As Detroit's Big Three defend their bailout requests before Congress, many industry insiders and lawmakers believe a key opportunity exists within the bailout to create cleaner, more efficient vehicle fleets. During today's E&ETV Event Coverage of the Electric Drive Transportation Association's Energy Policy Roundtable, industry executives discuss the policies they hope will be implemented during the next session of Congress to promote the development of cleaner vehicles. Panelists include Michael Andrew, director of government affairs and external communications at Johnson Controls-Saft; Edward Cohen, vice president of government and industry relations at American Honda Motor Co. Inc.; Josephine Cooper, group vice president for public policy and government/industry affairs at Toyota Motor North America; Nancy Gioia, director of sustainable mobility technology and hybrid vehicles at Ford Motor Co.; Thomas Kuhn, president of the Edison Electric Institute; and Tony Posawatz, vehicle line director for the Chevy Volt at General Motors Corp. The panel is moderated by E&ETV Managing Editor and Host Monica Trauzzi.
Brian Wynne: We have some phenomenal horsepower up here on the stage and our challenge in putting this panel together, when everyone accepted, was how do we manage this kind of horsepower and channel it?
As I say, we've got vehicle manufacturers, we've got utility represented and we've got energy storage represented on the stage. And I thought of someone that I've had the good fortune of being interviewed by at least twice.
I think I've been on their show at least three times and we were very fortunate to get Monica Trauzzi to come and moderate today's panel. Monica is the managing editor and host of Energy and Environment TV, E&E TV.
Since 2005 she has conducted hundreds of interviews with policymakers, experts, industry leaders, and academics in the energy and environment field.
Prior to the E&E Monica worked for CNN's United Nations unit in RAI Italian Television's headquarters in New York. If you haven't seen Monica's program, it's really required viewing on Capitol Hill and she really does get some really good folks.
I'm delighted to turn the program over to Monica, who's going to introduce our panelists today, Monica.
Monica Trauzzi: Thank you Brian for that introduction. Hi everyone, thank you all for being here. Today's energy policy roundtable features an all-star panel as Brian mentioned, of the auto industry's top government and industry affairs people and also electric drives experts.
And this is certainly a very interesting time for the auto industry as a whole. Companies are really at a pivotal moment in the history of the automobile and the corner has already been turned.
But the next couple of years will likely signal a dramatic shift in how cars are made, or at least that's the hope of many of the people on this panel and in this room.
So, how do companies get there and what can the government do to support the electric drive industry and sort of help usher in a period of heavy R&D in order to get these cleaner technologies on the road?
What are some of the main challenges and opportunities posed by the economic crisis and the crisis facing the big three automakers? What does that mean for the Japanese automakers? We're hoping to get to all of these points during today's discussion.
So, we'll start off by having each panelist speak for five minutes, and they've been instructed to keep it to five minutes please, and then we'll open the discussion for questions.
We'll take questions from the media and other audience members. So with that let's get started. First up we have Ed Cohen. Ed is vice president of Government and Industry Affairs for Honda North America, Ed?
Edward Cohen: Thank you Monica and good afternoon and welcome to Washington. For those of you that have traveled here, you're better off being here now than on January 20 when there will be another 4 million of you.
So welcome and enjoy the city while you're here. What I want to talk about is what I would tell the new administration coming in. And I would make three key points.
The first is appreciate the distinction between what the role is of industry and what the role is of government. Both of them are necessary, but not sufficient.
The industry's role is to conceive of new technology, develop the new technology, understand the market for the new technology and market the product in a successful way.
But government's role is very important as well. The first part of that role is perhaps basic research. There are some areas in our arena for example, battery technology and hydrogen storage, where there's some basic research that would benefit everybody that needs to be done.
And that's a good role for government, is to fund some basic research. The second is customer incentives. There are technologies when hybrid electric vehicles first came in the market the government had customer incentives of varying amounts.
It was a poorly structured program, but the concept was that in order to assist in the acceptance of the new technology, as well as to lower the cost differential, government incentives played a role.
And I think it continues to be an important role for new technologies for motor vehicles, but those incentives need to be temporary. If a technology can't stand on its own, then it isn't going to be viable for the marketplace.
And then the third thing that government should do is to make sure that regulation does not inadvertently retard a technology. An example here might be natural gas vehicles.
Honda makes a natural gas Civic and when we first introduced the cars we couldn't drive them through tunnels and you couldn't put them in parking garages, but we now know that that's silly.
The safety of a natural gas vehicle is on par with a gasoline vehicle, but that's the kind of role the government needs to play. The second thing that I would advise the new administration is don't try to pick winners and losers.
Nobody is that smart I can assure you. And, in that regard, what that really comes down to is that for regulation or for incentives, define a performance standard, not a design standard.
Don't tell us what specific technology to make, just tell us what performance parameters you want us to meet and then give us the opportunity to let a thousand flowers bloom.
Different companies have different perspectives on which technologies will best achieve specified objectives and we should let the marketplace, the role of the manufacturer, really address that issue.
You can make some right decisions and you can make some wrong decisions. You can cut off promising technologies prematurely and I looked at fuel cells was one of those potential technologies, that there are issues that need to be addressed, technological challenges that need to be addressed.
This technology has enormous promise. It has enormous promise to address the full driving needs of most customers. And yet you see, and I'm going to talk about this in a minute, a sort of an approach/avoidance with fuel cells by government.
Similarly, you can sometimes seed a technology that may not be the best one and I don't want to get into this too deeply, but there are many different biofuels that are out there and we've bet on one of them. We've bet on ethanol and I think it's important that we not stifle the development of other biofuels.
And the third point that I want to make and I must be approaching five minutes, because I'm getting a glare from Monica, is really a subset of the second, which is that we have to avoid the technology du jour issue.
You know, government can afford to be patient, but we have this tendency to sort of get excited about one technology and then back away. Twenty-five years ago it was ethanol. Fifteen years ago it was electric vehicles.
Ten years ago it was the hybrid electrics. Five years ago it was fuel cells. Two years ago it was ethanol. Last year it was plug-ins and who knows what it's going to be next year.
But the problem is that there's enormous economic displacement if companies are encouraged to go out and invest in a technology and then the government pulls back. Set a performance standard, tell us what you want us to achieve, and we'll go out and do it. Thank you.
Monica Trauzzi: Thanks Ed and I was not glaring. Next up is Josephine Cooper. Joe is group vice president for Public Policy and Government Industry Affairs for Toyota North America, Joe?
Josephine Cooper: Thank you and it's a pleasure to be here. Although, I must admit it's a fairly daunting challenge when you look at energy security, energy policy, hybrids, hybrid electric, plug-in hybrid electric, fuel cells, clean diesel, CNG, all of these words, infrastructure, batteries, the economy in five minutes.
I would have to say that for us to try to get through this I think we need to hurry to get to the Q&A. But for Toyota, I think all of you would acknowledge that we bet some time ago on hybrid technology as sort of our core for the future.
And we've been in the business for a long time, but what I want to say is, and I heard the senator say it, I've heard everybody say it, change is really important in the auto industry.
Change is critical, but change doesn't happen quickly. I mean all of us who are doing work on fuel cells today we know we've been working on this technology for 20 years, at a minimum.
We still don't see the end of the tunnel and we don't know what the light at the end of the tunnel is. From our perspective we look at hybrid technology and we recognize that hybrids can be a part of any kind of vehicle that we see for the future.
Whether it's the internal combustion engine, whether it's diesel, whether it's fuel cells, whatever it is, there's probably a hybrid component that we can apply. And so we've really looked to make hybrids sort of the core for our future, eventually.
Today we have six hybrid vehicles in the market. Come next year we'll have another dedicated Lexus hybrid and, ultimately, every model that we make we will be able to make it available as a hybrid.
And when you look at that change we are now selling, in this country, about close to 300,000 hybrids on an annual basis. We've been in the market for 10 years.
It's taken us 10 years to reach that number of vehicles in a market today that ranges - I hate to say where we might be at the end of this year, but since I've been in the industry, from 16 or 17 million vehicles a year.
Whatever that number is, that 275 or 300,000 vehicles, is not a huge number and it takes a long time. It takes time to change. It takes time to change consumer's minds, to convince them that trying this technology is going to be worth their money.
It's going to be worth their time. It's going to be worth their interest and their enthusiasm. The other thing I'd say is, and I think I agree totally with what Ed said.
You know, we recognize that a variety of advanced technologies are going to be part of meeting what our biggest challenge in this probably century is going to be, is the fuel economy standards.
That is, for our industry right now, our biggest challenge and it's not going to be answered by one technology or another. It's going to be answered right now by a variety of technologies.
And each company, if you look at all the companies here and all in the industry, we're all going in somewhat different directions. We're all betting on one path forward or another or a multitude of paths forward.
