Extended Interview: General Motors CEO Rick Wagoner
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SPENCER MICHELS: With the situation with layoffs and the lack of profit … why would GM want to continue to pour money into a development project such as the Volt (electric car) or any other advanced car, and will you continue to do that?
RICK WAGONER, CEO of General Motors: Taking your second question first. Yes, we certainly will continue it and the reason we’re doing it is because — certainly we have to make some adjustments given current weak market conditions — but we’re focused on the future and convinced that we’re in a period of change in the auto industry. Things like battery development and applying batteries to cars, as we’re planning on doing with the Volt, is important for the next 100 years of the auto industry.
SPENCER MICHELS: You say 100 years. Is it sooner than that? Are you looking too far ahead maybe?
RICK WAGONER: Well, hopefully we’ll begin to build these in about two years, maybe a little more than two years. I guess what I’m trying to say is that we had about 100 years of an auto industry in which 98 percent of the energy to power the vehicles has come from oil. We’re really going to change that over the next time period. Very different I think from a paradigm we’ve all grown up with.
Hydrogen, electric, or hybrid?
SPENCER MICHELS: You are of course still making gasoline powered cars. Will they continue into the long-range future or is the era over?
RICK WAGONER: Well, my crystal ball is not that clear, but I suspect for a long time we'll continue to offer gasoline powered vehicles. But if we want to move away from the heavy reliance on oil, we're going to have to begin to introduce these new technologies.
You know the rate at which they grow -- I mean, I hope they grow fast because I see the demand for oil growing quite strong because of the developments in placing like China and India -- so I think it's in all of our interests to promote the development of these industries.
But I guess we're going to have to see -- can we get them to market? Can we get them to be cost efficient? Can we meet the consumer expectations? And if we can, I think they will grow pretty rapidly.
SPENCER MICHELS: If you're a betting man -- and you probably are-- would you bet on hydrogen fuel cells; would you bet on electricity; would you bet on a plug-in hybrid? What do you think?
RICK WAGONER: Well, at this point we're betting on all three. We're betting on all three because we think different technologies might work best in different conditions. Some urban conditions, suburban, whatever.
And at this point our crystal balls aren't clear enough to tell us for sure which technologies will work. And frankly, a lot of the things we learn about creating electrically driven vehicles, driven by a battery, you also need to know that to apply to a fuel cell powered vehicle -- a lot of the electronics. So a lot of the learning we're doing really applies to all those kinds of vehicles.
So we think today it's a good use of our money to work hard on all three of those.
Government and consumer roles
SPENCER MICHELS: The company says it's going full bore now on the Volt and alternative fuel vehicles. But for a long time, California especially criticized GM and the other car makers for dragging their feet. Was that criticism justified, do you think?
RICK WAGONER: I think our position then and today would be -- Look, we're in the business of providing cars and trucks people want to buy. What has changed -- and I guess I'm not going to spend a lot of time looking into the rear view mirror, but what has changed is energy prices are up.
And I don't think it's a cyclical thing; I think it's a structural thing because of the demand factors we talked about. And then in addition, there is a lot more focus in society on CO2 emissions, the regulatory regime has changed, as you know. We have much tougher CAFE standards as you know.
All that is coming together and it's making clear to me consumers have different expectations today and are willing to make different tradeoffs for fuel economy than they were in the past. And if we want to be successful, we need to get out in front of that.
SPENCER MICHELS: How much do you think that new push comes from, for example, the California Air Resources Board pushing you, saying you've got to do it, we're going to make you do it, we're going to have restrictions, we're going to have quotas? And how much of it is internal and just related to the customer?
RICK WAGONER: Well, I think in the end for this to work, it has got to be driven by the customer base. And I think different people have different views of the role of regulations pushing.
What I've seen around the world is if the regulatory desires are combined with things that affect consumer behavior -- such as in Europe they tax gasoline very heavily -- you do get people to move to very fuel efficient cars; trade off bigger vs. smaller cars. What's in the end important is 'what do consumers want to buy?' And my sense is that consumers' attitudes are quite different today than they were when gas was $2 a gallon.
SPENCER MICHELS: So consumers want to buy electric; they want to buy hybrids at this point?
RICK WAGONER: I think they do. I think it's changed quite a bit. I'm not saying all consumers, and what's important to keep in mind is consumers expect value out of this, so they're not necessarily willing to pay significant premiums for these technologies.
