After a $2 billion loss in 2006, GM is trying something new. It wants to alter its reputation as a producer of gas-guzzlers, seeing that Green is in.
"The auto maker, as with companies in others industries, has concluded it can no longer wait and see how the public debate on global warming and the world economy's increasing thirst for oil plays out. A big consideration in this change: GM fears it will sell fewer cars if consumers associate it with gas guzzlers.'We have to have people think we are part of the solution, not part of the problem,' said Lawrence Burns, GM's vice president for research and development and global planning...
"A big part of GM's problem is that it is stuck with an image as a maker of primarily big trucks and sport-utility vehicles. By 2005, GM's top executives and members of its board were convinced it could get sales moving again in part by turning around its reputation on fuel economy and the environment. 'We saw how quickly the mantle of environmental leadership had been seized by Toyota because of the Prius.' GM Vice Chairman Bob Lutz said in an interview."
In other words, they're seeing how the public's tastes and preferences are changing horizontally, and trying to cater more towards the environmentally friendly sentiment that is increasingly conquering the United States.
They also are trying to gain a quality advantage, capturing some advantages in terms of vertical differentiation. GM plans to release two hybid SUVs later this year with "a system that GM believes has advantages over Toyota's hybrid technology."
In fact, their strategy includes trying to innovate in gas-economizing technologies and to push their image as an environmentally friendly company.
Full WSJ article posted as a comment "Shifting Gears, GM Now Sees Green."
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SHIFTING GEARS, GM NOW SEES GREEN
Push for Fuel-Saving Technology
Includes Building the Volt, an Electric Car
By NEAL E. BOUDETTE
May 29, 2007
Five years ago, General Motors Corp. gave the world the Hummer H2, a vehicle so fuel-thirsty that GM took advantage of a federal loophole that allowed the company not to publish its estimated mileage.
Today, the No. 1 U.S. auto maker by sales, usually the most conservative of Detroit's Big Three, has assigned hundreds of engineers and millions of dollars to an effort to become the greenest company in the auto industry.
Engineering teams at GM's technical center in Warren, Mich., are scrambling to turn a recently unveiled electric concept car into a production vehicle within three to four years. This month, GM kicked off a drive to hire 400 technical experts to work on fuel-saving technology and other innovations, and became the first auto maker to sign up for a cap-and-trade system for carbon emissions, which are blamed for global warming.
This year, GM's research labs are scheduled to turn its hydrogen fuel-cell technology over to an engineering group that prepares new powertrains for commercial launch, a sign of increased determination to put hydrogen-powered vehicles on the road.
GM executives acknowledge it is unclear whether these advanced-technology vehicles will ever come to market, much less generate a profit. The auto maker, as with companies in others industries, has concluded it can no longer wait and see how the public debate on global warming and the world economy's increasing thirst for oil plays out. A big consideration in this change: GM fears it will sell fewer cars if consumers associate it with gas guzzlers.
"We have to have people think we are part of the solution, not part of the problem," said Lawrence Burns, GM's vice president for research and development and global planning. The rush to produce its electric vehicle, known as the Chevrolet Volt, is in large part an effort to show consumers that "we get it" on climate change, Mr. Burns said. "It's not just words. It's deeds."
GM declined to disclose its spending on these new technologies, but people inside and outside the company said it appears to be devoting significant resources to the effort.
GM is working to restructure its unprofitable North American auto operations and recently lost the mantle of the world's No. 1 auto maker by output to Toyota Motor Corp., maker of the Prius gasoline-electric hybrid, which can go about 50 miles on gallon of gas. Efforts by the Detroit company and its rivals to revamp their operations and offer more fuel-efficient vehicles come amid rapid changes in the social and political climate driven by worries about oil and the environment. That is forcing U.S. auto makers to apply a different kind of calculus to green technology -- a shift that over time could change what Detroit offers Americans to drive.
Producing new types of vehicles such as hybrids and electric cars could ease the pressure to boost gas mileage requirements. One proposal in Washington would increase the mileage target to as much as 35 miles a gallon by 2020, a 40% increase from current levels. Auto makers argue that would force them to redesign vehicles powered by internal-combustion engines and delay efforts to produce new types of vehicles.
