With the president calling for a reduction in gas consumption by 20 percent in the next 10 years, a major focus will be placed on automotive technology in the coming years. During today's E&ETV Event Coverage at the Washington Auto Show, auto industry executives discuss which technologies will be most prevalent in the near future. Panelists include Volkswagen's Reinhold Kopp, Bosch's John Moulton, Diesel Technology Forum's Allen Schaeffer, Ford's Gerhard Schmidt, and DaimlerChrysler's Andreas Truckenbrodt. They discuss the role that clean diesel technology will play in the future of automobiles in the United States and discuss some of the issues that exist with other automotive technologies.
Reinhold Kopp: Good afternoon everyone. Excellency, thank you very much for your invitation. I'm very honored and delighted to address such a distinguished audience on an issue of utmost importance. Let me first give you a very brief overview of about the Volkswagen group. I'm sure many of you know of our group, the Volkswagen group, runs eight different brands including the commercial vehicle subsidiary. We held a strong position in Europe, South America and China. And we want to do better in the US, especially with the introduction of the clean diesel blue tech, diesel technology, as David mentioned before in the press conference. Unfortunately I'm not able to show you the 2006 figures because the financial figures of this year are not allowed to be published before mid-February. But I can assure you that they will be even better than in the year 2005. And we will have sales of 5.7 million. As Mr. Hahn and others mentioned before, we are faced by global challenges, growing mobility, local air quality, climate change, security of supply. These are four major global challenges. The priority may vary from region to region, but I think that we have an agreement here that we have to tackle all these challenges in parallel. Hence we need an integrated strategy for sustainable mobility, fuel-efficient technologies, and cost effective alternative fuels can play a major role. And cost-effective technologies, besides infrastructural measures and driver educations are the main pillars of that integrated approach. Therefore, ladies and gentlemen, the main objectives have to be to further increase the fuel efficiency of our products, to include alternative energy sources of fuel production, pushing the market penetration, to develop CO2 neutral path formability. Here fuel cells and electrical cars can play a major role in the remote future, but not before 2020. I'd like to present some findings how we can tackle those objectives because time is limited, it will only be an assortment. For the U.S. our major thrust will be on the interaction of clean diesel cars that are already prevalent in Europe. In 2008 we will offer a new generation of clean TDI vehicles that meet emission standards for all 50 states. Together with clean omissions, comparable to gasoline cars, these vehicles will provide 30 percent reduction in CO2 emissions without sacrificing performance or convenience. The new Jetta TDI is expected to achieve 40 miles per gallon in the city and 60 miles per gallon on the highway. In addition, we are developing new technologies to optimize the fuel economy of our gasoline powered vehicles. The 1.4 liters TSI engine in the Gulf GT, on our stand, it's exhibition has been very successful in Europe, delivering sporty performance with a 20 percent efficiency gain. You can drive this car outside the show today if you like. Finally, our promotional line of products shows potential for clean diesels with economy of over 60 miles per gallon. Thus our diesel and gasoline fueled cars can take advantage of another new Volkswagen group technology, the direct shift gearbox. The direct shift gearbox provides customers with a choice of manual and automatic gear changing through the use of fuel electro-hydraulically activated clutches. The elimination of the torque converter, found in most automatic gear boxes, provides an efficiency gain of ten percent with even greater comfort and control. Our new gasoline engines are capable for 10 percent ethanol blending. Volkswagen is the market leader for flexible fuel vehicles in Brazil. We are assessing the situation for flexible fuel vehicles in US. The fuel availability, E85, is not adequately developed. We worked hard on the introduction of the so-called combined combustion system that combines the best attributes of diesel and gasoline engines. Together with modern synthetic fuels efficient technology will provide unprecedented levels of performance, efficiency, and low emissions.
Warren Brown: And you're running out of time.
Reinhold Kopp: Oh, I got the message that I have eight minutes, but I will hurry up. The last two examples show that development of energy is closely linked to the development of new fuels. For example, the CCS needs outstanding specifications like those of synthetic fuels produced from coal, natural gas or biomass. We are working closely together with Shell and Sasol Chevron to push development of the new synthetic fuels. Biofuels can make a significant contribution to the decrease of CO2 emissions on the transport sector. That's why we care for them and why we have several partnerships and projects in dispute. For example, with ADM, regarding biodiesel for the U.S. market. Biodiesel and ethanol are the biofuels of choice today, but due to new production processes and further innovation a new generation of fuels will come into the market. We call them the second generation biofuels. The main advantages are the outstanding CO2 performance up to 90 percent, no interference in the food chain, and high hectare yields.
Warren Brown: End?