And that's what creativity, that's what innovation is all about. That's why our industry, our company, spends massive amounts of money on R&D. Our company spends $1 million an hour, about $24 million a day on research and development.
Those are huge, huge numbers, but that's what it takes in an industry that is as capital intensive and as dependent on trying to match what are consumers looking for to what can the technology deliver.
What are the attributes they want? And I think all of you would acknowledge consumers want it all. They want convenience. They want hauling. They want fuel economy. They want value for their money. Some people want three sets of seats in a car so they can carry their four kids. I mean everybody wants something different.
And the challenge to change an industry from one technology to a multitude of technologies, to achieve what society believes the future is going to expect of this industry, is a huge challenge.
So I would say to you if you talk about the challenges we face, we face the climate change challenge, we face the fuel economy challenge, the infrastructure changes that are going to be necessary to accommodate some of these new technologies, the batteries, the economy.
How long is it going to take us? How long is it going to take us to come back from where we are today as an industry? All of these things, alt fuels, flex fuels, as I think about this industry it is the future. We are the future. We are the advanced technology. That's what makes this industry tick.
So all of us in this room today, as we look forward to electric drive, more electric drive, the advances there, we've all got to recognize that it's going to take time and it's going to take money and it's going to take a lot of interest on the part of a lot of individuals, consumers and engineers and government officials to make us all able to see our way clear to achieve the changes that are going to be necessary to continue and to be sustainably mobile for our society, thank you.
Monica Trauzzi: Thanks Josephine. Next we have Nancy Gioia, director of Sustainable Mobility Technologies and Hybrid Vehicle Programs at Ford Motor Company.
Nancy Gioia: Thank you, delighted to be here. And I think all of us would agree that we're facing some of the toughest challenges we've ever faced, not only within the auto sector, but every industry, the economic downturn, energy security, climate change, and just an overall change in environment of customer expectations on a global basis.
To solve these challenges is really going to require a huge commitment to innovation and common goals, something maybe we haven't had in the past. At Ford we're working to be a part of the solution and I think this is really important, we recognize we need to be a part of the solution.
And as we accelerate the development of our products and technologies we have to do that again still with products and technologies that people want, value and desire, but then also help achieve the broader goals of climate change, energy security and affordability and sustainable business.
So for our overall commitment we've stepped back and we've said we will either be the best or equal the best on fuel economy with every new vehicle we produce and we've made several product announcements and are meeting that commitment as we go forward.
Also to aggressively bring market technologies that are going to deliver meaningful fuel economy improvements and reduce CO2 emissions. So we're really focused on that, be the best in fuel or equal the best and then make sure we bring forward meaningful technologies that can do so.
And when we say meaningful, what we mean is it's not technologies to work for 10 or 100 vehicles, but hundreds of thousands and millions of vehicles, because that's the impact we can make.
So, I think we've heard from the folks preceding me here that there's no real silver bullet and I think we would agree with that. We're pursuing multiple technologies.
We have our EcoBoost technology, which is downsized and turbo-charging, boosting of the engines, that we can deliver better fuel efficiency along with reduced CO2, but it's done affordably and with volume very quickly.
By 2013, for example, we'll have over half a million units annually produced with EcoBoost technology, so in a very short time period transferring existing suppliers, infrastructure, capacity to that type of technology.
Gasoline we believe is going to be with us for a long time and as we progress we want to make sure the use of that technology is as efficient as possible. Of course, there are other even more advanced technologies that we'll be doing and these would be for energy security, CO2.
Today we're focusing on the electrification of vehicles. This, for us, includes hybrids, plug-in hybrids, pure battery electric vehicles and we believe longer distance in the future, hydrogen potentially, fuel-cell vehicles.
We recognize electrification is going to play an increasingly important role in transportation as part of our near, mid, and long-term strategic plans. It represents a vehicle technology that we believe offsets carbon intensive petroleum use.
It operates on a domestic source of electricity and, with the proper support, can be made to customers available nationwide. Already today Ford has significant efforts in electrification with our hybrids on the road today.
We have our partnership with Southern Cal Edison, EPRI and a number of other utilities who have joined the Ford plug-in project that we're so excited about. It's really helping us understand how to commercialize this technology.
And we're really learning how to do this because we now share this common customer we've never shared before, between the utilities and the auto sector.
To make it successful when you start to plug-in we have an all-new interface there that we have not understood in the past and we need to understand each other and how the customer interfaces.
In addition to developing those technologies, together we're working on a range of issues around these plug-in hybrids or vehicles that can plug in.
Total lifecycle analysis, appropriate electric rate proposals, technology standards, connectivity to the grid, customer usage and other challenges, how do you implement this in a way that works?
The biggest challenge, and I think again we've heard this repeatedly, remains the battery. Lithium-ion technology makes plug-in hybrids possible, but the technology still for new vehicle applications requires work.
Questions remain about the durability and real-world use, safety, and, of course, affordability in the cost equation. It's worth noting most battery supply is still done in Asia.
We at Ford believe it's necessary to ensure a domestic battery supply if we hope to truly utilize plug-in technology to help address energy security concerns.
The infrastructure for plug-ins also poses a challenge. While nearly everyone has electricity, how many potential customers have garages? Where will the urban customers, who live in high-rises or do not have access to a plug, plug-in?
And if that plug needs to be different, then maybe the 110 outlet they have for faster charge or longer life batteries, or more capacity on their batteries. These are significant infrastructure elements which were very difficult when the BEVs first came out and we still need to address those.
We're already road testing the first of our development and demonstration hybrid Escape plug-ins in our fleet. They deliver up to, you know, this is the promise, 120 miles per gallon for the first 30 miles on a full charge.
And then afterwards we're in hybrid mode and you average over between the charge depletion/charge sustained about 70 miles per gallon for typical folks in their urban drive.
It has the potential of displacing up to 60 percent of fuel consumption nationally, but that's when you have very, very high volumes on the road. Such potential is not going to be realized overnight.
And we need to set the stage now to move beyond low-volume cost penalties and towards full-scale production so that cost efficiencies can make these vehicles accessible and affordable to customers nationwide.
So next month, at the North American International Auto Show in Detroit, you'll hear more details about Ford's electrification plan, but as announced today and I think it was in the Wall Street Journal, Ford has made clear that we will continue to accelerate our plans on electrification.
By 2012 we'll have a family of hybrids, plug-in hybrids and battery electric vehicles. We're partnering with battery and power train system suppliers and we'll have a BEV, a full battery electric vehicle and a van type vehicle, as well as a BEV sedan by 2011.
And a hybrid plug-in vehicle available by 2012 while we continue to double our hybrid production this year. It's a substantial commitment on our investment, but we feel it's very important as we move forward.
So, we feel it's very important that electrification of transportation, the merging the transportation and the utilities going forward to put forward a new approach on energy policy and security needs to be a national priority.
Other nations are significantly funding the research necessary to commercialize this technology. We need to do the same. Government should be a key partner in the efforts to bring electrified vehicles to market with appropriate energy policy and technology incentives.
So, at this critical juncture all partners have to come together. Again, we're back to the common goal, the auto industry, the utility industry, battery suppliers, government, academia, and the researchers, along with the media and opinion shapers, each of us has a critical role to play if we expect to win the race. Thank you.
Monica Trauzzi: OK and now for a slightly different perspective we have Thomas Kuhn, president of the Edison Electric Institute.
Thomas Kuhn: Well, thank you Monica and my friends in the automobile industry I think did a very good job of talking about the challenges and the opportunities. I'd just like to mention we're in the middle of probably the biggest recession in any of the lives of any of the people in this room.
We've got a major credit crisis going,
but I would like to congratulate EDTA, if this is a leading indicator, we have more people in this room, standing room only, more people in this conference than we've ever had before.
And I don't think you'd have to go back too far that we had just about a handful of people talking about this issue. And I think that indicates the drive and the momentum and the interest at least in moving to electric drive vehicles.
And as far as the electric utility industry is concerned, we're very, very bullish. We think that the time has come and obviously, again, there are challenging economic circumstances here. We've seen the price of oil move to triple what it was and then back to about a third of what it was before, $50 to $150, or whatever.
So will any of this change the momentum toward plug-in hybrid electric vehicles? We don't think so. We think, again, that there are a number of factors here that are moving very, very strongly.
I want to talk about a few of the things that the utilities are doing to help plan for the future and to make sure that they are ready for the future of plug-in hybrid vehicles.
Duke Energy and Progress Energy announced last week that they will soon start testing a fleet of converted plug-in Toyota Prius to a valuate their smart charging systems and I thank Joe Cooper and the folks at Toyota for their help in this enterprise.
Pacific Gas & Electric in San Francisco is also testing plug-in hybrids and the mirrors of San Francisco, San Jose and Oakland, have announced plans to, again, create a network of electric charging stations around the bay area in the next several years.
