological standpoint, the advent of math tools allows us to essentially eliminate what we call ‘alpha’ or ‘mule’ builds with hand-built hardware. We can actually validate in the computer. In the case of a new architecture, it could save 12 months. It’s been a big improvement. And then from a decision-making standpoint, we had some redundancy in our product development decision-making that we’ve taken out with our new process.

If you’re taking time out and giving your designing engineer more of a subsystem responsibility as opposed to a discrete part number, you’re going to be able to go faster. The math tool broadens the toolbox of the designing engineer as well as speeds up the time they need to get the job done.

With math-based tools, the ability to pass design solutions off and iterate them on a global basis is far easier than it was three or four years ago.

ON MAKING THE CASE
Several key elements to making sure the business case works. One is around capital investment—both internal and in vendor tooling. One is on material cost, which includes assembly labor. And the other is engineering workload. If you can balance those three elements and arrive at a price point where you can take your volume forecasts, where we feel we can make money or not. At that point we say go or no-go. To pass through VPI we have to be very sure we can make those business targets.

The days of the 300,000 unit runs are over, by and large. You still get Camrys and Accords and Impalas. But by and large, the market’s tending to be in the 50,000 to 100,000-unit chunks. That means we’re going to have more products by definition if we’re going to keep our volume up. And the enablers for doing that are obviously embedded in our vehicle development process and math-based tools, as well as process improvement both in terms of die development and in terms of manufacturing flexibility—so you don’t have to spend a lot of time changing over a plant. We shoot for zero downtime when we make a change.

We’re doing Solstice for $100,000,000. We have to because it has a three- or four-year product life. Roadsters don’t have a long shelf life.

ON BENCHMARKING
We pay close attention to Toyota. We can do that through our work on Vibe. Understand a lot more about the Honda process in part because we do engines with them. And we obviously try to pay attention to the other competitors to the extent that we can without being in the bowels of their organizations.

ON THE BENEFIT OF GM’S BRANDS
We’ve got a number of brands we have to feed. They each have a certain place in the marketplace. We try to think about what their purpose is in the marketplace, what their distribution channel looks like, and that tells us what kind of product array we should have. For example, most of our Pontiac, Buick and GMC dealers are in the same showroom. So it doesn’t make sense for us necessarily to have a two-seat roadster for Buick when we’re doing the Solstice for Pontiac. That doesn’t mean we won’t have common product responses in a showroom, but we pay attention to that. That combined with where we want to be with the brand—for example, we want Saturn to gain back some of its youthful exuberance that it’s gradually lost over time, so the Saturn Curve or the Ion Redline or the Vue, those are products we think about in terms of rejuvenating Saturn. 60% of Saturn customers: their second choice is an import. When we started it was 80%. We want to get back to 80%. The way we do that is to have product they don’t expect to be coming out of Saturn or GM. Curve is certainly one of those.

ON COVISINT
Covisint was thought to be a great example of a B-to-B solution that would take cost out of the system. It never materialized. The suppliers didn’t buy it. When the dogs don’t eat the dog food, the dog food company goes out of business. [Hogan was the president of e-GM prior to his current position.]

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In his new role as head of GM North American Design, Ed Welburn is looking for clean designs that will endure.

Edward T. Welburn - GM North America vice president, Design Center

 

Edward T. Welburn: ON WHAT HE DOES—AND DOESN’T DO
Well, I’m managing Design, so I feel that I’m designing. The team of designers is so talented. Creative. Number one, I don’t have to draw. And I don’t think it would be appropriate, it would throw off the judgment if I were in there sketching along with them. At times in private, I enjoy drawing and sketching. I continue to do that. It’s a good way of thinking through a design challenge that we’ve got. In my own quiet time, to think through a design. So that when I go into a review, it helps.

ON HOW A PROJECT IS DONE
We’d have two, maybe three, teams that would begin work on it in isolation. Developing ideas, developing thoughts. Then we’d bring those ideas together for review. Ideas come from West Coast studio, UK, one of our global partners—we might ask them to take a look at it. The Saab design team did the Saturn Curve exterior. As those ideas come together and we have a critique and then the design goes forward. It’s just in our in our blood to want to sketch and think through the ideas.

ON WHAT HE’D LIKE TO BE REMEMBERED FOR
Designs that were bold, designs that really connected with customers in a very emotional way. Designs that were very diverse, that covered the market, the entire market, from the most aggressive design to the designs that were more quiet—but in all cases, very fresh designs. Very well executed. Very well detailed. Very precise designs. That span the test of time.