Reinhold Kopp: I come to my second to last one. We need the first-generation biofuels today and for our transition periods. We will do even better with the second-generation in the future to reach our ambitious CO2 targets. And on the slide you can see the performance of the various production of biofuels. I come to my conclusions; this is a roadmap in a sustainable future. First, for sure, we will depend on fossil fuels for the next decades. As a first step, we have to plant them with as much biofuels as possible, with safeguarding our high fuel quality. Secondly, on the diesel fuel side we have to diversify our fuels firstly with synthetic fuels, like gas to liquids, and with synthetic fuels from biomass, once they are available. On the gasoline side we will plan to an increasing amount with ethanol. Thirdly, before hydrogen will be on the market there are several bottlenecks to overcome, so storage and leakage of H2, the durability and cost of such vehicles, and the production of renewable H2. And thirdly, cars will be powered by electricity, and it could be more efficient and it's more likely and promising to go this way to tackle the climate issue. Yes, we will develop appropriate vehicles for this fuel evolution. It's more an evolution and not a revolution. And you all will benefit off the richness of innovations. Thank you very much for your audience.
Warren Brown: Thank you. Thank you, Mr. Kopp, and as we of course will thank Mr. Ambassador, Klaus Scharioth, for being here and Representative Dan Lipinski and Director General Wolfgang Hahn. And next we'll have Mr. Moulton, John Moulton, from Bosch Automotive Powertrain, president.
John Moulton: Trying to say that with a French accent?
Warren Brown: I'm from Louisiana.
John Moulton: I got it, OK. Good afternoon ladies and gentlemen. I'm also very pleased to be here in Washington, D.C., as part of this distinguished panel to discuss the engines of the future. Bosch is the largest automotive supplier in the world, who's really also a leader in powertrain technology. Since the early '70s, Bosch's three S philosophy of sicher, sauber, sparsam, or safe, clean, economical, has guided our product development. We're well known for our diesel technology introducing the first common rail systems in 1997. But Bosch is also a leader in gasoline direct injection technology with advancements that make direct injection also a fuel economy and performance leader in spark ignition engines. Bosch is actively involved also in hybrid electric and fuel cell technologies. Actually we've been involved with hybrids for more than 30 years. We've just built up a competence center in 2004. We have over 200 engineers working on the development of hybrid systems and components. We're also working with Getrag to develop and market a parallel hybrid system in conjunction with dual clutch transmissions and electrical drive units, really highly integrated compact systems that enable low fuel consumption and excellent vehicle dynamics. Regarding fuel cell technology, we're fostering collaboration with strong partners in research and industry. Many of today's prototype fuel cell vehicles have Bosch technology onboard. Bosch's role really, as a supplier of technology, is to provide solutions and products that enable the vehicle manufacturers, my customers here at the table, to achieve their goals, especially in the area of advancing powertrain for improved fuel economy and emissions reductions. So working with all of the suppliers in the world and understanding a lot of the technology, what really is our perspective? What do we see in the future? Gasoline engine will remain the dominant engine for U.S. light vehicles over the next 10 to 15 years, with increasing applications of direct injection. Talking about gasoline engines, I know the subject of the symposium is what's the future after gasoline? Well, one of the alternatives after the current gasoline is the future gasoline engine. The gasoline engine will continue to improve. There's a lot of potential left, all kinds of things, with variable valve timing, cam phasing, cylinder deactivation, increasing direct injection, as I mentioned, turbo charging, especially in the upper class and SUVs, really taking advantage of the direct start capability of direct injection. All to further improve the fuel economy. What's happening in Europe is also downsizing, taking a four-cylinder turbocharged engine and replacing a six-cylinder engine. And we can apply that same downsizing approach in the US. For example, taking a DI turbocharged six-cylinder engine, for example, and replacing a port fuel injection eight cylinder engine. Better performance, lower costs, lower weight, better fuel economy. So some impressive potential is still available in the gasoline engine. Long-term we're also looking at further optimization of the combustion using controlled auto injection, ignition, excuse me, or spray guided DI. Really enabling a higher compression ratio and, again, further improvement. Coming to diesels, which seems to be a very popular subject with the announcements also this morning, Bosch's forecast is aligned with the announcements we heard. A fifteen percent market share for U.S. light vehicles by 2015, still a far way away from the 50 percent in Europe. The advanced clean diesel is really the preferred technology for the U.S. as it meets its legislative and societal objectives for reducing fuel consumption and greenhouse gas emissions. The key is that the technology that's available right now. Diesel cars, we've heard, there's 30 percent better fuel economy. We saw some of the numbers from Volkswagen. And they benefit the environment by reducing greenhouse gases up to 25 percent. The advantage is being further expanded through technical advancements. Achieving these standards for Tier 2 Bin 5, the upcoming U.S. standards, still requires optimization of the engine out emissions to avoid or to limit the amount of after gas treatment, highly effective EGR, optimized two-stage turbo charging, reduced compression ratios, closed loop control. A lot of technology is still required. Of course, advanced common rail fuel systems, multi-hull injectors, multiple injections, higher pressures, 1800 to 2000 bar. Even with these improvements the after treatment, such as SCR, will still be required to remove about 85 percent of the nitrous oxide emissions. Diesel particulate filters, of course, will become standard both in Europe and the US. Finally, hybrid is clearly another piece of the solution. They lower the carbon dioxide, but they require also sophisticated technology. They're especially efficient offering fuel consumption advantages in mixed driving cycles, such as dense inner-city traffic. Bosch assumes about 50 different hybrid models will be on the market by 2010, the largest market growth in North America. We assume a market share of about eight percent in Japan, six percent in the United States, and two percent in Western Europe by 2015. But regardless of the market share of hybrids and the technology we're using, all this technology to improve the internal combustion engine, diesel and gasoline, also improves the performance of the hybrid. In summary, there will be advancements in gasoline engines further improving fuel economy, increasing shares of diesels and hybrids. Investment in fuel cell technology has to continue because that's really the long-term future for the industry as a whole. Thank you. I'll cut it off.