Excel Energy of Minneapolis is looking at the vehicle to grid technology about now. Vehicles can actually, in the future, serve as storage devices for electricity and help, again, the electric system operate a lot more efficiently.
Southern California Edison is working with Ford Motor Company to test drive systems, battery types, and charging infrastructures. Those are just a few of the activities that are out there. We have a CEO task force on electric transportation that meets regularly on this issue.
Most of the people in this room have talked to that group. John Bryson, the recently retired CEO of Southern California Edison is taking my place as co-chair of the EDTA board. And we have just a tremendous amount of interest among the CEOs in moving forward in this particular area.
I think, again, you heard Senator Dorgan, that's one senator, but when we talk to people on both sides of the aisle and we've heard President-elect Obama talk about a million cars in four years, you know, I don't know how far or how fast we will be able to go.
But I can tell you that politicians on both sides of the aisle, there is a tremendous bipartisan support for alternative fuel vehicles, for moving the transportation system in different directions. And, again, I think the imperatives are the economic imperatives of bring the economy back, what I call these four imperatives.
The economy is one. National security, to reduce dependence on foreign oil. The last time I talked to a group on this subject I said people got really angry at oil prices.
They didn't just get angry every once in awhile, they didn't get angry every time they went to fuel up and had to spend that hundred dollars that Senator Dorgan mentioned, they got angry every time they passed a street corner and saw the price of gasoline up there.
Now, again, will that stay up there? I don't know. You know, it hasn't. It's back to two dollars. Will the economies of the world come back and China and India and all those economies cranking? A lot of people say it's going to go to $300 a gallon.
And so I think, again long-term, you've got to think that the fuel economy is going to make a difference to people and that people are going to be looking for more fuel-efficient vehicles.
So I think in terms of the energy security, to reduce the dependence on foreign oil, I think in that anger I've said that people want to put up a sign, the OPEC sign and they want to put an X through the OPEC sign and put an N before it and say NOPEC, no on oil purchase electric cars.
Maybe that ought to be our marketing ploy, but I do think that's the way people feel and so you've got the economy, you've got energy security, you've got the environment. I mean global climate change, there is a momentum in this country to solve the global climate change issue which is a major, major driver.
And it was clear during the campaign where both presidential candidates talked about it. It was clear in terms of the makeup of the Congress right now that we are going to be moving forward on global climate change legislation.
There will be a price on carbon and in that context I think that fuel-efficient vehicles, electric vehicles will offer a major benefit to the environment.
A study was done by the Electric Power Research Institute and the Natural Resources Defense Council, the major environmental groups that talked about the incredible environmental reductions in carbon that you could get from the plug-in hybrid electric vehicles.
I think that will also be a major driver in this equation. And I think that finally the cost element, I do think that on the ability to -- whether that be two dollars a gallon or four dollars a gallon, on the cost side of the equation the mileage that Nancy just talked about that electric vehicles can get.
The fact that you could get, perhaps in the range that we've studied anyway, looked at about a dollar a gallon as opposed to two or three or four times that amount, I think that's going to be incredibly attractive to the consumer as well.
So what are some of the public policies that are going to be extremely important in the equation as we look to these things? Well, I think it's been said you're going to need public policies for the batteries, to continue to move the batteries along.
Whether or not it will be the research and development or whether or not it will be the major battery manufacturing plants here in this country to help make sure they get in place and we're ready to go to meet that demand.
I think that certainly the car companies, for the retooling that they have to do, are going to need the major incentives to help make sure that we can move toward the production of a sufficient amount of plug-in hybrid vehicles, again, to meet what I think is going to be a tremendous demand for them when they do emerge.
Thirdly, there is the electricity infrastructure. Utilities are going to have to - I mean we can wire up in houses easily where there are garages and where there are not garages. We can rev up in parking lots for apartment buildings or in parking lots downtown where people would be having their cars while they're at work.
So there is going to be an electric infrastructure need and, again, we're working on the abilities to be able to move that. And we think we can move that very, very quickly because electricity, fortunately, is everywhere.
And so it's not a matter of building a major infrastructure to get electricity to a place, it's a matter of just having it wired up in the places where it needs to be.
And finally the buyers obviously, we were very, very pleased that in the last Congress at the very, very end of the Congress along with the stimulus bill the tax credits were put in there, up to a $7,500 credit per vehicle.
Maybe in the future as the vehicles are ready to come out it might be even more and I think that will help move the equation as well. But I do think there will be the buyer demand. I think the people do want to reduce their dependence on foreign oil.
I think they do want to help the environment. I think the climate change issue is a major imperative right now and I do think the cost issue is going to be a major beneficiary as well.
So it's going to require a long-term commitment from all of us, the automobile companies, the utility companies, the federal, state, and local governments. But I do think that the future for plug and electric vehicles is indeed bright.
And I think that as we sit at this conference, about five years from now, I don't think we'll be able to sit in this room. We'll be over at the auditorium over there in the convention center, because I think the people will see how much progress we've made. Thank you.
Monica Trauzzi: Next we have Tony Posawatz. Tony is the vehicle line director for General Motors Chevy Volt.
Tony Posawatz: Good afternoon everyone. It's nice to be here in Washington, seriously. Actually, why it's very nice is there's a lot of friendly faces here and I think the gathering of folks that we have really do want to make some impact to forward the cause.
Now, for the record, I think Senator Dorgan left, but for the record I made my trip partially in a Tahoe hybrid, partially in a very cramped center seat on a commercial airline, and I hope to do some electric driving yet before I leave Washington.
So let us capture that for the record. When I was asked to participate in this panel I jumped at the opportunity because it's really not too often that someone from Detroit gets the opportunity to provide advice and counsel on policy in Washington.
So that's another one of the reasons I'm happy to be here in Washington. Let me focus my commentary really on thoughts, thoughts to consider. And I think it was well stated by Senator Dorgan, by Brian Wynne relative to the real need to have a national energy policy.
And so hopefully some of these thoughts may find their way as elements or ingredients into that energy policy. Before I begin my three focus areas that revolve around energy policy and policy enablers, a few comments on a General Motors perspective. General Motors is one of the manufacturers that has placed many bets.
I think it was well stated by some of my many fellow panelists, there is no silver bullet solution and we should let the market, competition, innovation, entrepreneurship help us and challenge the other technologies to see which is the best commercial opportunity, which is the most viable, and which does the most to satisfy customer needs and wants and the very large, overarching looming issues that we have regarding energy and environment.
So, to that end, General Motors has a very large fleet of 100 fuel cell vehicles in the United States today, operational. By 2009 we will have nine hybrid models on the market available for sale.
We have 4 million flex fuel vehicles on the road and, obviously, we have many other initiatives as it relates to conventional vehicle efficiency improvements, the largest number of over 30 mile per gallon models.
And, obviously, much of our focus here going forward is to set the pace as it relates to electrically driven vehicles, more specifically, our Chevrolet Volt. And I've got the great privilege to work on that project.
It does knit so many of these technology initiatives together, whether it's hybrid software, whether it's battery development, whether it's electric drive, whether it's energy storage systems, etc.
So we're excited about all of those prospects here going forward. Relative to some thoughts and considerations, I would lump them into three fundamental categories.
Help is required in the area of fuels and infrastructure, number one. Number two, market development and support. And then number three, technology, very specifically, advanced batteries.
And I'll talk a little bit about some examples of some of the challenges that we're working through on a real program relative to some of the challenges around this battery technology, which we've all talked about is so incredibly vital as it relates to energy diversity, energy independence, opportunity, capture, renewables, etc.
First on fuels and infrastructure, I think all of these areas have to be, in some way, shape or form, supported. In many respects, when you talk about ultra propulsion the real question is it's about the fuel, buddy.
So, some of the thoughts there is the overarching should be to facilitate more diverse choices of cleaner fuels. So that includes some of the flex fuel opportunities that have been supported to date that need to be continued to be supported, that displace petroleum and support the cause.
Support of renewable, support also of a charging infrastructure, which Tom talked a little bit about and others, which I think as much as electricity in the grid is omnipresent, I think there are steps that need to be taken to support that for, as Nancy indicated, for people that don't have a garage, don't have access, live in cities, etc.
These are policy areas we could help. Support for homes so that your home can become efficient utilizing and integrating an energy management system if you will and, obviously, also we continue the support for hydrogen.
So that's the areas of fuels and infrastructure. Speaking a little about market development support we want to give thanks to those that helped support the recent federal plug-in electric drive vehicle credit.
As we indicated, I think EDTA and others had a significant role. We're very pleased that when the Chevy Volt comes to market in the end of 2010 it will be one of the vehicles that qualify for the $7,500 tax credit.
