(March 6, 2007)

Good morning.  My name is Elizabeth Lowery and I am Vice President for Environment and Energy at General Motors.  I am pleased to be able to speak to you today regarding GM’s technology plans for the future.        

Today’s automotive industry provides more in the way of opportunities – and challenges – than we have seen in its entire history.  On the challenge side, there are serious concerns about energy supply, energy availability, sustainable growth, the environment, and even national security issues that, collectively, have come to be called “energy security.”  And the fact of the matter is that it is highly unlikely that oil alone is going to supply all of the world’s rapidly growing automotive energy requirements.  For the global auto industry, this means that we must – as a business necessity – develop alternative sources of propulsion, based on alternative sources of energy in order to meet the world’s growing demand for our products.  The key is energy diversity, which can help us displace substantial quantities of oil that are consumed by U.S. vehicles today.

This is a huge assignment.  But it’s also an extraordinary opportunity. 

By developing alternative sources of energy and propulsion, we have the chance to mitigate many of the issues surrounding energy availability.  We will be able to better cope with future increases in global energy demand.  We will minimize the automobile’s impact on the environment.

This means that we must continue to improve the efficiency of the internal combustion engine, as we have for decades.  But, it also means we need to dramatically intensify our efforts to displace petroleum-based fuels by building more vehicles that run on alternatives, such as E-85 ethanol, and, very importantly, by significantly expanding and accelerating our commitment to the development of electrically driven vehicles.

First let me speak about bio-fuels.  One of the greatest opportunities for displacing U.S. gasoline is to ramp up the usage of bio-fuels.   There are already over 6 million E-85 capable vehicles on America’s roads.  If all flex-fueled vehicles on the road today ran on E-85, we would displace the need for over 3.8 billion gallons of gasoline annually.

Last year, we committed to double our production of vehicles capable of running on renewable fuels by 2010.  That’s almost one million E-85 capable vehicles a year by the end of the decade   Late last year, we also said that we are prepared to make fully half of our annual vehicle production biofuel-capable by 2012 -- provided there is ample availability and distribution of E-85, as part of an overall national energy strategy.   If all of these flex-fueled vehicles ran on E-85, by 2017 we would displace the need for over 22 billion gallons of gasoline annually.  As a nation, we need to be developing the necessary sources of these bio-fuels to make sure we can produce the volumes that can have this dramatic an impact.

But as you know, flex-fuel vehicles alone will not get the job done.  Right now, there are about 170,000 gas stations in the United States, but only slightly more than 1,100 E-85 pumps.  So, we are also partnering with government, fuel providers, and fuel retailers across the U.S. to help grow the E-85 ethanol fueling station infrastructure.  Since May of 2005, we’ve helped add 200 E-85 fueling stations in 13 states with more to come.

Now let me turn to potentially the even more exciting opportunity for the future of our products -- electrification of the automobile.  Over the last few months, GM has made several announcements related to our commitment to electrically driven vehicles.  The benefits of electricity include the opportunity to diversify fuel sources “upstream” of the vehicle.  In other words, the electricity that is used to drive the vehicle can be made from the best local fuel sources – natural gas, coal, nuclear, wind, hydroelectric, and so on.  So, before you even start your vehicle, you’re working toward energy diversity.  Second, electrically driven vehicles -- when operated in an all-electric mode -- are zero-emission vehicles.  And when the electricity itself is made from a renewable source, the entire energy pathway is effectively greenhouse gas emissions free.  Third, electrically driven vehicles offer great performance -- with extraordinary acceleration, instant torque, and improved driving dynamics.

There is a continuum of electrification of vehicles – and we are working along that entire range.  For example, there are what most people think of as “electric vehicles” – pure battery-powered vehicles, such as GM’s EV1.  The EV1 ran solely on electricity that was generated outside the vehicle and was stored onboard the vehicle, in lead-acid and nickel-metal-hydride batteries.

Then there are gas-electric hybrids -- which are not, per se, electric vehicles -- but which are, in part, electrically driven.  This type of conventional hybrid vehicle has both an internal combustion engine and an electric drive.  And, it can be powered by both systems simultaneously or by either system independently.  The electric energy in a conventional hybrid vehicle is generated by the vehicle itself and stored onboard in a battery.

We have several kinds of hybrid vehicles, either on the road or under development – from the heavy duty hybrid that is used in more than 550 transit buses – to the Saturn VUE and Aura Green Line models (which use our high-value “belt alternator starter” system) -- to our advanced “two-mode” hybrid system (which will begin to show up on our full-size SUVs and pickups later this year). 