Warren Brown: Well, we're beginning to find out the differences between engineers and politicians. Engineers give you facts and figures, politicians give you…well, we'll save that for Allen Schaeffer, who is the executive director of Diesel Technology Forum. Not exactly a politician, but a very good lobbyist.
Allen Schaeffer: Thank you very much Warren, and thank you for your moderation of this panel. And all of us enjoy reading about your trials and tribulations in the New Vehicle Technology each week in the Washington Post. So Ambassador Scharioth and Director General Hahn and the German-American Business Council, thank you all for your initiative in arranging this very important session. I'm delighted to be here to represent the views of the Diesel Technology Forum. We are the nation's leading advocate for diesel technology. And what a time it is to be talking about diesel. Just today I could not have asked for a better forecast. Earlier today, DaimlerChrysler Chairman Dieter Zetsche introduced the new Dodge Ram, heavy-duty 2500, 3500 series pickup with the new blue tech technology, with the Cummins 6.7 liter turbo diesel, that meets the stringent 2010 nitrogen oxide emissions standards today, three years earlier than required. It does that while getting 30 percent better fuel economy than the gasoline version, and has 20 percent fewer emissions of carbon dioxide. Key to this important announcement today was the arrival of ultra-low sulfur, clean diesel fuel here in the U.S. in October of last year, which went off without a hitch by the way. For those familiar with the diesel story, the past offered us only promises of what was to come. But today manufacturers like Cummins, DaimlerChrysler, Mercedes, and Volkswagen are beginning to deliver on that promise by offering products that make it very clear that diesel technology is indeed an engine of the future. And there are more to follow. In the last six months BMW, General Motors, Honda and Mitsubishi, and probably others I haven't read about or heard the rumors about, have all made product announcements about new diesel technology coming in the near future. But in this tidal wave of discussion about flexible fuel vehicles, hybrids, hydrogen, and fuel cells, why are manufacturers suddenly talking about clean diesel technology? Because the clean diesel of today offers a unique combination of characteristics, a desirable engine technology for the future is what it must become. And these characteristics are very intrinsic to the diesel. First of all, low emissions. We can now say that we have accomplished the major challenge to bringing diesel to the U.S. market. And that is getting gasoline equivalent, or better, emissions; inherent energy efficiency, in the case of the diesel, 20 to 40 percent better than gasoline; very desirable performance, more torque and power, the kind of drivability that Americans so often like; a low carbon footprint with its increased fuel-efficiency; a good investment for consumers in resale value/lifecycle costs; and now, a readily available, ultra-clean diesel fuel, and accessible infrastructure in place nationwide. And finally, an ability to use renewable fuels such as biodiesel, biomass to liquid or even coal to liquid fuels, all make the diesel a desirable technology and engine for the future, a clean, quiet, and fun to drive technology. A recent study of a thousand consumers, done by the Diesel Technology Forum and Mercedes-Benz, looked at consumer attitudes in response to higher gasoline prices to assess this question of whether consumers in America are ready for diesels. And what we found was that 79 percent were aware that diesels were for sale in the US. And four in ten would consider buying a diesel in response to higher gasoline prices. Studies by JD Power and Associates and other research organizations have also identified that powertrain quality is one of the leading factors in consumer choice when purchasing a vehicle. And so it happens that diesel vehicles that are available today score highest in those ratings. This is all even with only a few product offerings. Growth of diesels sales in the U.S. has been 80 percent from 200 to 2005, with 31 percent of that growth coming in 2005 alone. Still small overall, about 3.6 percent of overall vehicle sales in the US, with growth as you've heard and predicted. And while all of this is encouraging, there clearly is more that needs to be done. Using more clean diesel cars and light trucks in the U.S. would enable us to make a near-term and meaningful reduction in reliance on imported oil. You've heard the statistics earlier today, if you were here, 30 percent penetration by 2015 would help us eliminate 1.4 million barrels of oil per day, the same amount we import from Saudi Arabia. And with some of these diesel vehicles using renewable fuels it makes the benefit all the better. So, in conclusion, let me say that it is human nature that in the rapid pace of change in technology in our lives that often encourages us to look for something new and better, sometimes, just because it is new and trendy. But we often learn that that it is not always better and it has its pluses and minuses. And sometimes we learn that a technology we have right before us may do the job at hand just as well or better. But because it is not viewed as new it might not be as accepted. Now I'm not a great student of history, but I firmly believe we can learn a lot from this 100 plus year-old technology called the diesel. From the very beginning it was a technology appealing because it generated lots of power but used very little energy and could use lots of fuels, including renewable fuels. And where are we today? We're looking for a very efficient technology that can generate lots of power and use renewable fuels. It's a good thing that by our very nature we're looking for the next big thing, and what we're learning though, there's not one big, single solution out there. There's many solutions and clean diesel is one of those solutions. And I would predict that next year, if we're standing here at this car show, we'll have more than twice as many opportunities to see diesel cars than we have today. Thank you very much.