And Tom gave me a hint here, he said it might be higher, so do tell later on, all right? Similarly, this is now on the federal side relative to stimulating the demand part of the equation, the adoption, etc.
I think there's still help that can be done on a policy side, from a state, community, and other stakeholder level. I think the community aspect is very interesting when you look at what opportunities exist when communities can pull together.
That is, the municipalities, the universities, the company, the utility, the assorted other technologies in that area and how they can pool together to provide an attractive place for consumers and products to flourish as it relates to furthering the cause of electrically driven vehicles, plug-in vehicles, etc.
I think the opportunity exists also to stimulate the market so we can get some scale, volume if you will, because like any technology, generation one is never, never business viable. It needs to be worked down.
So anything that we can do to facilitate volume, in other words fleet orders, that will get more suppliers engaged, more competition, more innovation, will help drive the cost down and increase the adoption rate.
And, ultimately, I think some support for retooling for the transition for these fuel efficient and advanced propulsion systems is also appropriate.
Final major category is the technological area and I think my colleagues did a very nice job in identifying some of the key areas there. I would summarize it that we need to continue to fund the effort to strengthen domestic capabilities.
We think a lot of good things have been done in the R&D world, but I'm very, very concerned about the lack of manufacturing capability that exists in this country for a number of reasons.
Let me highlight for you a little bit of an example as it relates to the Chevy Volt, something that's near and dear to me. I had my engineers do a little study and I said, well, count up how many Volts we would have to sell in order to be the number one purchaser of active lithium-ion cell materials.
And that number was order of magnitude of 150,000 or 200,000 a year and we'd be the number one purchaser of active lithium-ion cell components and the like. Now, when someone asked me where do I get these cells from today? The only choice I have is to go overseas and look at Asia.
If I tell you the next point and told you how much I spend for duties, tariffs, packaging, shipping, and a sundry assorted costs and how many hundreds of dollars that adds to the battery, to the car, to the consumer, I ask you, is this the automotive industry's challenge to solve or is this truly a policy initiative that we can take on as other nations have taken on relative to establishing this critical core skill set and capability?
So something for us all to ponder and we talked a little bit more about specifics. And, again, these are things that we think should be very, very high on the list of elements in a future national energy policy.
Another area that we're very excited about is the opportunity to look at something called an advanced battery trust fund or warranty guarantee fund, rewarding those that take the risk to be the first movers into this space.
That during the gen-one technology, to help soften any challenges they have in accelerating this technology in the market by taking care of a bit of the warranty burden. I think that's been tossed around a bit in Washington. I think that's something that is very, very exciting for us to look at.
And it really is a risk sharing proposal, because we want those batteries to be as good as they possibly could be so no one pays, whether it be the manufacturer, the consumer, or a trust fund.
But I think it's time is here for us to strongly consider that and it's a worthwhile cause. Last commentary I'll make, and I think I was also referenced by a few of my colleagues, is I think we seriously need to look at what I'll call the modernizing of the regulations.
And this is very much focused around if you have electric drive vehicles in the market today, how should the regulations be set up vis-à-vis when they were set up without electric vehicles on the road or electrically driven vehicles on the road?
And there are some conflicting regulations. There are regulations that apply to certain types of vehicles that when extrapolated may or may not work in an electric vehicle or an electrically driven vehicle.
And, again, I go back to the examples as it relates to some of the potential policy and legislative help that could be assisted with us if we don't have domestic capability to manufacture lithium-ion cells or advanced battery cells here in our country, then we should at least be looked upon to find the right rules to enable that technology.
Because I think that's what everyone is interested in and looking forward to. So with that, I hope that these comments are something that will be considered in the future and I'm very optimistic that we will all be pulling together and further this cause together. Thank you.
Monica Trauzzi: OK, our final speaker is Michael Andrew. He's the director of Government Affairs and External Communications for Johnson Controls.
Michael Andrew: Thank you Monica. It's a pleasure to be here with this esteemed panel, a lot of horsepower or brainpower here. This is a great discussion.
I always enjoy coming to Washington. This time it was particularly enjoyable. I was up yesterday morning at about 4:30, snow blowing, 6 to 8 inches of snow off my driveway and commiserating with the neighbors.
And the thing that we were really cranky about was not the snow, but the fact that the Packers lost again. So it's just kind of nice to get out of town.
Just to set the stage a little bit in terms of Johnson Controls and our perspective on this issue, energy policy and powertrain electrification.
We do have three businesses. We do automotive, interiors, seating and many of the other automotive components.
We have a building efficiency business, so from the standpoint of conservation of resources and lessening CO2 emissions, that's a keen business opportunity for us as well and, more important to today's meeting, our power solutions business.
We're the largest provider of lead acid batteries globally, but two years ago approximately or three years ago, we formed a joint venture with Saft Batteries, which had great strength in electrochemistry for lithium-ion batteries.
We thought that was a great combination with our global footprint and automotive expertise in systems integration capability to go after that market. So that's our perspective on this discussion.
And when I think about energy policy, I guess my viewpoint is, and I tend to have historical perspectives, you can't separate it from manufacturing.
I think back to a comment made, I think it was in 1940, a fireside chat by President Roosevelt when he referred to the U.S., the arsenal of democracy, referring to our manufacturing base and how strong it was.
And the fact is much of that arsenal was really in Detroit in the transportation industry that had converted over to other uses. And, clearly, from a generic manufacturing standpoint, we've slipped the last 30 years, tremendous erosion in our manufacturing capability.
I think labor statistics, the month of August alone, 61,000 manufacturing jobs down the drain probably never to come back. And if you look at those jobs, I think an Economic Policy Institute study from a couple of years ago indicated that even at a tier 1 level, one job created has a multiplier effect of 4.1 other jobs in the economy.
So there's a huge impact there. And when we talk about securing our energy future, I don't think we can divorce it from our manufacturing future and, in fact, I would suggest that the updated term, instead of being arsenal of democracy needs to be arsenal of prosperity for this country.
So as Congress reenters the debate about whether or not there should be financial assistance provided to the transportation industry, I think it's key to recognize from a more specific standpoint that there's more than just a transfusion of cash that's needed.
But that cash has to be used, I think, to drive forward a new paradigm for transportation technology focused on energy efficiency and environmental stewardship. And I really think the key there is electrification across the board to the greatest extent possible.
There are definitely options to petroleum-based liquid fuels, but when you look at the built-in energy efficiency advantages of electric powertrains and, when you think about it, the broad menu of fuels that you can use to electrify, when you think about what fuels can be used at a power plant or for renewable resources or nuclear, whatever, I mean those are the type of options you want.
You've got a broad suite of fuels that you can use to provide that electricity which is used in a manner, in an efficient manner that no other technology can really match.
So to that extent, the electrification of powertrains, when we look at our situation here in the United States, and I think some of the other panelists have mentioned this, the big gap right now is the supply chain is almost nonexistent.
Now, we have contracts. Johnson Controls-Saft has contracts with BMW and Daimler. We will be launching lithium-ion batteries for serial production vehicles in Europe next year and we've built the plant in Europe because there are orders from customers in Europe.
But for us it's like the opposite of the movie comment, if you come we will build the plant, but obviously there's a lot of industrial distress in the United States. There's not a lot of demand right now.
So a key is government assistance. What can they do? What role can the federal government play to accomplish the objective which is to help launch a sustainable electrified powertrain industry?
I would suggest probably 8 key items. Number one, bridging loans are necessary, but as a subset to that those should be scaled based on the commitment to domestic content in those vehicles of the key drive train technologies.
And not just batteries, electric motors, power electronics, many other components. I think the continuation or expansion of purchase incentives is very important.
A $7,500 per vehicle max is a good start, but perhaps it would be wise to continue the availability of those incentives for other hybrid vehicles, not just plug-ins.
I really believe manufacturing grants are going to be needed for other members of the supply chain, those let's say smaller companies where investing without firm orders in plants and equipment is going to be a very difficult challenge.
We definitely need to maintain or strengthen CAFE regs and I think CO2 mandates are going to be absolutely critical. It goes to this whole issue of how do you convince your board to make an investment when it's based on people's purchases as a reaction to high gasoline prices?
If those keep fluctuating up and down it makes those sell jobs in a board room very difficult. So we need long-term regulations to ensure that there's going to be demand for those technologies.
We do need to better utilize I think the tremendous wealth of talent that we have within the federal laboratory system. I know this has been discussed by other entities.
But I think the centers of excellence concept where with the focus being commercialization, I would disagree a little bit in that, yes, we do need long-term R&D.
But what's holding back this industry right now is the manufacturing capability and the focus on technologies to enable the commercialization process technologies, manufacturing technologies.
So better utilizing the federal laboratory network in partnerships with academia and private industry I think is absolutely critical. I think our educational system, going forward, the data from 2001 shows that 7 percent of our bachelor degrees are in engineering.
