GM Teams With Power Companies To Make Plug-ins A Reality

July 23, 2008

This is not necessarily unexpected news, but key to the success of upcoming plug-in hybrids like the Chevy Volt. It’s also another reason why it takes big corporations like GM with enough influence (and promises of huge increases in revenues) to create this type of drastic investment/change in infrastructure…as well as modification of consumer behavior.

General Motors and Electric Utility Industry Launch Major Collaboration to Commercialize Plug-in Vehicles

· Paves way for customers to realize the benefits of plug-in electric vehicles such as the Chevrolet Volt and Saturn Vue Plug-in Hybrid

· Further progress on road to electrification of the automobile

San Jose, CALIF – General Motors announced today that it will collaborate with the nonprofit Electric Power Research Institute (EPRI) – more than 30 of the top electric utilities in the United States and Canada — to accelerate the introduction of plug-in electric vehicles.

General Motors will work with EPRI and the utility companies on everything from codes and standards to grid capability to ensure that when the Volt goes to market, the infrastructure is ready – and customers can realize the full potential of these revolutionary vehicles as soon as they leave the showroom.

Details of the alliance, which is by far the largest and most-comprehensive between an automaker and the electric utility industry, were announced today in San Jose during the Plug-In 2008 Conference.

Among the many things the coalition will address include ensuring safe and convenient vehicle charging, raising the public awareness and understanding of plug-in electric vehicles, and working with public policy leaders to enable a transition from petroleum to electricity as a fuel source.

“Together with EPRI and the utility companies, we can transform automotive transportation as we know it, and get our nation and the world past oil dependence – and heading toward a future that is electric,” said Jon Lauckner, GM VP of Global Program Management. “This group is taking significant steps toward making electric vehicles a reality and in helping our customers enjoy the tremendous benefits these vehicles will provide.”

Using electricity to power vehicles such as the Volt and the Vue Plug-in is attractive to GM because it can simultaneously reduce the industry’s dependence on petroleum and vehicle greenhouse gas emissions. Consumers will also see a tremendous benefit as the cost per equivalent mile of a vehicle powered by electricity is roughly one-fifth of the cost per mile when powered by gasoline.

The coalition of utility companies plays a critical role in developing universal technical standards that will facilitate ease of use and commercial feasibility of electric vehicles.

“EPRI is pleased to collaborate with GM and utility leaders in electric transportation to work together in advancing plug-in hybrid electric vehicle transportation,” said Arshad Mansoor, Vice President of EPRI’s Power Delivery & Utilization sector. “This collaboration is critical in the development of standards that will lead to the widespread use of electricity as a transportation fuel.”

Last month, GM, along with EPRI, received a conditional award from the U.S. Department of Energy to create a plug-in demo program using the Saturn Vue.

In June, GM’s Board of Directors committed to production of the Chevrolet Volt extended-range electric vehicle — due in showrooms in late 2010. And, at the 2008 North American International Auto Show, GM announced its intention to produce a plug-in hybrid electric version of the Saturn Vue. Given the huge potential vehicles such as the Chevrolet Volt and Saturn Vue plug-in hybrid offers for fuel economy improvement, these programs have emerged as top priorities at GM.

“This coalition shares a vision of bringing plug in vehicles to market so we can accelerate the use of electricity as a substitute for gasoline,” said Lauckner. “We are focused on creating affordable, highly desired vehicles that will take advantage of the grid – and providing accessible, reliable, convenient low cost electricity to plug-in customers. Collectively, we can realize all of the benefits of the plug-in revolution.”


Lotus releases first picture and details of Esprit replacement “Eagle”

July 15, 2008
Lotus Eagle available Spring 2009

Lotus Eagle available Spring 2009

Project Eagle has landed. Here is the first official picture of the long-awaited replacement for the Lotus Esprit. The car will be unveiled on July 22 at the British Motor Show…the official marketing name to replace the project name “Eagle” will be released at that time.

The car will be powered by a 3.5-liter V6 mounted midships. Since it will be available in two seater and 2+2 forms, Eagle will be the only midengine 2+2 on the market.

Lotus claims the Eagle lapped the Nurburgring faster than the Elise and with much more high-speed stability than the Exige. Performance doesn’t come at the expense of comfort, as the Eagle will offer sat nav, high-end audio and other luxury features.

Eagle will be available to customers starting in Spring of 2009. Production is planned to hover around 2000 units annually.