Warren Brown: Well, I don't know if you've been keeping count, but by my tally that's diesel three and we'll see what happens with the next two speakers. We have, coming up, Gerhard Schmidt, Ford vice president of Research and Advanced Engineering. Mr. Schmidt?
Gerhard Schmidt: Thanks Ambassador Scharioth. Thank Warren for the introduction and you were just a witness of a cross brand cooperation, because Andreas Truckenbrodt helped me to disconnect -- let's see…okay, there we are. Okay, I think many of the key facts I'm intending to share with you will sound a little familiar because I'm not the first one here in line and giving a presentation. At first, I think what was not really covered was the ever-increasing carbon dioxide emission content in the atmosphere going higher and higher. And this will not be forever acceptable because of the impact on global warming. Today, when we look at all these fuel options, I know that the topic of this short presentation is engines for the future, but there's no engine if you don't have the right fuel and the close interaction, I would call it team play, between the two. Therefore, today, if you look at all these energy options, almost 100 percent is fossil fuel. We have some first attempts at introducing biofuels, but on a percentage it's still pretty low. So if you look over these different options we have to be aware that we have to work on all these different options, at least on many of them. And we have to work on clean ways to create electricity. I intentionally didn't mention here nuclear energy, but this may also, in addition, play some role. I think I should add it in the future. So if we're looking at the different options we will move away from 100 percent using fossil fuel to alternatives. And we heard already about the potential great hopes, it will be, for sure, significant increase in bio-based fuels for gasoline and for diesel engines. And it will be long term also the great opportunity for hydrogen. Coming to the powertrain options, I think there's still a huge potential for the classical, traditional powertrains called internal combustion engines. And I outlined this here on the left and the right side. On the diesel side, we heard already said for sure we have to address all submission topics. This is more, let's say, more the challenging part for the diesel engine. From the overall efficiency side, diesel engines are already pretty mature. We will see only gradual improvements there. On the gasoline engine side we will see significant improvements in the future, taking advantage of some of the technology to which we are using already today. With the diesel engine this was called downsizing, direct injection turbo charging. These elements will significantly increase efficiency of the gasoline engine. And more and more of these technologies you will see in the marketplace. By modifying the combustion processes of the diesel and the gas engine, some of the topics are low temperature combustion with diesel engines or homogeneous charge compression ignition with gasoline engines. These combustion processes will move closer and closer together, therefore, maybe we will have a chance to merge these combustion processes sometime in the future. We see a great benefit of future electrification, I would call it, of the powertrains. Still, today, traditional fossil fuel will be the key enabler for sure, but using hybrid electric air drives and we heard already in the keynote speech from Ambassador Scharioth, there was an increase and doubling of the hybrid vehicles in the U.S. market. And we are proud, actually, that we were able to participate to the increase by delivering Escapes and Mercury Mariners since already it's the third year of production already. Therefore, and just looking a little in the future, we are working closely together with the Department of Energy and other partners in preparing the pathway for hydrogen used in fuel cells, and with demonstration fleets already on the street. And working on some more sophisticated concepts, and one of these concepts you are able to see at our booth upstairs. It's called the forward hatch high series, with a sophisticated blackened concept using a fuel cell to recharge the battery. Okay, what are the key market drivers? This is exactly what the challenge is for all of us, because there's no one silver bullet with climate change issue. This is addressing global warming. We have an energy security issue and we have, for sure, affordability and a cost issue. But not necessarily each has a different solution, I outlined before, immediately fulfill all the three different requirements. Okay, let's come to a summary. The first biofuels will move us to a carbon reduced future. I don't expect that this will be a hundred percent solution, but depending on how optimistic or pessimistic you are, it will be somewhere in between. I don't know, 10 to 40 percent, I think somewhere in between, assuming more advanced methods to create ethanol or some other biofuels because not only ethanol. Hydrogen offers a really great promise, but we have to solve -- and this is still some work for our research community, first ensure clean production, either from renewable bio-energy or from clean electricity. I think there's a significant role for coal, especially in North America. We have large resources