So our challenge is to develop them, the technologies, get them to market and make sure that we provide them at a price that the consumer sees the value. And if we do all that, I think they will really embrace the technologies.
A responsibility to lead
SPENCER MICHELS: What do you say to people who maybe don't buy that and say the oil companies and the car companies are really invested in keeping us in a gasoline economy, and especially they have been in the past. Is that true and is it true at all today?
RICK WAGONER: It's certainly not true today and I don't think it was true in the past. I mean, the auto industry and the oil industry have worked together on things like fuel blends, but other than that, I think frankly we've operated pretty much at arms length the entire time I've been involved in senior positions.
So it's true, the infrastructure is petroleum based, so that's the easy thing to do with the next car. But I think for a variety of reasons we're going to need to move away from that. In the auto industry, we have a responsibility to lead that. We can't do it alone, but we have a responsibility to lead that.
And I hear some of the oil companies, the heads, talking about developing alternative kind of energies in the future, so I suspect they're seeing some of the things we are -- maybe on different time frames than we see.
SPENCER MICHELS: There was a discussion recently in this area, especially with the Tesla (electric car manufacturer) and other car manufacturers, smaller ones, trying to get going, saying, 'you know, we wonder if Silicon Valley may be the next Detroit?' What do you think?
RICK WAGONER: Well, certainly, there have been some interesting developments here (in Silicon Valley) and there's a lot of smart people and obviously some tremendously deep engineering capability -- all of which could be helpful to us.
But my sense is, you know, automotive manufacturers, if we're going to make a difference, we've got to do this on scale and we have to meet -- consumers are not going to trade off safety requirements. We have regulatory crash requirements.
We have a lot of different standards we need to meet with automobiles and we and our competitors in the industry have a lot of experience in that and have a lot of experience in high-volume, high-quality manufacturing. We make vehicles that can run at 100 degree temperatures and minus 20 degree temperatures.
I think that's worth a lot. So we welcome the chance to work with others, but I suspect, you know, 10, 20 years from today, companies like GM will be the ones that can really lead the mass adoption of these technologies.
Economies of scale
SPENCER MICHELS: And when you say it's scale, you mean you've got to make enough of these things. You can't just make a few.
RICK WAGONER: Yeah. Look, it's fine if you're making 1,000 or 2,000 of an electric car and I think there is value in that in a lot of ways, but it's not going to have a big dent in oil consumption in the country, or CO2 emissions. What's going to have a big dent is if you can do 100,000, 200,000, 500,000, a million units.
And that's really what you have to do if you're going to make a difference in what is a long term trend in the growth of petroleum CO2 emissions. We've got to get a lot of volume out of this out here over time if we're really going to make a difference in those areas.
SPENCER MICHELS: But I wonder if Tesla, for example, or some of the others are in effect pushing you to get to that point. You see what they're doing and 'we've got to catch up or we've got to surpass it."
RICK WAGONER: We've watched with admiration what Tesla is doing and have had a chance to talk to some of their people and view their progress and don't want to imply in any way, shape or form we aren't impressed with what they've done.
But I think to be honest, to do really large-scale manufacturing of those, we would have to use quite a different process. So, we are fascinated to see a lot of people interested in what they're doing and we're cheerleading for their success.
And if we can learn from that, we will. I'm not sure that the processes that work for production units of 100 or 1,000 or 10,000 are what gets us to the breakthrough, but if we can learn from that, we'll be glad to do that.
SPENCER MICHELS: And when do you see the big changes coming which you seem to imply are going to happen? What is the tipping point?
RICK WAGONER: I guess I can't give you that completely. I mean a couple of things to keep in mind: We are pushing to try to get this Volt out at the end of 2010.
So, I think hopefully we'll begin to see an acceleration of the battery-driven at that time. We'll have eight hybrid models by the end of '08 in the U.S. So hopefully that will begin to get some momentum over the next couple of years.
SPENCER MICHELS: GM will have --
RICK WAGONER: GM will have eight different hybrid models. And I think in things like flex fuel, you know, we've committed to have 50 percent of our production flex-fuel capable by 2012.
So, if you add all those up, I think over the next several years, we're going to feel this thing shifting. Is it all going to be done in five or 10 years? That's probably an overstatement, but we're going to be moving on a different path than it feels like we've been on for the last five years as an industry.
SPENCER MICHELS: Thank you very much.
RICK WAGONER: Thank you. Good to see you Spencer.