In Europe that number is as high as 20 percent. In China it's expected that by the year 2010 the number of engineering doctorates will exceed the number here in the United States. Those are ominous signs.
We need to get our kids re-interested in what used to be considered uncool curricula, engineering and science. We've got to emphasize that going forward.
Standards, very important. Should the government mandate designs? No, but they can help in terms of an enabler to get the parties together, the suppliers, the OEMs, some of the regulating bodies to drive standards, not only nationally, but international harmonization between all the countries.
That's going to help drive down costs and ensure higher quality. And the last point I can't emphasize too much, I think you need to kickstart demand. The government can serve a really vital role in terms of fleet orders.
I think Tony alluded to that. You need something to drive confidence in there being enough volume to make investments. Fleet orders can also provide you the opportunity of a lot of great engineering data.
A perfect example, to me, would be something like the U.S. Postal Service. There are a quarter of a million vehicles in that operation. Even if, and this is just I'll throw the number out, let's say for arguments sake that the incremental costs of having a PHEV postal vehicle was $10,000.
At a two dollar increment in fuel costs, that the equivalent additional cost to the Postal Service, because it's 8 million bucks a year for a one cent increase, that the equivalent additional cost would equate to converting or having 160,000 new vehicles be plug-in hybrids.
Not too bad of a business case, especially if the long-term view is that fuel costs are going to continue to rise. And I just want to close with just one statement here. It's a quote, so I want to get it right, so pardon me here.
"Not only the wealth, but the independence and security of a country appear to be materially connected with the prosperity of manufacturers, every nation ought to endeavor to possess, within itself, the essentials of a national supply."
"These comprise the means of subsistence, habitation, clothing and defense," Alexander Hamilton in 1791. I humbly submit that if he was in a contemporary situation today he would add transportation and energy to that list as well. Thank you.
Monica Trauzzi: All right, thank you and thank you to all the panelists for their comments. I'm going to throw my first question out to Ed. How would Honda North America be impacted by the financial crisis and the big three crisis? Have your financial prospects for R&D changed at all?
Edward Cohen: Well, I think we're all being affected first of all. Anybody who believes that there are two industries in this country, a domestic industry and an international industry, doesn't understand the industry anymore.
We are all connected, if at no other level than the supplier level. And so it is, from our vantage point, extremely important that the Congress pay close attention to nearly every component of this industry from the manufacturer to the suppliers to the dealers, because we are all interconnected.
That said, these are pretty tough economic times for everybody. I know we're cutting. I know my colleagues are cutting. We're slowing down production, but I think that a smart auto company will recognize, hopefully, that these economic situations are cyclical, that there is a future.
That the pressing needs that we've been discussing here in terms of energy security, in terms of fuel economy, in terms of climate change, are not going to go away because we are in a recession right now.
And so from Honda's vantage point we are continuing to invest as much now as we did before in these new technologies. And these technologies are both mid term and long term. For us the hybrid electric vehicle is, we believe, the most cost effective way to go, at least for the next decade.
We'll be putting on the market in April a new Insight that will be priced below the Civic hybrid. I think it's going to be an extremely successful vehicle. We'll have a distribution of 200,000 vehicles worldwide.
We think that that's what's going to attract consumers. But we can't stop there. This is an evolving target and so our research continues to focus beyond the hybrid electric to battery technologies to fuel cells and other alternative vehicles.
So, the short answer, and I'm trying to be efficient, is that no, I don't think - I think the last place that Honda would ever cut would be in R&D. We're in this for the long-term.
Monica Trauzzi: Tony, Ed mentioned the price of vehicles and the Chevy Volt is expected to be released in 2010 and it's expected to cost about $40,000.
There's been a lot of PR behind this vehicle. Do you think the consumer demand is going to match that level of PR considering the price that this vehicle is going to be released at?
Tony Posawatz: We typically price vehicles a little closer to the market than two years in advance. So we'll see where things are at, where the associated other cost of ownership elements come into play in the late 2010 timeframe.
One of the things we've highlighted to a number of people, we talked about it here on the panel today, is we need to subtract $7,500 off of whatever the MSRP is right off the top.
And I think we have to, at some point in time, help educate the customers as it relates to the advantageous relationship that we think will exist certainly in the future related to the cost of electricity in cost per mile versus gasoline in cost per mile.
We do anticipate, as I indicated to you, during this first generation of some of these new technologies, just with hybrid vehicles, that there may be others support mechanisms put into place to help facilitate an earlier adoption of the technology.
But it is a very fair question to state that the ability of the company to continue on and to create business cases out of this new technology requires us to get some returns.
It requires us also to get some support to get through generation one. And, if I may add, if I can piggyback a little bit on the comment that Ed made relative to some of the R&D activities at General Motors.
If anything, in the last month or so, we have probably added more people to work on electric drive technologies, Volt programs, and what comes after Volt, because I think the understanding that this is truly the future and we have to invest and have to take some risks in order to get to volume, to drive that price down.
It's a step that you have to go through and you have to take and it's a difficult step, but I think many of my colleagues in what other industry and business they're in, are doing it also together.
Monica Trauzzi: Is your hope to release other less expensive vehicles that are equally clean down the line?
Tony Posawatz: The portfolio of General Motors beyond the Volt and also the View plug-in hybrid, which will come out around the same time frame, is being developed as we speak. And certainly some of that is very sensitive information.
These vehicles by themselves are not the answer. These are the enabling technologies that will allow for much optionality in the future. And we've talked about perhaps a 20 mile battery electric vehicle with some range extending capabilities as a possibility.
Or perhaps a vehicle that could have bigger and smaller engine generators, bigger and smaller gas tanks. And we're hoping in the timeframe in the future that we can increase the power density and energy density of the battery cells so that we can offer customers choices.
Almost like we used to offer four-cylinder, six-cylinder, eight cylinder. But we can't do them all at once. We have to pick an application and develop that technology.
The Volt is our attempt to deliver a no-compromise vehicle, but certainly we agree that there ought to be more choices, lower cost choices in the future and perhaps other body styles and other functional type vehicles.
But you have to start with one and it has to be done very well. We don't get that many more chances I don't think.
Monica Trauzzi: Something I've heard from just about all of the panelists relates to consumer education and incentives for these types of vehicles. Should there be a floor on the price of gas to sort of help drive the consumer to buy these more efficient, cleaner vehicles?
Especially now we've seen the price of gas drop down rather dramatically from what it was over the summer. So do we need that floor on gas prices to drive consumers to buy these vehicles?
And I'll throw this out to all of the panelists. I don't know if one of you guys wants to start. Joe?
Josephine Cooper: Well, I'll make a comment that what you're saying is we need carbon tax, a gas tax, a greater gas tax, whatever. And I think the challenge there is that it's going to take courageous politicians to put out forward.
And since I've been in Washington, which is many years, I've not seen the kind of leadership on that issue. And I think many would agree that's a simple solution if we're willing to do it as a society.
But I'm not sure, even with gas prices where they were, I'm not sure we're willing to engage the market in that way in today's times. It may come at some point, but I think it's going to take some education of the politicians and government officials on that.
But there are many who say that would be the easiest way to change consumer behavior and to force people into a technology or an avenue of technologies for the future. But as a society we've not been willing to go there.
Monica Trauzzi: Does anyone else want to tackle that question?
Nancy Gioia: You know, just from a commitment to - still prices have gone up and down. I think there's probably general agreement that in spite of what it's done, a little motivation, a lot of motivation, it's been an ever - for the last 10 or 15 years, steadily increasing.
And that it will continue to go up. So fuel costs and recognizing that our policy and our company strategy and product plans are not driven by fuel costs, they're driven by sustainability, greenhouse gas and energy security and affordable transportation.
The challenge we face is, as we bring new technologies forward, recognizing we're going to continue to progress for sustainability reasons.
The technologies I've talked about and deploy them, starting with fleets in the hundreds, but our goal is millions and hundreds of thousands and millions of vehicles, is as fuel prices or cost of ownership of whatever that equation is, drops very low, it means that the challenge that we face is to make a sustainable business.
That we have to have either the cost of the components go down dramatically or there will have to be other elements that come in that then allow that whole system, not just the OEMs, but the supply base, the dealer network, the entire community benefit and have a sustainable business.
So whether it's fuel, whether it's recognition that from the component level, the technology development, the manufacturing base and the sustainability of business for employment security, societal security and energy security, we need to recognize there has to be a balancing effort there.
So what we will say is consumer demand absolutely flows with fuel price on hybrids. You can track it. You can trace it. You can plot it. Every time fuel prices went up hybrid demand went up.
Fuel prices dropped like a rock, some of the hybrids dropped, some have not. Our Escape hybrid has remained very steady on demand and days supply. So it also says you've got to get the product right and that's acceptable.