We have a relationship between design and engineering, throughout product development, that makes that kind of thing happen in a way that we hadn’t been able to do years ago. There’s a product development process that allows us to take a Solstice concept vehicle and in two years have in place an all-new architecture, an exciting architecture with terrific proportions that allows great design to occur.

When you get the proportions right—and you must get the proportions right—you can do a much cleaner design—the statement is in the overall shape, in the gesture of the design, in the proportions.

ON WHAT ENDURES
I think clean designs are the designs that stay fresh longer. When there are vehicles that are 10, 20, 50 years old. When you look back at the history of automobile design—I think in product design in general—the clean designs are the ones that weather the times better. In order to achieve clean design, you must have great proportions. In order to get great proportions you need to have a good working relationship between design and engineering. Right up front, a common vision that allows you to get to that point.

ON HOW CONCEPTS COMMENCE
There’s some real strategic work that happens before we begin work on a concept vehicle. There’s some very keen planning that occurs. There’s a great engineering team that Mark Reuss [GM executive director, Engineering Architecture & Specialty Vehicles Design Centers] leads that is very much a part of the planning of the concept from the very beginning. And the designers begin to work. There’s some real thought that goes into the design of a particular concept. Each concept has a different mission. In some cases, ‘Here’s a great idea for a new production vehicle.’ In other cases it’s more, ‘Here’s a direction for the brand.’ The concept is bigger than one vehicle. It is a statement for the brand. Every particular concept has a different vision. Some of them are just real exploration into a new vehicle type. There are other concepts done internally that we don’t share with the public. But I think that it is that real strategic work. What is the right vehicle to do for next year? What is the mission of that vehicle—before we get too deep into the design itself.

ON TECHNOLOGY & TOOLS FOR DESIGN
With each shift in technology, there’s a learning curve we go through. The same is true when design went to clay. We didn’t work in clay. We worked in wood. There’s an understanding of how to work in that medium. We knew long term that there were shapes we couldn’t make in wood, or easily make, but it took an understanding of how we are going to use the clay, keep it soft and pliable. Math—we’ve gone through that same learning curve. There are a lot of people who feel that a design developed in math is going to be sterile, harsh, won’t have life, energy, emotion. The SSR, the concept vehicle, was developed totally in math. There was no clay model at all. I think it is a pretty emotional statement.

Since then, math has been an integral part in the development of our vehicles. We still use clay and we will use clay in our development. But math is very integral, very important. It allows us to move quickly. It allows us to communicate much earlier with our engineering partners. If we can do that, then it aids us to get the kind of proportions, the kind of vehicles that we all want. If we can communicate with the engineers earlier. It also allows us to create solutions quicker and then spend more time on the refinement.

Virtual reality is a great tool and we use it all day, every day. Very important tool. But to take that math data and mill out a clay model and fine-tune that clay model and walk around it is very important. We have great reviews, the design team. Great reviews with the leadership of the company, they’re all in on a very regular basis to review the designs; it is a high priority with them. Those models are important.

ON THE TREND OF NO TREND
This is something that I’ve been talking about for a while that is absolutely fabulous. There is no one trend. There are a lot of things happening, but there is no one trend. It’s just wonderful for a customer—the choices. It’s true in our industry. It’s true in other industries. Look at architecture. There’s just incredible architecture going up. It’s not all the same 50-story boxes with mirrored glass. Very expressive stuff being done. At the same time, restoration of historic buildings is bigger than at any other time. It’s fabulous.

Consider fashion design. There was a time when hemlines were a big deal. High or low. It’s all over the map now. Men’s suits—lapel widths. Narrow, wide. Today, it’s all over the map—even within a particular brand. Look at a Hugo Boss or Armani; they’ll have lapel widths that are all over. The materials. The proportions. Choices. All forms of designs. It’s a wonderful time with all the choices the customers have.

Look at the supercars. Lamborghini—very strong design. Ford GT. Both mid-engine supercars. Both are relevant. Both look fantastic. Both are appropriate for the time. And a supercar doesn’t even have to be mid-engine. It can be a front-engine vehicle—an Aston Martin.

ON WORKING WITH INDUSTRY OUTSIDERS
We work with Bulgari. It’s neat to visit their studio. It’s a very small studio. They use the same tools we use. We can communicate with them. We put a Bulgari clock in the Cadillac; we’re looking at other opportunities to expand that relationship. It is fascinating to talk. They bring up designs on the tube and we talk like we’re old pals working together. It is a good learning experience. When we send a designer over to Bulgari or have a Bulgari designer in one of our studios, it’s a great benefit.