At the Los Angeles auto show, we announced work on another type of hybrid, the Saturn VUE “plug-in hybrid.”  A plug-in hybrid will be a conventional hybrid vehicle with an important difference – the battery will be much more advanced – storing significantly more energy and, of course, being able to be plugged into a standard outlet to recharge it.  The result will be significantly better “fuel economy” -- based on the petroleum consumption of the vehicle -- and the ability to use diverse energy sources.

No major OEM has built a plug-in hybrid for retail sale because the required battery technology doesn’t yet exist.  In fact, given what we know today, it’s pretty clear that it will take several years to see if the battery technology will occur that will let us bring to market a plug-in hybrid that will meet the expectations and real-world performance standards that our customers expect -- things like safety, reliability, durability, driving range, recharge time, and affordability.

The Saturn VUE plug-in hybrid will use an advanced battery, like lithium-ion.  Production timing will depend on battery technology development.  But, based on our work with EV1 and our different conventional hybrid-electric vehicles, we already have a lot of experience developing and integrating advanced battery technology into our vehicles, and we’re already working today with a number of battery companies to develop the technology necessary to build a plug-in hybrid.  The technological hurdles are real, but we believe they’re also surmountable.  I can’t give you a date certain for our plug-in hybrid, but I can tell you that this is a top priority program for GM, given the huge potential it offers for oil consumption improvements.

Earlier this year, we unveiled the Concept Chevrolet Volt at the North American International Auto Show in Detroit.  The Chevrolet Volt is designed to be powered by GM’s next-generation electric propulsion system, the E-flex System.  The E-flex System can be configured to produce electricity for mechanical propulsion from gasoline, ethanol, biodiesel or hydrogen.  The Volt uses a large high energy battery pack and a small, one liter turbo gasoline engine to produce electricity. 

The Concept Chevrolet Volt can be charged by plugging it into a 110-volt outlet for approximately six hours each day.  When the advanced lithium-ion battery pack is fully charged, the Volt is expected to deliver 40 city miles of pure electric vehicle range.  When the battery pack is close to depletion, the small engine spins at a constant speed to create electricity and replenish the battery pack.

One technological breakthrough required to make this concept a reality is the large lithium-ion battery pack.  This type of electric car, which the technical community calls an “EV range-extender,” would require a battery pack that weighs nearly 400 pounds.  

There are other types of electrically driven vehicles that we expect to see in the future as well, including hydrogen fuel cell vehicles, such as the Chevrolet Sequel concept vehicle.  A hydrogen fuel cell vehicle is, in fact, an electric vehicle.  It drives on electricity that is created by the fuel cell.  The fuel cell is little more than a battery that stores electricity in the form of hydrogen.  The beauty of a fuel cell vehicle like the Sequel is that the electricity is generated onboard the vehicle without using petroleum-based fuel, and without emissions.  And like electricity, hydrogen can be made from diverse energy sources before it ever powers a vehicle.  As part of a comprehensive deployment plan dubbed Project Driveway, we are building more than 100 next-generation Chevrolet Equinox Fuel Cell vehicles that will operate and refuel with hydrogen in California, New York, and Washington D.C.

GM is developing a prototype fuel cell variant of the Chevy Volt that mirrors the propulsion system in the Chevrolet Sequel (fuel cell vehicle).  Instead of a big battery pack and a small engine generator used in the Volt concept vehicle, we would use a fuel cell propulsion system with a small battery to capture energy when the vehicle brakes.  Because the Volt is so small and lightweight, we would need only about half of the hydrogen storage as the Sequel to get 300 miles of range.  In fact, we continue to make significant progress in this area, and we continue to see fuel cells as the best long-term solution for reducing our dependence on oil.

Since I have mentioned that advanced technology vehicles that can promote the development of biofuels and electrification are “the answer” to displacing and diversifying U.S. fuel sources – let me share our view on what is not the answer.  Over reliance on CAFE is not the answer to U.S. oil dependence.  Now don’t misunderstand what I am saying here. We agree with the need to reduce the Nation’s dependence on petroleum.  And the objectives for the original CAFE program were to: 1) reduce U.S. gasoline consumption and 2) reduce U.S. imports of petroleum.  But despite dramatic increases in vehicle and fleet fuel economy over the 30 year existence of the CAFE program, U.S. gasoline consumption and oil imports have not declined.

Since the CAFE program was enacted, U.S. consumption of gasoline has increased by 60% and U.S. imports of petroleum have increased from 35% of our supplies to over 70% of our supplies.   At the same time, new vehicle fleet fuel economy has more than doubled for passenger cars and increased 60% for light trucks.  But these increases have been overwhelmed by the increases in the size of the vehicle fleet and the number of miles traveled by Americans annually. 

