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Remarks by Bob Lutz 2009 LA Auto Show

At GM, it’s almost hard to imagine the transformation we’ve undergone this past year. And while we still have a long way to go, it’s fair to say we have a much better foundation for success than perhaps anyone could have imagined this time last year.

Today, we have a much healthier balance sheet, with significantly less debt. We’ve slashed our operating and labor costs. We’re creating a leaner, stronger dealer network. We’re positioned to be profitable in anything close to a normal automotive sales market. And we’ll begin to repay our government loans sooner than expected, starting this month.

Equally important, we’re going to market in North America with just four brands – Chevrolet, Buick, GMC, and Cadillac – and next year, just 34 nameplates, down from 48 last year.

One key to our success is developing those four brands… We must make people more aware of them and what they mean. Which reminds me of a quick story…

A few years ago, a giant multinational corporation decided to buy up dozens of cattle ranches out West. They planned to make a tidy sum on livestock operations, and to make a killing on the oil and mineral rights that came with the ranches.

When the company's lawyers couldn't agree on what to call the new corporation, they decided to incorporate the names of all the ranches they had purchased: trademarks like Circle J, Lazy M, Dancing K, the Flying Q Ranch, Rocking Horse T, and so on.

They had a high-priced designer bundle all the names together in a corporate trademark, and incorporated the new company in Delaware.

At the company's first annual meeting, the Chairman reported that the entire acquisition had been a big success -- with one exception. The ranching operations were a total loss. All the cattle were dead.

"What happened?" asked a stunned stockholder. "Was it a plague?"

"Were they poisoned?”

"Neither," replied the Chairman. "They didn't survive the branding."

And the moral of that story is, of course, if you don’t know how to handle your brands, you’re dead.

Our May The Best Car Win campaign is all about promoting the four individual brands, and their specific products.

This emphasis on fewer, better entries is enabling us to devote more engineering and marketing resources to each model – products like the Chevrolet Camaro and Equinox, Buick LaCrosse, GMC Terrain, and Cadillac SRX and CTS Sport Wagon.

You see it in the products we’re launching around the world – cars like the Opel Astra in Europe, Daewoo Matiz Creative in Asia Pacific, and Chevrolet Agile in Latin America.

And you’ll see it in the products we launch in the U.S. next year – cars like the Cadillac CTS Coupe, Buick Regal, Chevrolet Cruze, and the revolutionary Chevrolet Volt.

I hasten to add that a key part of our business strategy is an unprecedented focus on green technology – a strategy we first announced here at the L.A. Show just a few years ago. Since then, we’ve come a long way in the energy and environmental areas. Now, in the past year, we’ve ramped up our focus even more.

At GM, we believe that in an energy-constrained world marked by dramatic growth in developing markets, it is critical that the global auto industry – as a business necessity and an obligation to society – develop alternative sources of propulsion, based on diverse sources of energy, to meet the world’s rapidly growing demand for our products.

That’s exactly what we’re doing at GM, and what I’d like to spend the rest of my time talking about this morning.

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As we look at the global energy and environmental picture today and consider the future of the automobile, one fact stands out above all others – going forward, the auto industry can no longer rely on oil to supply 98 percent of world’s automotive energy requirements .

This matter gets plenty of attention here in California, but it’s a global issue. Take GM’s recent experience.

• In September, we signed an agreement with Reva Electric Car Company to cooperate in the development of small car platform based electric vehicles for India. Our goal is to jointly develop, with Reva, EV technology, and advanced vehicle control systems. We’re also working closely with the government of India to develop an electric vehicle infrastructure.
• In Shanghai this summer, we opened our new China Science Lab to perform research in several automotive fields. Our research will help advance the work we’re already doing with our Chinese joint venture partner, SAIC; China’s prestigious Tsinghua University; and others to move China away from its reliance on petroleum.

• In Brazil this year, we opened a new technology center to focus, in part, on development of ethanol-based FlexFuel vehicles, in which Brazil and Chevrolet are the world leaders.

• And in Washington this summer, we joined other OEMs in endorsing a single national standard to control greenhouse gas emissions and fuel economy in the United States. This was a major breakthrough – one that, in most years, would have been one of the top two or three automotive stories of the year. A single standard helps OEMs improve our planning and manufacturing efficiency, and develop future product plans with greater consistency and certainty. More importantly, a single standard benefits consumers by getting cleaner, more efficient vehicles on the road quicker and more affordably. The new standards are tough but fair, and we at GM are fully committed to meeting or exceeding them and all future requirements in this area.

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These examples show how widespread the focus on energy and environmental issues has become. They also illustrate the enormous opportunity that we, as an industry, have to influence them.

Around the globe, there are a number of very promising solutions to the energy and environmental challenges we all face. At GM, we’re working on most of them – things like:

• improvements to the internal combustion engine;
• broad-scale application of hybrid technology;
• development of advanced biofuels like cellulosic, non-food-based ethanol;
• and further into the future, hydrogen fuel-cell vehicles like the Chevrolet Equinox Fuel Cell we’ve been testing with customers in California and elsewhere for the last two years.

But the technology that generates the most interest here in California and around the world – and one we’re working very hard to bring to market a year from now – is electrically driven vehicles like our Chevrolet Volt extended-range electric vehicle.