That whole relationship with Nike is fantastic [on the Hummer H3T concept]. Both of us benefited on that project.

You’ll be seeing some things pretty soon—relationships with architects. Very well-known architects. It will be very creative and help us both.

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If the issue is one of reducing the dependency on petroleum, then the solution is hydrogen power, maintains Larry Burns.

Lawrence D. Burns - GM vice president, Research & Development and Planning

 

Lawrence D. Burns: ON DEVELOPING THE FUEL CELL-POWERED VEHICLE
We’ve got two goals out there. Commercial viability by 2010. Be the first company to build and sell a million profitably. We haven’t put a date on that second goal. You certainly have to have commercial viability before you can even think about the second goal. So you can conclude we’re not talking about a million before 2010. How quickly you can get to a million once you’ve proven commercial viability is going to depend on some things we don’t totally control ourselves, like infrastructure, availability of hydrogen, codes and standards. We want to know by 2010 that if you’re building real volume of these kinds of vehicles, you can do that at $50/kW and that the car is going to be exciting.

We’re confident we can deliver the first step in our overall mission.

ON THE HIGH COST OF TODAY’S FUEL CELL
It’s an overall systems hurdle, not any one thing. It’s the integration of a lot of things. When you look at the stack, you have some fairly sophisticated material in that middle membrane. Some material on each side of that material that are important with respect to how you get the hydrogen evenly distributed over the membrane and how you manage the water on the cathode side. Then you’ve got the plates that are on both sides of the diffusion material. It’s a combination of the material selection for the plates, the diffusion media, and the membrane. And the management of the flow of the hydrogen, the air and the water: To do that in such a way that you’re absolutely maximizing the amount of current and power you’re generating per square centimeter on the surface of those materials. To do that in such a way that you don’t have corrosion that would reduce your durability. And to do it in such a way that you don’t have deterioration of the membrane, which would reduce durability. That’s the stack portion.

The other part of the $50/kW is the hydrogen storage. When we talk $50/kW, it’s from stored hydrogen to torque at the wheels. We’re not worried about the electric motors that take advantage of the electricity. That’s commodity-type stuff. We’re not overly worried about the power electronics and the controls. We know how to do that. We’ve shown with HydroGen3 that we can take gaseous hydrogen, put it into the stack, generate electricity, and have the car respond as we want it to respond. That’s a pretty big deal. We don’t have a battery sitting there with a bunch of stored energy on HydroGen3 to give you the transient responses for the car; we’re doing it directly from the hydrogen flowing into the stack and the electricity coming out of the stack. We know how to do that. There hasn’t been enough work done by the world on hydrogen storage. There hasn’t been a reason for it until recently. You look at liquid hydrogen tanks—they’re pretty crude, quite honestly. They were not developed with high-volume automotive applications in mind. There’s great engineering opportunity. The valves tend to be inside the tanks; we think they can be engineered to be external to the tanks. The geometry of the tanks has been assumed to be a cylinder; we think the geometry can be very exciting as a packaging enabler. You have to get that combination of design and cost right.

Scale economies are going to be important.

But it’s going to be materials, understanding the basic physics and chemistry of what’s going on to get you the maximum power density out of the available material. We’ve got the industry-leading power density that’s been made publicly known. I can’t tell you where we are in the lab, but it’s significantly beyond what we’ve stated publicly. That’s going to be a critically important variable, because if you double the power density, you get the same amount of power for half the material. The cost of this thing is ultimately material. That becomes the central variable.

ON FUEL CELLS & THE INNOVATOR’S DILEMMA
Christensen’s Innovator’s Dilemma comes up from the bottom [Harvard prof Clayton Christensen’s 1997 book of that title argues that disruptive technologies often start out less capable than the entrenched technology]. You’ve got the performance of the current technology as a function of its cost; the examples he gives are of things that are simpler; they perform less well because the mainstream technology has gotten to the point where it is offering an attribute package beyond what most customers really need, so it opens up this window for things to come in underneath. You’ve got to think about what we’re doing as coming from the top down. Coming from above. Offering a combination of capabilities on a vehicle that are better than today’s vehicle at a lower cost. That’s where the difference lies.