By the way, hybrid sales also tracked with high occupancy vehicle lane sticker access. So people's time was valuable.
So I think it's a complex equation, but I think clearly as we look at this, whether it's fuel, the cost of ownership and accessibility and something that recognizes all of the parts have to have a sustainable business, including the customer have affordability over product life, that has to be considered.
You know, it's a really tough policy equation. It's a really tough policy equation.
It's a whole series of interdependencies and just like some of our farm policies in the past had unexpected, undesired consequences 15, 20 years later, we have to have the foresight to look at the system interaction and assure that the policies or the things we take and place are not done as individual elements solving apart.
This is an interconnected system that's going to require, I think - wow, it's going to challenge us. It's a whole new level of thinking that we, I'm not sure, have successfully done in the past, but the good news, lots of good minds thinking about it.
Josephine Cooper: But you also have a regulatory overlay that forces companies to make these decisions when the market and what consumers are looking for, you don't have the same certainty in the market.
And most of us are looking, today, at vehicles for 2012, 2013, 2014. We are predicting today with whatever we put in the market in that future we're trying to say we know what the market is going to look like.
And with the economy where it is, with fuel prices where they are, with technology where it is, with a whole new government put in place in January all of those things are forcing companies to make decisions when there isn't certainty.
And I think all of those, really all of those factors really, as you say, it's a very complex formula. And the fuels, the technology and consumers and government, you really can't separate all that.
It's a cycle and it is a huge challenge and I think as we move towards electric drive technologies and look at the future, it is really a crystal ball in many ways.
And all of us are betting, all of the companies and our suppliers and the fuel producers, we're all betting that we know we have a good idea of what the answer is.
And the hope is because we're all looking at an array of technologies that this industry and the continuum that it represents will continue to play the vital role that it does today.
And I think my colleague from Johnson Controls said some of the same things. I mean the manufacturing base in this country, I mean autos is a huge, huge component of that when you add all the supply chains, and we are all connected.
And I think Ed said it too. None of us can operate independent of all those suppliers and our dealers. I mean all of the elements of this industry that come together.
And as we move to new technology it does require education. It requires education of the consumers. It requires education of the dealers and all of the players here.
I mean there are many people today, as long as our Prius has been in the marketplace, our hybrid technology, there are still a lot of people who ask how long do you have to plug it in to recharge it?
So there's still a lack of consumer understanding of a lot of these technologies. They want to buy it, fuel it like usual, maybe less frequently, and that's all they want to know in terms of the technology.
Michael Andrew: We're delighted that they'll hook into that plug. But in any case, I think Monica your question was about taxes I guess. And I don't think that many people in this room would bet that there's going to be a major gasoline tax.
Taxes are transparent and we know that politicians aren't particularly crazy about that kind of transparency. But I do think that we can forecast, everybody up here would forecast that we're going to have a cap and trade, which is similar to a carbon tax or whatever, a price of carbon, at some point in the near future.
So there will be a tax out there. Secondly, I think there's a new attitude about politicians, like Byron Dorgan there, that are going to stand up here and say to their constituents, OK, gasoline prices may be down, but when the economy comes back and the international economy that you've got China putting 5 million new cars a year on the road a year.
On India, on South America, etc., with all these cars coming on and oil being in limited quantities, it's a depleting resource over a period of time, you know, it's not hard to predict that what Nancy says is overall long-term prices are heading this way.
And I think that people understand that. And thirdly I think that people are going to start to look at that third factor that I mentioned before, is that it's not going to be miles per gallon is the important thing that people are looking at in the future.
It's going to be cents per mile. I mean because really you don't care about miles per gallon. You care about how much money you're spending for each mile that you drive.
And I think to the extent that you can come up with alternatives that reduce the cents per mile, that's going to be a pretty attractive figure in this economic time or even better economic time.
Edward Cohen: Let me just round out Joe's answer because I agree with what she said. There are some things that are constants that drive us all. The first is climate change and I'm not sure that I agree that every industry is going to be subject to cap and trade, maybe your industry, but we're not prepared to accept that quite yet.
Josephine Cooper: We're already regulated.
Edward Cohen: The heck is already being regulated out of us as it is, fuel economy. But certainly climate change is something we know we have to address. And in that regard that really does have implications for technologies.
I know everybody here is excited about plug-in hybrids, but there is this dirty little secret about plug-in hybrids, which is you've got to have the right source of electricity if you're concerned about reducing the climate change.
Coal is not the best source of electricity. Hydro would be. Nuclear would be. So these issues are really a little more detailed than sort of a superficial I just want to plug it in and go because it's clean.
A second thing that we know, and I think it's true, is that gasoline and petroleum are finite. I don't know anybody that's inventing it in any cost-effective manner these days. And so if you look at the law of supply and demand it may be down now, but it's going to be up later.
And so all of us need to be looking for ways to either improve our fuel economy on petroleum or substitute with something else that makes sense. The third thing we all know is true is that the customer is a really tough, tough nail.
They've got a finite amount of money. They want to get the most for their money and so each of us is challenged, and this is what distinguishes us, we are each challenged by producing a product that meets their need, that will last, that's a good value, that retains its value, that provides the various comfort features that people want.
And boy that's really different. Everybody has different needs. And so that's why when the comment was made earlier that there's no single solution, that's because there's no single way in which vehicles are used by customers.
So while there are an awful lot of variables out there, there are a lot - and I can go on with the constants, but my point is that we do have a lot of guideposts. And so there is, to some extent, a map out there for us.
But I think every one of these technologies that we've talked about, hydrogen, natural gas, battery, battery electric, gasoline, you can improve the internal combustion engine and make tremendous strides in that regard, they're all going to be a part of this mix and each technology is going to appeal to a different type of consumer.
Monica Trauzzi: So, do we then need a renewable electricity standard? Will that help mitigate some of the issues that may come about by increased demand on the grid, maybe needing to build more coal-fired power plants to meet these increased demands?
Senator Bingaman has already signaled that he'd like to take this up at the beginning of the next session of Congress. Is the renewable electricity or a portfolio standard the answer?
Thomas Kuhn: Well, you know the renewable electricity standard, number one, renewables are one of the fastest-growing parts of, wind has grown at 45 percent a year for the last several years.
And I think 70 percent of the new generation last year, the wind in place, was wind generation. And you've got major - after last year's energy bills, I guess major tax credits for solar are in there.
I disagree with Ed on one thing, I mean he mentioned coal and obviously coal is going to continue to play a role in the future and we're moving toward carbon capture and storage and clean coal technologies that I think are going to help that fuel source.
But I do think that the studies that were done with NRDC and EPRI showed that even under the current mix of technologies, the current electricity technologies that the environmental benefits of plug-in hybrid vehicles are substantial in terms of reduction of CO2 emissions.
Now, we're not going to stay in the current mix of technologies because there is going to be clean coal and there is going to be carbon capture and storage, there are going to be nuclear plants, there are going to be a lot more renewables and there is going to be more natural gas.
So I mean I think that basically the electricity sector, we don't think we're going to be exempted from any carbon legislation in the future.
It is going to be cleaner in the future, it's going to be a lot cleaner. We're moving towards a low-carbon world. We're moving toward a low-carbon society and I don't care whether or not it's transportation or utilities, we're going to move there folks over the next 50 years. Face it.
On the renewable portfolio standard, I think that that has been an issue over the past several congresses and there are renewable portfolio standards in 28 states right now. There will be in a debate as to whether or not there will be a federal one and how high it should be.
But I think that renewables are an increasing part of our generation. Nuclear, which is zero carbon technology, is moving forward too as well. So I mean I think that the electricity system is going to be a lot cleaner in the future for sure than it is right now.
Monica Trauzzi: Michael, in your opinion, what's the most important thing policymakers need to understand about electric drive technology? What are they not getting right now that they maybe need to understand in order to create the correct policies to propel this technology?
Michael Andrew: The most important thing relates to a point that I was making earlier, that it's not a matter of is there a fundamental chemistry out there that's good enough and are we doing enough R&D?
We have products that are already validated for HEV applications. We're working on products that will be validated for PHEV applications. There's a spectrum of very worthy competitors out there.
The issue is, again, domestically and many people have brought this up as a security issue. Somebody threw out the line do you want to exchange an oil cartel for a battery or a cell cartel?
The issue is we need a domestic supply base. We need acceleration of the manufacturing and processing technology. The product technology itself, the information age has, to a great extent, leveled the playing field.
I mean a great example is lithium-ion technology itself. A lot of the seminal research done on lithium-ion technology was done 30 or 40 years ago here in the United States.
But in terms of manufacturing it we let that opportunity slide away. So we need to focus on how can the government assist the rapid development of a domestic supply base with focus on key raw materials to assemble cells and, not to be forgotten, manufacturing equipment?