in coal, therefore, on long-term we have to take advantage of this benefit, and this is an important part for energy security. And using coal carbon sequestration will be vital. Electrification, we talked about hybrids and maybe sometime in the future or the blackened hybrids, better technology, better cost is essential. And, for sure, when we talk about, okay, electricity for free, actually it's not for free you have to pay for auto, but only in another place. Clean electricity is important to offer this pathway. And just the last two statements, one-size-fits-all, I know that's very popular. You buy everything one-size-fits-all, in the past we had gasoline engine in North America and we had gasoline, 100 percent transportation was done with these two options. This is not anymore the case. And we will have a significant migration from these powertrains and fuels. And we will find more tailored and more diversified solutions for the different market requirements. And, therefore, many of the technologies we have heard just a minute ago will find its way in the market and we will be a witness of a really exciting time, having a competition between different powertrains in the whole marketplace. Thank you.
Warren Brown: And our final panelist for this session is Mr. Andreas Truckenbrodt, executive director, Hybrid Development Center, DaimlerChrysler. And I can pronounce your name because I got a D in German in undergraduate school. Thank you.
Andreas Truckenbrodt: Thank you Warren. I really liked your greeting before, but as a German living in the United States I just would like to cut it short. Friends and countrymen, what I would like to do here is really the question what is the right technology? Expand it a little bit and not only talk about the what, but also how we do it and who is playing which role in that, because I think it's important not only in me being an engineer, not only looking at the technology as such, but how we do it. What is the right technology? I won't tell you, not because I don't like you, but there is not the one silver bullet technology which gets its all right, which solves all the problems which we have. What are the technologies which we are talking about, and many of them were mentioned already. I think we have to talk in two dimensions here. One is powertrain concepts and the other one is fuels. And they are really interrelated with each other. In DaimlerChrysler we have what we call an energy for the future roadmap, and this really, on the powertrain concepts side, is built on three pillars. Number one, and I can only stress what was already mentioned, the conventional combustion engine is by far not dead yet. There is a lot which we can do there still. And certainly it is diesel Warren, but it's not only diesel. There is also a lot diesel in blue tech. There is also a lot which can be done on gasoline engines. The second pillar of the powertrain concept building is certainly hybrids, which really makes sense because it's physically right and it makes sense with all other powertrain or propulsion technologies, be it gasoline, diesel, ethanol, even fuel cells or hybrids. And it's the right thing to do because stop/start, recuperation of braking energy or a clever engine tuning is physically right. We will see, and that's where I'm very much in line with my friend Gerhard Schmidt from Ford, the electrification of the vehicle will go on. We will see more and more. And by the way, we do not think of hybrids as a bridging technology. It's a known, justified technology on its own. And the third pillar of the powertrain concept is certainly the fuel cell, the hydrogen fuel cell, because it doesn't have any emissions. It has the highest both tank to wheel, but also well to wheel efficiency and it's independent of crude oil. That's why the fuel cell, the hydrogen fuel cell, has its place in our roadmap. On the fuel side we will still see the conventional fuels with a lot of improvements. The sulfur free or the reduced sulfur contents in the conventional fuels we already talked about. And then there is the alternative fuel spectrum from biodiesel, gas to liquid, biomass to liquid, which we feel deserves the most attention, up to hydrogen. And in hydrogen, of course, you'll still see our belief in the fuel cell. Now with all these technologies what we see in the future is really a growing diversification. It's not, as mentioned already, it's not a one fits all because the applications and the customers, the demands of the customers, vary largely and lead to different optimal solutions. And we also have to recognize that we have regional differences between Europe, the United States, South America, Asia, that's very different due to traditional likes and dislikes, but also to different national energy policies. So the result of what is the right technologies, all these technologies have their merits. And we, as high-volume manufacturers, unfortunately, cannot pick one and declare it as the winner. We have to work on all of them. And that takes me automatically to my second question, is how do we do that? How do we manage to go down a couple of parallel technology pathways with limited resources? We feel that our industry does not need proprietary solutions to every problem anymore. The costs of these solutions get higher and higher. No one company alone can afford to develop all of them at the same time, nor, and this is maybe the most important, nor will our customers be willing to pay a price premium for a proprietary developed solution to a generic problem. And that's why we feel the path to success that worked in the past is not going to be the path to success in the future. And what that means is that drives us really into collaboration with other automakers on the development of