GM’s Press Release

July 15, 2008

Here’s the announcement cited in yesterday’s posting.

GM Fact Sheet: GM Turnaround: Actions and Accomplishments

Additional Cost and Liquidity Initiatives

GM announced operating actions, potential asset sales, and financing activities totaling approximately $15 billion

Announced plans for internal operating and Board of Director actions to generate approximately $10 billion in cumulative cash improvements by the end of 2009
Further reductions in truck capacity and related component, stamping and powertrain capacity
Reducing sales and marketing spending, and holding engineering spending
Reducing U.S. and Canada salaried headcount in 2008
Beginning in 2009, eliminating health care coverage for U.S. salaried retirees over 65, partially offset by pension increases
No base compensation increases for U.S. and Canada salaried employees and no annual discretionary cash bonuses for the executive group
Revising capital spending plans
Targeting working capital improvements, driven by inventory reduction
Deferring payments into the UAW VEBA trust until 2010
Suspending dividends on common stock

Announced additional plans for potential asset sales and financing initiatives to raise additional liquidity of $4-7 billion
Broad global assessment of assets for potential sale or monetization
Strategic analysis underway for HUMMER
Plan to opportunistically access global markets for capital
Previously Announced Cost Reduction Activities

Announced an additional $4-5 billion in cost savings by 2011 driven by the implementation of the 2007 GM-UAW contract
Includes independent healthcare VEBA scheduled to begin in 2010
19,000 participants in 2008 attrition program
Announced additional structural cost savings of more than $1 billion by 2010
Announced that production will cease at four North American truck plants and shifts would be eliminated at two others
Achieved $9 billion structural cost reduction from 2005-2007 in North America
2005 health care agreement
North American capacity reductions of nearly 1 million units
34,000 participants in 2006 hourly attrition program
Spending for U.S. hourly and salaried legacy pension and health care will decline from annual average of $7B over last 15 years to less than $2B per year in 2010
Structural cost reduced from 35% of revenue in 2005 to 30% in 2007; targeting reduction to 25% by 2010 and 23% by 2012
Product Excellence

Numerous prestigious industry awards
Saturn Aura and Chevrolet Silverado 2007 North American Car and Truck of the Year; Chevrolet Malibu 2008 North American Car of the Year
2008 Cadillac CTS, Chevrolet Malibu and Corvette Car and Driver “10 Best” cars, and Automobile Magazine “All Stars,” Motor Trend Car of the Year
Strong car and crossover sales increases (U.S., June CYTD)
Saturn Aura (up 21%); Buick Enclave (up 291%); Pontiac Vibe (up 28%)
Chevrolet Malibu (up 31%) – average transaction prices up more than $4,000 and residual values up 11 points
Cadillac CTS (up 34%) – average transaction prices up more than $8,000
Upcoming products
18 of the next 19 major launches will also be cars and crossovers, including:
New midsize Buick sedan,
New CTS coupe and sport wagon,
Midsize crossovers for Cadillac and Saab,
Compact crossover for Chevrolet,
New midsize car and wagon for Saab
Chevy Camaro and Pontiac Solstice hardtop; G8 sport truck
Chevy Volt
Revitalized U.S. Sales & Marketing Strategy

Retail share stabilized near 20%
Incentive spending reduced by 24% from 2004-2007
Reduction in daily rental sales of nearly 200,000 units 2005-2007
Exterior styling cited as top reason for purchase
Average transaction price up 3%
Introduced GM channel strategy:
73% of Buick-Pontiac-GMC sales through aligned dealers
Reduction of 635 dealerships from December 2005 to June 2008
Quality

Industry’s best 5-yr warranty coverage program – confidence in GM products
89% reduction in recalls 2005-2007
New vehicle launches performing at record warranty levels
Chevrolet Malibu ranked highest in initial quality according to J.D. Power & Associates in the midsize car segment and was the highest-ranked domestic vehicle


Press Release Of the Day: GM To “Align the Business to Current Market Conditions”

July 14, 2008

General Motors announced today that it will announce tomorrow how it will operate going forward… or at least until the next time they reorganize.

Detroit, Mich. (NYSE: GM) General Motors Chairman and CEO Rick Wagoner will hold a news conference on Tuesday, July 15 to discuss actions the company is taking to align the business to current market conditions.