Right now, I mean if we got a domestic order to build 12 million vehicles at JCI, we'd look in each other and say, my God, where are we going to get all the process equipment?
Because we would have to get line and wait for several years. So the development of a supply chain, whatever the government can do to facilitate that is absolutely the most critical thing.
Monica Trauzzi: I'd like to give the audience the opportunity to ask some questions of our panelists. We'd like to start with taking questions from the press. So if you do have a question, I believe we have some mics up front and there are some mics in the audience as well.
Question: I'm in the back.
Monica Trauzzi: If you could state your name and your affiliation for the panelists.
Question: I'm Steve Parliss with Automotive Engineering magazine. I wanted to ask Tony, and this goes to what you were just talking about, the battery technology. I guess it is an energy security issue, but it's also a cost issue, the cost of the Chevy Volt?
You talked about the engineers that did that study. You didn't say what the additional costs, transportation, shipping, import, packaging costs were for importing the same battery that Johnson-Saft could build for you here in the United States. Do you have a number for us?
Tony Posawatz: Hundreds of dollars. Yup, hundreds of dollars per vehicle.
Question: How many hundreds?
Tony Posawatz: I can't get into specifics, sorry.
Question: Since I'm still up here, I've got another one for Michael. Did I hear you say, and the vehicle manufacturers might want to turn away here, that you could see an increased CAFE standard? That you would support an increased CAFE standard?
Michael Andrew: If it makes sense in terms of taking away the volatility and the support and stability of policy to support the development of a sustainable electrified powertrain industry in the United States, then I think you have to do that. And I think CO2 is the other bookend to that, the carbon tax is a key piece.
Question: So, in terms of the energy bill that Senator Dorgan talked about coming down the pipe this year, are you going to be pushing, I mean in fact DOD hasn't even published a final rule on a CAFE standard. But are you going to be pushing for an increase in the CAFE standards that were in the 2007 energy act?
Michael Andrew: We don't lobby in that area, but, again, if it makes sense then I think it's a good idea.
Monica Trauzzi: Is there another member of the press that has a question? You can just raise your hand and we have someone walking around with a microphone.
Otherwise I'll open it up to all of the audience members if you'd like to ask a question of the panelists. There's a question right here. Is this one better? Oh, it is.
Question: The other one has a dead battery.
Michael Andrew: Yeah, a dead battery in that one.
Question: And actually that's one of my questions. First of all I'd like to thank the panel, a very interesting discussion. I wanted to follow up on the points mentioned by Tony about warranty and risk share and also mentioned by Nancy about cost of ownership.
When we look at advanced electric propulsion drive it's going to include lithium-ion batteries or some advanced battery technology. As we all know, several years ago lithium-ion batteries were in the news dealing with laptops in terms of durability issues.
And I think that the panel realizes out the automobile is one of the harshest environments that you could put a battery in. So the question for the panel, who is going to be responsible for end-of-life requirements?
Who is going to be responsible for recyclability? Is it the OEs? Is it the suppliers? Is it the energy companies or is it somebody else?
Tony Posawatz: Let me start off with a few comments and I'm certain my colleagues will have other points to add. Certainly, when we look at what we're doing with the Volt and some of our other advanced batteries in our production programs, we're setting very, very high standards so that the batteries can operate in a manner that is much longer than typical battery applications that we're used to in our device batteries, our cell phones, etc.
So, for our Chevy Volt our targets are 10 years, 150,000 miles, and, oh, by the way, at the end of this 10-year life period we still have about 70 to 75 percent of the energy capacity still available.
So what we think, and again I'll let my colleagues add to it, but this gives just one perspective or point. By demanding such high standards we can create a robust battery system, high energy, high power in the case of a Volt, where this battery then will take the technology as a whole further.
And I think a critical point, it may have been raised by Nancy earlier, it is that the vehicle manufacturers will add a lot of value to it because we're taking a technology that was operated in a one to two year throw away battery environment, not in a harsh environment, not with unusual temperatures, debris, dust, moisture, etc.
And so we are creating, with our expertise, ability to liquid cool batteries, to temperature control them, to use sophisticated software to manage the various modules and at the cell level etc., as well as to manage the life.
So to the original question, one answer is at the end of 10 years that batteries still has use. And I think Tom and I and others have talked about that and I've talked about it with a number of the electric utility companies.
But it's still very early and premature since we don't have any of these batteries in volume. But we do believe there are secondary markets and applications.
Monica Trauzzi: Did one of the other panelists want to tackle that question? I'm sure -
Nancy Gioia: I was going to say, we have the same requirements on all of our batteries, 10 years, 150,000 miles and the same idea, where at the end of that period you still have 70 plus percent capability on the cell.
So secondary use is absolutely being investigated. It's part of what we've got going with EPRI and Southern Cal Edison. Take the battery pack out of the car and drop it in stationary equipment, what can it do? How can it run? What can it help with?
But at the end of the day there has to be recycling, so we've been working very much with research groups, battery suppliers, Mike's team down there as well, really formulating, well, how do you ultimately, whether it's nickel metal hydride or lithium-ion cells, how do you take all of that and recycle as much as possible?
The bad news today is batteries are ground up. So there is not an effective recycling plan today. Fortunately, for Escape hybrids we launched in 2004, so we've got a few more years before we would anticipate any need to start to pull those out of vehicles.
So I mean what we're doing is working very aggressively so that recycling standards and capability is in place. We would like to recover the nickel, that's an important metal.
You know, the challenge on batteries though is there's a chemical reaction going on and reversing that chemical reaction and pulling everything back apart into some sort of usable form at the end of the day is not simple.
And many times you use more energy trying to do that than you would do by simply grinding it up. So you have to net/net and make sure that the energy solution that you're having is one that's appropriate.
And that's a challenge. And so great news is there are teams looking at it. We don't have a clear answer, but secondary use and tertiary use beyond are all opportunities that we're investigating together.
Monica Trauzzi: There was another question in the back, someone had a hand?
Question: Yeah, I have a question. Dean Tate with Southern California Edison. There's a lot of interesting news from Asia and Europe in the last month or so.
In fact, yesterday Germany just announced their goals for a million electric vehicles by 2020. Spain made a very recent announcement. France just said 400 million to build infrastructure. UK did a very similar, very bold announcement on electric vehicles.
Other announcements in Denmark, in Portugal, over in Asia. China is being very aggressive. Japan as well. Australia has also made announcements on this.
I guess for all of the different panelists, whether you're an automaker, does this make a difference? Are you taking advantage? Are you moving over there for utilities? Are we talking to the counterparts in Asia and in Europe?
Are there synergies? Policymakers, are we benchmarking? Are they suddenly going ahead of us? Just a whole series of questions about the global marketplace.
Thomas Kuhn: Well, in the utility side of the equation, we just recently had a meeting of our utility CEOs from around the world, Europe and Japan and Canada and Australia, etc. And I'll tell you what, every one of them said exactly what you said, that the momentum in their countries is huge.
So we are working together and, again, we can't do anything until the cars are there. I mean we can get prepared and we can do a lot of things, but I think that, again, the political momentum, which you just mentioned, the desire to move in this direction is tremendous all over the world.
Nancy Gioia: And in many ways, the global market development that you're describing, I think the United States is so significantly behind in its policy that leadership in this area is likely to come from outside of this country.
So I have global product responsibilities. So when I work on our platforms we have global platforms. The plans that I have for products and that Ford has for products are for global product use.
I think we've heard the same from Toyota and Honda and everybody is looking at that. What would be very detrimental is if regulations or policies are put in place that are prohibitive between using the same vehicle and its technology around the world.
That will slow the adaptation and its ability to make this technology affordable and to have that roll out. So, communication standards, how do we hook to the grid?
Anything that starts to dictate it has to have so many miles or so much distance or so much energy, if that's done differently between the countries that's going to slow our ability to rapidly deploy product in an affordable and sustainable way.
So I think what's really important is that here our policymakers have to be well aware that the rest of the world is being very aggressive in this space.
We have to understand what they're doing and how they're driving it and make sure as we progress, and I believe we need to be more aggressive in this country, that we need to not differentiate ourselves by just making our policy different for difference sake.
The question is how do we do it to help accelerate, help make it affordable and help make achieve the energy security and the independence that we need to have?
So, again, the policies we have and their interdependence, just like safety standards for driving differences for product makers and drive incremental investment with little to no real customer value.
We need to make sure that this delivers value and so I think, Dean, we're going to be challenged. But from our perspective it actually opens up global markets that have maybe more acceptance of product as it rolls, tighter, smaller cities, different vehicles, architectures that we can roll out quickly.
Tony Posawatz: Yeah, let me add on to some of Nancy's comments. I always have a little fun with the attention that our business gets in the media. And I always try to share with them when you look at the global perspective, the auto industry is a growth business, just not so much here where we call home.