the cornerstone technologies of our joint collective future. Collaboration is here really the issue. And we have a couple of good examples there. One is that Ford and DaimlerChrysler are together in developing fuel cell technology with our partner Ballard Power Systems in Canada. And the other one, which I have the pleasure to be involved in, is General Motors, BMW and DaimlerChrysler decided to join forces and to jointly develop hybrid technology. And how do we do that? We have taken 500 engineers from the three companies, put them all in one building in Troy in Michigan, let them jointly develop the core hybrid technology by freely sharing their know-how, their experience, their resources, the learnings. But at the end of the day, don't worry, a Mercedes will always be a Mercedes and will not be confused with the BMW or a Cadillac or other GM or Chrysler vehicles, because the integration of those systems, core systems, into the vehicles we do separately. The end products, therefore, is really reflecting the specific brand requirements. And we believe that this new business model could be a role model for our industry because it just helps manage the substantial economical burden of developing all those technologies. It advances the technology development and sets industry standards, but it still maintains the brand characteristics. So that's why, for us, this new business model is really something where we will see more in the future. My third question was who is playing which role? Who of the stakeholders is playing which role in this context? The major manufacturers and suppliers suddenly have, in the first place, the role to take on the challenge to develop, manufacture, and market these technologies. It's costly. There's a lot of unknowns in this area, market being maybe the biggest one. How many hybrid customers will we have in the next five years, ten years? Nobody really knows. And suppliers, for suppliers it's really a growth opportunity and they are still a little shy there. Government and legislators have to provide the right framework for sure, stable predictable regulations, develop, sponsor, foster the research and technology in market development with enough vision, but please also with enough certain realism. Because, at the end of the day, there is somebody who we all need and that is the customer. The customer doesn't buy a vision, he does buy a real car which on the one hand certainly has to give him excellent fuel economy, but it still needs to be safe, roomy, good comfort, performance. And it must be affordable. So in my last three takeaways, Warren, for a summary; number one, there is not one single ideal powertrain solution. We will see all of them. Number two, new business models based on cooperation will redefine the automotive world. And number three, at the end of the day the customer decides what is the right technology for the future. And let's never forget that. Thank you.
Warren Brown: Thank you. We thank our panelists. And now you, in the audience, have your 15 minutes of fame or interrogation. So questions from the audience please. Let us not sit on our hands. Let us not be shy. Who will volunteer? Who will be first? Yes sir?
Questioner: Christophe Marshoff, from the German daily Tagesspiegel. I would like to address the question to Allen Schaeffer. We just heard that the customer decides, that the customer can decide only if he has the option to buy what he wants to buy. As far as I know the U.S. customers didn't have the option to buy the diesel cars you were advertising in such a convincing manner. What is the reason why diesel never made it to the U.S.? I mean I am reminded, living here now one-and-a-half year, of Germany in the '60s when diesel was just a car for the farmers, stinky, slow, not attractive, and so on. And here, Craig Helsing, who could tell us that in Europe probably they sell more diesel seven series and more diesel series five, which are very sporty. You made all the arguments, so why doesn't that work here? Why doesn't it has worked until today?
Allen Schaeffer: Thank you for the question. First of all, diesel technology has been in the United States for many years. The pickup truck market is substantially diesel. In fact, folks that go out to buy one of the heavier duty pickup trucks, more than half of them have bought diesel pickup trucks for the last 10 years. And that trend has been gradually building over time. So there's been a steady stable of diesel customers out there, not necessarily as high-profile as some other technologies. But to get to the question, I think a lot of it has to do with technology availability, emission standards, and, most importantly, very low gasoline prices. With very low gasoline prices in the U.S. motivation has not been coming within for discussion about conservation kinds of technologies. So that put the diesel kind of at a disadvantage I believe for many years. And now we have a serious situation globally that we are in a constrained oil market going forward and it offers an opportunity for these very fuel-efficient technologies to rise to the fore. But gasoline prices would be one of the major determinants.
Warren Brown: Well, you know, Allen, I thank you for opening that wonderful Pandora's box because if I may take the moderator's prerogative, I'd like to ask a question. With very low gasoline prices in the United States will any of these technologies have a market backing? I mean right now, for example, I just came from Georgia last night, where in the Stone Mountain, Georgia, the price of regular unleaded is now $1.75 a gallon. So with those prices do any of these technologies have a chance to take off? Allen, anybody on the panel? Come on gentlemen, don't be shy. You're not giving ... address tonight.