Why do I say ‘better’? A fuel cell propulsion system—one tenth as many moving parts as an internal combustion engine propulsion system. That’s a huge deal in the Clayton Christensen context because this is a much simpler device from a mechanical perspective. Each moving part that you have in a system tends to have to be precisely formed, machined, hardened, lubricated because they’re moving relative to each other. If you can get an order of magnitude reduction in all of that, that simplifies everything. The parts we’re talking about are very simple geometry. You look at the shape of a piston and the bowl we machine to optimize the combustion process, that’s sophisticated geometry. That goes away. Furthermore, you don’t need a separate plant for four-, six-, and eight-cylinder gas or diesel like we do today. You can do all this in one facility. There are huge enablers for simplifying the design of the vehicle. Then you put the electronics in place of a lot of the mechanical controls. You’ve got to do that in such a way that you don’t have redundant mechanical controls—by-wire systems aren’t going to mean anything to the industry if you have to have a back-up mechanical system—that’s going to add costs. We’ve got to get to the fault-tolerant electrical architectures and other things that allow us to not need a redundant mechanical system. When you put it in the Innovator’s Dilemma context, we’re not asking our customers to drive a product that offers them less value, that offers less capability. We’re, in fact, thinking about a car that is more fun to drive and simultaneously safer to drive and simultaneously environmentally benign and dramatically more energy efficient. We want to give something that’s better. And that’s different than what the Innovator’s Dilemma is about. We want to do something that’s better at equal or better cost performance.

Better performance comes from the electric drive—the maximum torque instantly. The ability to get the wheel motors and control each wheel from a braking, steering and accelerating standpoint. You’re controlling each wheel separately. Some people say we’re solving a problem that doesn’t exist or answering a question that hasn’t been asked. I think there’s going to be dramatic excitement around a driving experience that comes from having the ultimate control from a chassis perspective. You take each corner of the vehicle and you’re managing the traction and the braking and the torque and the suspension aspects. Take things like MagneRide—five times faster response with respect to road motions. Combine that with the controls of the steering, braking and accelerating in each corner of the vehicle—plus the inherent simplicity: Electric motors are commodities, not something that has to be invented.

It absolutely obsoletes the conventional automobile if we’re right, and if we can get to those cost goals. That’s why Wagoner [G. Richard Wagoner: GM chairman and CEO] is driving us like mad to $50/kW. I don’t even think about this technology in terms of bringing it to market at a higher cost.

On the Hybrid Market
This market has not exploded in size. We’ve got to be really honest with how many hybrids are being sold out there. It’s not like anyone has run away with hundreds of thousands of units of sales that other competitors are missing out on because Toyota and Honda have put hybrids in the market. The 35,000 units sold in 2003 were just 0.2 of 1% of the 17 million unit market in the U.S. What is there to be concerned about? The thing you should be concerned about is knowledge, know-how, capability, and supply base. Having that knowledge in our Allison Bus—which also is a key part of the story: our 235 buses that we sold to King County [Washington] this year will save as much fuel as 8,000 Priuses. The bus garage operators love the bus because of the fuel savings, the lower wear-and-tear on brakes, lower peak operating cycles on the diesel engines, fewer oil changes—all real pluses for the bus operators and customers. We have that knowledge in our company. We’ve transferred that into our advanced Hybrid System 2, which will be the basis of the [‘07] Tahoe and the Yukon. This system fits right within the footprint of our six-speed transmission. Any vehicle that GM has that has this six-speed transmission could have this hybrid system available on it. It doesn’t have to marry up with a purpose-built engine or architecture like the Prius.

I give Toyota and Honda full credit for what they’ve done. It took a lot of courage and technical know how to get their products where they are, but this perception that GM is out of this game on hybrids is a misplaced assumption because we’re selling one now, the bus plus the pickup truck, and we’ll add to that the Saturn Vue and Malibu as belt-alternator starter systems with 12-15% fuel economy improvements. The real big question is: How big is this market?

Please don’t count us out of the game on hybrids. You’re going to see some impressive hybrid technology from us. And we’re doing it because there may be a market there. We’re doing it because we’re the world’s largest auto company and we need to be in a leadership position on the technology. We’re also doing this because we don’t want this to be a one-horse race. Also, we don’t want people to conclude that this is a one-technology race relative to advanced propulsion because there’s a lot of impressive stuff going on to improve gas and diesel engines and longer term on fuel cells and hybrids.

ON WHY HYDROGEN-POWERED VEHICLES MATTER
Our strategy is simple. Hydrogen gives us a solution to 99% dependence on petroleum for personal transportation. The auto industry should not be held hostage to the petroleum industry, and petroleum as an energy pathway. That’s being pretty myopic. If you bet the future of this industry on petroleum, I think it’s too risky in today’s world. You need alternatives in addition to petroleum. And if you can make the cars more exciting, and simpler and easier to build, with more design flexibility—gee, that feels like the win-win that we’re seeking. The key to making that a reality is the $50/kW, 5,000 hours of durability, and 300 miles range.