This still surprises some people, who continue to think of GM as the company that “killed the electric car.” Well, movie titles to the contrary, the electric car is far from dead at GM. And my friend, the filmmaker Chris Paine, would be the first to tell you that.

The truth, of course, is that we have significantly expanded our commitment to electrically-driven vehicles at GM, and are now in the midst of an extraordinary transformation.

GM is moving from a company that, for 100 years, has been based on mechanically driven automobiles, to one that will eventually be focused on electrically driven vehicles. This is a big deal.

The Volt is powered by our exclusive Voltec electric propulsion system. When running off its battery, the Volt operates as a traditional battery-electric vehicle. In this mode, it has a gas-free range of up to 40 miles – which is more than the average daily commute for three-quarters of Americans.

And when the driver of a Volt needs to go farther, the car’s engine-generator kicks in, seamlessly, to produce enough electricity to power it for another 300 miles. The engine-generator eliminates the “range anxiety” of electric-only vehicles – the fear of being stranded by a depleted battery.

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Now, the key to getting the Volt and other electrically driven vehicles into the hands of consumers is advanced lithium-ion battery technology.

Three years ago, we set out to develop a battery that some said couldn’t be built. Well, we went to work with some of the best battery-cell manufacturers and battery-pack integrators in the world. And after countless hours of research and testing, we’re very confident we have a battery pack that delivers the required power, range, safety, and durability that customers will demand.

In the process, we determined that the design, development, and production of advanced batteries must be a core competency for GM… and so we’ve been building our capability and resources to support this direction.

Last January, we announced the selection of LG Chem to supply lithium-ion battery cells; we signed a joint engineering development contract with Compact Power and LG Chem; and we joined with the University of Michigan to create a new advanced battery lab in Ann Arbor, along with specialized curriculum to develop battery engineers.

In June, we dedicated a new GM battery lab – the most technologically advanced battery test facility in the U.S.

And four months ago, in Michigan, we announced the world’s first OEM-owned, high-volume lithium-ion battery pack plant. We’re moving fast, and I’m happy to report that battery-pack production will begin early next month.

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And our interest extends well beyond batteries. We also determined that the design, development, and production of electric motors and power electronics need to be core competencies for GM – and we’re moving in those directions, too.

And it’s not just GM. The ripples keep expanding.

In 2006, I can think of only one company that was openly planning to build an electric vehicle [Tesla]. Now, just about every car company in the business is planning one – including several companies that weren’t on the radar in 2006, like Fisker and Coda.

And the ripples extend well beyond the OEMs. EV development is creating entire new industries – an ecosystem of battery developers and recyclers, builders of home and commercial charging stations, power control and electric motor suppliers, and so on.

Needless to say, this electric-vehicle ecosystem is creating new jobs here in the U.S. – green jobs. GM’s lithium-ion battery plant, for example, will provide more than 100 advanced technology jobs. LG Chem, the company we selected to supply lithium-ion battery cells, has announced plans to manufacture cells in the U.S. More U.S. jobs. And that’s just the beginning.

As demand for electric vehicles grows, competition will drive further innovation, the ecosystem will continue to diversify, costs will decline, vehicle sales will climb… and the ripples will continue to expand.

So, while there are huge challenges confronting the industry in the energy and environmental area, there are huge opportunities as well.

In our case, the launch of the new GM last summer provided an unprecedented opportunity to re-energize our advanced propulsion strategy… and to drive the company toward a dramatically greener future. We’re doing that, and introduction of the Volt next year will be a huge step in that direction.

Initially, as we ramp up production, we’ll offer the Volt to customers on a market-by-market basis. And because anticipation for the vehicle is building all over the country, where we initially sell the Volt has become the subject of considerable interest.

We were thrilled this week to confirm that, by the end of next year, the Chevrolet Volt will first be available here in California… along with other lead markets that we’ll announce in a few weeks.

California has long been a leader in environmental change, and we at GM are very excited to offer the Volt’s unique technology to consumers who have demonstrated a keen interest in putting it to use.

Today, I’m also very pleased to announce new partnerships with three California utilities – Pacific Gas & Electric, Southern California Edison, and the Sacramento Municipal Utility District – and EPRI, the Electric Power Research Institute, an independent non-profit research organization based in Palo Alto.

Together, these four organizations will participate in a vast new program led by GM, with a matching grant of over $30 million from the U.S. Department of Energy, to advance the electrification of the automobile.

As part of the program, GM will deliver more than 100 Chevrolet Volts to the program participants to use in their fleets for two years, starting in early 2011.

This extended, real-world study will help us make electric vehicles as good as they can be for our EV customers. We’ll collect vehicle performance data through our OnStar system, gather driver feedback, and report our findings to the DOE.

We’ll also work with the utilities to further explore the infrastructure of automotive electrification, including the installation of more than 500 charging stations.

Overall, this new program will help determine the best methods to accommodate an expanding fleet of electric vehicles, from all OEMs.

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In closing, let me reiterate that the huge challenges confronting us in the energy and environmental area… are also huge opportunities for driving positive societal change.

I have no doubt that, years from now, we’ll look back at this period as a time of great progress – the “tipping point” that enabled the age of electrically driven vehicles. It will be every bit as momentous as the transition from horses to horsepower.

Thank you for your kind attention. I look forward to your questions.