John Moulton: I'll comment.
Warren Brown: OK, go ahead.
John Moulton: As the supplier up here, and understanding a lot of the technology, and being an American, living here and also living in Europe, I think yes, it has a possibility. But it makes it more difficult. And I think especially with the gas prices below two dollars we have to be careful we don't lose sight of the goal. And I believe a strong energy policy will also support that because some of these technologies are expensive for all the companies to develop and maybe behind the scenes with subsidies or tax incentives we can still drive some of that technology. But I'm convinced, working with all of the OEMs, Bosch, that everyone is working towards the technologies, the hybrids, the diesel, the gasoline, the fuel cells. So we're going to keep moving forward. Competition is out there. I think the OEMs are also afraid that somebody else might get out there first with a better solution and a better technology. And as Andreas mentioned, the consumer is king. If you drive a new turbocharged diesel it's fun to drive. And I think people inherently will say, at least I know my wife says that it does get 40 miles per gallon. It's still the right thing to do, even if gasoline goes down to two dollars a gallon. So I think things will happen, but it's definitely more difficult, maybe a little bit slower, but we need to keep the eye on the ball and maybe we need some help with a strong energy policy.
Warren Brown: Well, let me put it this way, if the President of our esteemed United States tonight, in his State of the Union address, and this is just kind of a fantasy we did over here, says something like, you know, increase taxes on gasoline, increase taxes on horsepower, that sort of thing. Would any of you be unhappy with that move?
John Moulton: Bosch won't be.
Warren Brown: Excuse me?
John Moulton: We won't be unhappy, no.
Warren Brown: You wouldn't be unhappy? You care for any elaboration? Again, you're not running for office here.
Reinhold Kopp: I'm skeptical if limiting horsepower is the right measure. I think these are two elements. I think John mentioned it. The first one is really convincing our customers that we have the right products. Therefore there may be opportunity even with more expensive technologies adding additional value. It could be diesel. It could be gasoline too, with direct injection engine which offers, in addition to a fuel economy benefit, also some other attributes which finally enables a pathway for these technologies. And the other one for sure is the energy policy path. And I think, by intention, ___ went here in Washington, not maybe Detroit or some other place, I think there are some elements of support necessary to enable new technologies to get a chance in the marketplace.
Warren Brown: Okay, back to the audience. Yes sir?
Questioner: Mr. Moulton, you predicted a 15 percent market share for diesel by 2015. Will all those diesels be imported? Because I don't know of any car diesel plants planned in the United States. There are truck diesel plants, but where are these diesels going to come from to bear out your prediction?
John Moulton: That's a good question. In the beginning, some of those engines at least will be imported. Actually, some of the OEMs actually produce diesel SUVs in the U.S. and ship them back to Europe. For example, BMW, Volkswagen, they're shipping some of the diesel Mercedes back to Europe, Chrysler as well. So there is some diesel capacity, engine capacity in the U.S. or in North America, but clearly that will have to be increased. We're working with a lot of the OEMs on programs to do that. I can't divulge that, but I know they have plans to increase their diesel engine production as the market develops in North America. They have the technology. All of the OEMs are global players. They all produce it around the world. And, again, as I mentioned, a lot of the diesel SUVs are produced in the U.S. already and shipped back to Europe so they can actually produce more here and actually just sell them here. Maybe the OEMs can make specific comments. I'm not allowed to say what their plans are.
Reinhold Kopp: Actually, I'm also not allowed to say what our plans are, but maybe it's a little difficult position for you to answer on behalf of the OEMs what the plans are for North American-based engine manufacturing. And first, we have very flexible manufacturing facilities today. Therefore, we will be able, when the diesel market share increases, to use some of the existing facilities to produce diesel engines. This is the first answer. And the second, if this really high-volume I think in the timeframe outlined by John Moulton we will be able also to create some new manufacturing facilities in the NAFTA.
Warren Brown: For all the people who are not allowed to say anything, the Washington Post is open for business. We take leaks, emails, anything you care to slip over the transom, you know, send, we'll take them. Yes sir?
Questioner: Hi, is this on?
Warren Brown: It is now.
Questioner: That's okay. I'd like to get back to the question earlier about the diesel penetration in the U.S. and the gasoline prices and so forth. You may have traveled to Georgia, I just flew in from California where I paid $2.89 per gallon of diesel fuel, and I thought I'd died and gone to heaven. It's the cheapest it's been for a long time. But the federal tax on diesel fuel, at least in California, is eighteen cents higher than the state tax is on, than it is on gasoline, I should say. So in other words, the federal government is taxing diesel fuel eighteen cents more than its taxing gasoline. So I'm wondering whether it's a California issue or a five state issue or a 45 state issue. Is there something to be said about the federal tax structure on fuel that has to do with the question of why do we not have more diesel in the U.S.? I'm just wondering if there was somebody who wanted to address that?