Anyone want to bet that relaligning executive salaries to a pre-1990’s multiple of average employee compensation is not a part of this announcement? I’m going to predict, however, that there are a number of plant closures and retirement packages to discuss.


Reports of the Big Three’s deaths have been greatly exaggerated

July 11, 2008

If I hear another journalist predict the death of one of the Big Three automakers again in the next few weeks, I think I might hurl. No matter where I turn – the local newspaper, a business publication or online, some so-called expert is again spouting the certainty of GM, Ford or Chrysler failing.

There’s no doubt that times have been better for the Big Three. Lending, real estate and stock markets have led to a crappy economy for much of America. While jobless rates are extremely low, the median salaries have fallen adjusted for inflation over the last eight years. While some cite fuel prices as a reason that people aren’t buying expensive goods and services, this actually is probably more of an incentive than detraction when it applies to cars. After all, there are literally millions of people out there dying to get rid of their fuel guzzling Silverados, F150s, Durangos, Suburbans, and Expeditions.

Beyond external economic factors, there are the internal cash flow issues. Chrysler is probably the most cash-strapped, having been privately purchased from Daimler-Benz. Ford and GM have their own woes, because losing money each quarter hand-over-fist has a funny way of taking a toll on your liquidity.

Then there’s the whole lending market as it applies to these companies actually getting money. Just like Joe Six-Pack with his 400 credit score, GM and Ford are also finding their bad credit can be seen as a liability not worth taking when going in for a loan. Each of the Big Three relies on borrowed money to survive.

So at this point it probably seems like I’m not disagreeing with the other journalists at all! This is probably because this is where the others stop thinking about the issue and send their articles to their editors. I’m a bit different – I was a Business major with a minor in History, so I have a tendency to look at the past to give indications of where the future is headed.

Predicting the demise of companies is nothing new. Forty years ago, everyone thought Boeing was dead meat. Even ex-employees bought a billboard that asked that the last person leaving Seattle to please “turn out the lights.” Boeing obviously survived, and even has had long periods of thriving. It exists today in a functional duopoly.

Then there was Chrysler, which was on its way into the toilet when Lee Iacocca was a part of securing a federal bailout. A few K-cars and minivans later, and Chrysler was back in the mix. Even stupid moves like purchasing Lamborghini couldn’t stunt momentum in the 1980s and 1990s.

And this is the basis for my argument – business is all about ebb and flow. When the markets get tight, small companies fall off the face of the earth, but 800-pound gorillas hang in there…mostly because it’s too damn difficult for them to truly fail.

The reason is simple: huge corporations are so intertwined into the fabric of other businesses, as well as federal, state and local economies that there is simply too much at stake. In addition, because there is so much meat and fat, that a company like GM can literally spend a decade cutting waste and squeezing last bits of cash out of profit centers.

Journalists still seem to think of corporations like GM or Ford as a bunch of suits and line workers in Michigan. Nothing could be further from the truth. Beyond an employer of 266,000 people, GM is also an owner of contracts and relationships with thousands of suppliers, consultants, manufacturers, financial partners, and media conglomerates. Then there are the hundreds of thousands of employees of independently-owned dealerships worldwide. When GM shuttered Oldsmobile, the cost to handle the dealerships was over a billion dollars. Imagine the cost of dealing with Chevy, Pontiac, GMC, Buick, Saturn, Hummer, Saab, and Cadillac all at once! The cost to federal and state governments alone in lost tax revenue and unemployment insurance guarantees would be staggering.

Before someone throws out Enron or Worldcom as examples of how mighty can fall, please keep in mind that the auto industry is much different. Enron was a true shell game with an astonishing little amount of assets. Worldcom had fiber, but it also had debts in excess of the network’s value – especially after all the cooked books were straightened.

Even if any of the Big Three reached a critical point of no return, the federal government would again step in with a bailout. Just like with the mortgage lenders, the boys in DC know it is cheaper to borrow money from the Chinese and use it to keep the companies afloat until better times than to support all the layoffs, decreases in tax revenues and stock prices during an extended recession.

Keeping afloat for the next few years will be tough, but it provides the opportunity for GM, Ford and Chrysler to rethink brands, products, services, contracts, operations, financial management, and organization. Each company will need to meet increasing CAFE and safety standards, so what better time than now to make tough decisions that could position each for thriving in decades to come?

Maybe The Kinks were thinking about the Big Three when they wrote Low Budget. “Times are hard, but we’ll all survive – we just gotta learn to economize!”