A big part of GM's problem is that it is stuck with an image as a maker of primarily big trucks and sport-utility vehicles. By 2005, GM's top executives and members of its board were convinced it could get sales moving again in part by turning around its reputation on fuel economy and the environment.
"We saw how quickly the mantle of environmental leadership had been seized by Toyota because of the Prius," GM Vice Chairman Bob Lutz said in an interview. "The board knew that if Toyota continued unchallenged [as the industry's technological leader], then this would sooner or later doom our sales."
Finding a way to get on the right side of the global-warming and oil-consumption issues won't be easy. Two hybrid SUVs are due late this year with a system that GM believes has advantages over Toyota's hybrid technology. But GM only expects to sell a few thousand, while Toyota is counting on selling 250,000 hybrid vehicles in the U.S. this year, including 160,000 Priuses.
To differentiate its strategy, GM decided to develop vehicles and technologies that don't require petroleum-based fuels. That led to a campaign to promote ethanol. By early last year, Mr. Lutz and others had concluded GM had to do come up with a much more dramatic idea for addressing global warming and oil consumption -- a environmental "halo" vehicle, such as the Prius, that would cast a glow over GM's entire product line.
In a presentation to GM top executives, Mr. Burns suggested the company needed to create the automotive equivalent of Apple Inc.'s iPod music player, a product so alluring that it knocks all other competitors for a loop. Mr. Burns wanted to do this by forging ahead with a fuel-cell vehicle, a pet project of his. Mr. Lutz advocated building an electric car, noting battery makers had made strides in lithium-ion compounds that held promise for automobiles.
One day late in the winter, Jon Lauckner, head of development for front-wheel drive vehicles, pulled out a fountain pen to sketch out for Mr. Lutz an idea that had been kicking around among GM engineers in Warren.
They could build a compact car, with a huge T-shaped battery pack in the middle with enough power for about forty miles of travel, Mr. Lutz recalled Mr. Lauckner saying. In the front, Mr. Lauckner put a small engine, not to drive the wheels but to serve as a generator to recharge the battery. GM estimates the vehicle could go 150 miles on a gallon of gas.
Because it emits so little tailpipe exhaust, producing the vehicle could give GM valuable credits if a U.S. emission cap-and-trade system is ever put in place.
Other top executives got on board with the idea, and the car was called the Volt. Mr. Burns endorsed it when it was clear a version could eventually be built with fuel cells rather than a gasoline engine recharging the battery .
In a speech in Los Angeles in November, Chairman and Chief Executive Rick Wagoner outlined GM's vision to field an array of electric, hybrid and fuel-cell vehicles, saying the company wanted to "reinvent" the automobile after 100 years of relying on the internal-combustion engine. Two months later, GM unveiled its Volt concept at the Detroit auto show.
Some of GM's toughest environmental critics found themselves cheering for the company. "The Volt really hit the mark in terms of what people want to see from GM," said Walter McManus, a researcher at the University of Michigan's Transportation Research Institute.
GM is working with three battery suppliers in hopes of developing the Volt's most crucial component. Even though it has no guarantee the batteries will be available, GM decided to have its engineers start designing the other parts of the car and the manufacturing processes to produce them -- a big risk for a company that is coming off a $2 billion loss in 2006.
How much this has to do with strict economics I don't know, but I find it interesting how the company that innovates first (in this case, Toyota) has such an advantage not because of the monopoly they experience for a short amount of time, but for the residual beliefs of consumers that hold them as the "better" firm long after their monopoly is ended. Do you all think that will affect GM in this case? I think it will. The Auto industry is such a big-ticket item and a market in which people often try to express their own, personal "Green" beliefs. Thus, to be perceived as caring about the environment, some people will probably still continue to buy Toyotas even if GM's hybrid system is better mechanically because getting seen driving the Toyota makes them seem more environmentally conscious. The amount by which the GM hybrid engine has to be better than the existing Toyota hybrid engine is much, much larger because of the stubbornness of consumer beliefs. Is this why it makes sense for GM to develop the next best thing (a completely electric car) rather than/in addition to simply a better hybrid?
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