Warren Brown: Anybody?
Allen Schaeffer: I'll take a preliminary swing at that. Keep in mind that the primary driver of fuel tax policy in the U.S. in diesel use has been the commercial trucking sector. Passenger car diesels are really not part of that equation, have not been for a long time. And that taxation is largely designed to help support the infrastructure and viewed from a, I think, much more commercial perspective than a passenger perspective. But you raised an interesting possibility, that we might have differential taxation that would incentivize a particular technology while still preserving our transport network of roads and bridges. So certainly that is a new dialogue that I would think needs to happen within this current energy debate.
Warren Brown: Yes? That's you. Take it, you know.
Questioner: I have to put this down. In our remarks today, by the way, I'm Shannon Herzfeld from Archer Daniels Midland.
Warren Brown: OK.
Questioner: In our remarks today our ambassador spoke, as did Minister Hahn, of the concept of sustainability, of energy supply or sustainability of fuel. And some of our panelists have also used that term. In normal parlance sustainability could mean uninterruptibility or otherwise it could mean an agricultural or an economic concept or in other areas it means an environmental one. So when people speak about sustainability of fuel or of energy, what exactly is being referenced? Thank you.
Warren Brown: Yes?
Gerhard Schmidt: I would say sustainability is a three bottom-line approach. We have to consider economic sustainability, environmental sustainability, and social or societal sustainability. And if we talk about security of fuel supply we have many concerns about instability of regions where the oil comes from. The owners of oil resources are not always very friendly to the industrial states. So I think we have really to have comprehensive and holistic approach to sustainability. And that is why we try to find solutions with really -- take the whole picture. And that is the first side to this diversification of energy sources. Therefore, we do talk about biomass fuels, about coal to liquid, about gas to liquid. I think we have various opportunities mentioned by all the colleagues on the panel. And I think all the different sources can contribute to sustainability.
Warren Brown: More questions? Yes, sir? I'm sorry, ma'am. You were standing in front of the guy with the white hair and I couldn't -- and you're short, but that's OK I'm short too, come on.
Questioner: Am I that short?
Warren Brown: Look, I'm short, short people rule. Go on.
Questioner: Miranda Anderson with David Gardner and Associates. Two very quick questions. I think even though gasoline prices are lower now, there's pretty clear signals that they're not going to be sustained at a lower level, as we saw, after the '73 oil embargo. It's quite expected that oil prices will remain quite volatile and likewise consumer preferences. So a couple of questions, one, to what extent do the auto manufacturers have sort of an imperative to be building various kinds of technologies knowing that we can't necessarily predict what consumers are going to be choosing in the future? And secondly, a question to the engineers and R&D people on the panel, to what extent do the engineers and R&D folks in your companies actually have any influence over the capital investment decisions being made about what kinds of manufacturing facilities to invest in, how to retool manufacturing facilities and production decisions?
Andreas Truckenbrodt: Well, if I may start with that.
Warren Brown: Please.
Andreas Truckenbrodt: To begin with your second question, in our company the engineers have a huge influence because our chairman is an engineer. So we really, that's a very close talk between the engineers on the one hand asking for money to develop something. But at the other end, of course, you have to look into the business case. So it's not that the finance folks only have the say or the engineers have only the say. That really works together. And what you were mentioning in your first question is really the critical issue that we don't know yet what the mix of the various technologies will look like in the next few years. And this becomes, on the one hand, really a challenge because how do you architect, how do you lay out your manufacturing capacity? And, of course, what the consequence is too, that we have to invest in all those technologies. There is not this one technology where we all agree, okay, that's the winner at the end of the day. And that is why the financial burden is certainly high.
Warren Brown: Mr. Kopp?
Reinhold Kopp: Yeah, let's leave like one remark. That is why we ask the legislator to be, in creating the legal framework, to be technology neutral. We do not want to see that the legislator give the priority to specific technologies, not by tax incentives or other measures. We think that we need competition and technology. That will lead to the best solutions.
Warren Brown: So then the idea would be, by technology neutral you mean that the idea of any legislation would be to get to the end goal, which is a reduced dependence on fossil fuels. But not specifically, not to be specific ...
Reinhold Kopp: Not in favor, for example, the hybrid versus the diesel or something else. We should really look for best performance.
Warren Brown: OK. And with that we're going to close. Our conference has come to an end, on time I might add. I'm not German, but I'm working on it. And so we're done. And I thank you all for joining us.
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