If you look at some of the trends and aside from where the little blip and the unusual aspects and dynamics of the recession we're in right now, which we'll get through obviously, by 2020 most experts forecast that we'll probably add 300 million vehicles to the planet, most of those will be outside the United States.
There are not 300 million vehicles in the United States today. So, General Motors approach is pretty much every one of its entries is a global entry. The Volt is the same.
Along with its introduction in North America, the Volt will also be earmarked for Western Europe, as well as China and then perhaps some other areas as well.
So we carefully look as we formulate the future product plan, what are the best environment where there's growth, where there is opportunity for business viability, where the communities and the environment is ripe and ready, where the product that we have can be customized and contoured and tailored for the needs in that marketplace?
And I think it was stated well by my fellow panelists that I think some of this competition is good and I put out the challenge to our nation that this is truly an opportunity for us to be leaders in this area, facilitate leadership.
And then perhaps we can sell green technologies and all that goes with that to some of these other developing nations as they seek to have mobility in the form of automobiles in the lifestyle that we've become accustomed to here for many years in this country.
Monica Trauzzi: There was another question up here.
Question: Yes, I'm John. Does this work? Okay, I'm John House with the Ridlin Energy group. There was some discussion earlier about tax credits and grants to help industry move into the future with green technologies for plug-in hybrids and that kind of thing.
But when it comes to plug-in hybrids, those tax credits and grants only go so far. There is going to be an enormous requirement for huge capital investment on the part of utilities to pay for all of this new infrastructure that will be required.
And auto companies are obviously looking for the cheapest cost of energy to help them in the manufacturing process, yet given the fact that enormous capital requirements will be needed for utilities to pave the way for plug-in technology and that kind of thing, what is the position of the auto companies with regard to the recovery of all those costs and consumers rates with regard to state commissions?
Tony Posawatz: Let me start off with that one because that's an oft answered question. In a good year our market here in the U.S. is about 15, 16, or 17 million vehicles.
And as I indicated there's order of magnitude of close to 250 million in the United States, so changing over the whole fleet will take many, many years as it relates to the impact on the grid. Typically, a typical consumer will drive their vehicle about one hour or so a day.
They do sleep seven to eight hours a day and so we think that in the early stages, as the plug-in vehicles, EVs, extended range EVs get put into the marketplace that the predominant charging mechanism will be at night, off peak, unused capacity for quite some time before we get a critical mass.
So I think your points are well taken as to longer-term, but I think some of the near-term issues are very, very important to address first and foremost.
And I think there's some ways to incentivize the use of the off peak electricity until some of the appropriate mechanisms can be put in place relative to tools to manage the load, ability to integrate the batteries and capture renewables and create a more optimized, fulfilling energy system.
But I think the key point that I'd like to add is that we cannot fritter this time away. We have some lead time to plan for it and it would be a shame on as if we don't act upon it today.
And I think that's why I'm so excited about seeing how crowded this room is, the quality of the questions, the attentiveness of the people here because I think it's very important that we, together, work on these challenges
Thomas Kuhn: Yeah, I think as Tony was saying - I would agree with what he said. And I think you know that we can put - if what he says happens, we can put millions of electric vehicles on - we could accommodate millions of them without having to build any additional capacity on the generation side in any case.
I do think that also we are working toward a much smarter grid with advanced metering and information system too where we can really price differentiate electricity a lot more, which we should in the future, between peak daytime prices and those nighttime prices.
And, quite frankly, will help us run our business a whole lot more efficiently with respect to utilization of the system, better utilization of the system.
There are infrastructure issues with respect to infrastructure we have to put in to accommodate places where there aren't garages or where you need to do parking lots and things of that nature.
And I think Tony also raised an interesting thing in the beginning with jumpstarting things with fleet purchases. I think we can all look at policies here that will enable us to maybe write off cars a whole lot faster or expense them or whatever with respect to these electric diesel purchases for fleets that will make them a whole lot more attractive.
There's a myriad of different policies that EDTA is incidentally looking at right now. And they're policies that we can all support with respect to the battery manufacturers and the OEMs and the utilities.
And I think that right now the politicians are ripe for suggestions on policies that will help us move this along and facilitate it a lot quicker. So I think there are many opportunities in the public policy side on this. It's a good question John.
Monica Trauzzi: I think we have time for one more question.
Question: Thank you. Jan Mueller with Environmental Energy Study Institute and I'd like to focus on the climate change issue for a second and just how international and national climate policy might be an important driver for advancing electric drive vehicles as well as other power technologies now.
You know, the more we think about alternative fuels of the liquid form or nonliquid form, like electric drive vehicles, the more it seems like the vehicle and the fuel, and as someone noted earlier it's the fuel, stupid, are almost inextricably linked.
And right now, I mean even though we just went through a long fight to finally get CAFE standards and the industry is scrambling to deal with that, and like in the last climate bill, the Lieberman-Warner bill, there was a low-carbon fuels standard.
And there is still a developing discussion about how to actually do that, California's experiment and whatnot. So I'd like to think outside the CAFE box or beyond the CAFE box for a second and see if you can imagine that miles per gallon is not really the right standard for the technologies down the road or even for the climate problem that we're trying to address.
And if you can imagine a CO2 per mile kind of standard down the road and how that might work. So we might get fuel providers, which includes the utilities as well as auto makers, sort of driving innovation for the thing we really need to accomplish.
Because otherwise we may be wrestling with this piecemeal and so I'd just like you to entertain that if you can.
Edward Cohen: I think you raised a terrific question and it could be the subject of an entire panel. The truth is that we do not have the correct structure for regulating climate change, particularly in the transportation sector.
We have 17 states going in one direction, when, in fact, this is a national issue. And ideally the drive towards greenhouse gas standards should have begun at the federal level quite a while ago.
And, secondly, we're being asked to do it under a statute that was not structured for transportation or for the kind of emissions issue that is not local, where the impact is not local.
And so in response to your question, and I guess the third point I would make is that EPA is in the process of proceeding under the Clean Air Act and I anticipate that they will make an endangerment finding.
You know, I anticipate that they're going to try to do something under that statute. The truth is that we're going to have then California's law, we're going to have EPA going, we're going to have the NITSA, CAFE rules. And it really is an untenable situation and makes very little sense.
It makes it much harder for manufacturers to design vehicles to meet three different standards or some would argue 20 different standards, depending on how you want to compute the California standard and the 16 other states that have or might adopt it.
But the truth is what we really need is a single federal statute that comprehensively addresses, simultaneously, because they're so integrally related, fuel economy and climate change.
And from our standpoint we would love to see the Congress focus on a different kind of structure that leads to this unified national approach.
Monica Trauzzi: Anyone else on that question?
Tony Posawatz: Yeah, I absolutely agree with where Ed is going. If you add the global standards on top of it and, again, we talked a little bit earlier about how important for us to get scale and get volume and run a good business model going forward to go where the growth is.
If you look at all the global standards that get compounded so many times, there's times when my team has more lawyers on them to interpret these standards than engineers to work on batteries.
And so I think that would be a most helpful and I think a doable thing. It's not a technological leap to say, OK, these people take the lead and maybe you'll live with an existing standard.
But then you work on the next phase that could, in fact, the more CO2 based and alike. But these dueling standards are really non-value added.
Thomas Kuhn: Just one additional point. You kind of slipped over it and I don't know whether it was intentional or not, but the notion of a per unit emission, per unit of miles, something I think makes a lot of sense.
Michael Andrew: Yes, I would make a comment there too. I think the question is excellent and here's a perfect example how you can transfer that type of thinking into activity in the marketplace and really make an impact.
You have that type of standard in Europe and as a result and somewhat due to the fact that their fleet is generally more fuel efficient to begin with, but they tend to look more at what are the accumulated incremental increases you can make in terms of vehicle technology to achieve CO2 emission reduction success?
A perfect example, micro hybrids. Now, it doesn't sound like a sexy technology, but BMWs and Smart Fortwos available as micro hybrids.
Last year we sold hundreds of thousands of what I call specialty lead acid batteries that are needed specifically for the more rigorous duty cycle of a micro hybrid.
It's probably only a 5 to 7 percent improvement in fuel economy per vehicle, but if you're talking about a half a million vehicles and your goal is to lessen CO2 emissions and reduce fuel consumption, you're making progress.
So that was my point earlier, we should take advantage of the spectrum of hybrid technologies from micros all the way up to full batteries, full battery electric vehicles.
It doesn't necessarily have to be going for the grand slam home run of a plug-in hybrid culture. I love plug-in hybrids, but we shouldn't ignore the other opportunities.
Monica Trauzzi: OK, I think we're going to end it there. Thank you to the panelists. Thank you to the audience for your excellent questions.
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