There are four factors that drive U.S. light duty gasoline consumption: 1) purchasing decisions of American consumers - sales mix, 2) total vehicle miles traveled, 3) size of the overall fleet, and finally 4) individual vehicle fuel economy.  CAFE only affects one of these four factors – only vehicle fuel economy.   Data from the government’s own Energy Information Administration shows that CAFE requirements alone cannot overcome our increases in petroleum demand -- due to the continued increase in vehicle miles travels and the increasing size of the fleet.  Even so, increases in CAFE standards continue to be one of the major focuses of how to address energy security issues. 

We understand, of course, that increasing vehicle fuel economy does play a role in helping address U.S. gasoline consumption.  As competitive automakers looking to win consumer purchases of vehicles in the marketplace, we look for opportunities to increase the fuel economy of our new products each time they are introduced. But many of the recent legislative proposals to increase CAFE requirements (by 4% or more) are not based on any realistic measure of what is technically achievable and economically practicable.

Rather than having Congress try to pick an arbitrary rate of increase for CAFE standards, we believe that the regulatory process at the Department of Transportation should be used.  That way, the agency can collect and review confidential and proprietary company product plans and consider the opportunities to increase the fuel economy levels consistent with consumer needs and choices, competitive implications, vehicle and highway safety, and the impact on U.S. jobs.  This Administration has twice undertaken such rulemakings for the light truck CAFE levels.  The most recent fuel economy rule for light trucks has now set in place increases for 7 consecutive years (2005-2011) – increasing the standards by 16 percent (about 2% per year) and for the first time adding to the regulated fleet the largest SUV’s in the market.  These challenging increases in the CAFE requirements allow the automakers to make the progress that they can with conventional technology vehicles, and still focus increasingly on the advanced technology systems and vehicles that can really make a difference in addressing U.S. gasoline consumption.

In addition, before any increases are undertaken for the passenger car fleet, the agency should be given authority to establish a reformed, or attribute-based system, similar to what was done for the light truck CAFE system. This will help reduce the competitive disparities as well as avoid other consequences of raising fuel economy levels - like vehicle mass and size reductions that can adversely affect vehicle and highway safety. 

Technology, biofuels and energy diversity are the best answers to oil security concerns.  And, as we pursue these technologies – and more energy diversity – there are steps the government can take to help.

·         First, the government should fund a major effort to strengthen domestic advanced battery capabilities.  Advanced lithium-ion batteries are a key enabler to a number of advanced vehicle technologies - including plug-in hybrids.  Government funding should increase R&D in this area and develop new support for domestic manufacturing of advanced batteries. 

·         Second, biofuels production and infrastructure should be significantly expanded.  The market response to renewable fuels is encouraging, but it needs to reach a self sustaining level that is not lessened when gasoline prices fall.  Steps to increase the availability of biofuels should help increase its use.  Government should continue incentives for: the manufacture of biofuel-capable flex fuel vehicles; increases in biofuels production; increases for R&D into cellulosic ethanol; and increased support for broad-based infrastructure conversion.

·         Third, government funding should continue and expand development and demonstration of hydrogen and fuel cells.  Tremendous progress has been made this decade on fulfilling the promise of hydrogen powered fuel cells.  The U.S. needs to stay the course on the President’s hydrogen program and begin to prepare for the 2010-2015 transition to market phase.  Funding should continue for hydrogen and fuel cell R&D and demonstration activities at DOE.  The government should also commit to early purchases by government fleets and support for early refueling infrastructure in targeted locals in the 2010-2015 timeframe.

·         Fourth, government purchasing should set the example.  Government fleets can help lead the way to bringing new automotive technology to market and bringing down the cost of new technologies.  The government should continue to purchase flex fuel vehicles; demand maximum utilization of E-85 in the government flex fuel fleets; use federal fueling to stimulate publicly accessible pumps; provide funding to permit purchase of electric, plug-in and fuel cell vehicles into federal fleets as soon as technology is available.

·         Finally, there should be further incentives for advanced automotive technology so that these technologies may be adopted by consumers in large numbers to help address national energy security.  Well crafted tax incentives can accelerate adoption of new technologies and strengthen domestic manufacturing.  Consumer tax credits should be focused on technologies that have the greatest potential to actually reduce petroleum consumption and provide support for manufacturers/suppliers to build/convert facilities that provide advanced technologies. 

In summary, we believe tomorrow’s automobiles must be flexible enough to accommodate many different energy sources.  And a key part of that flexibility will be enabled by the development of electrically driven cars and trucks.  From conventional gasoline and diesel fuel -- to biofuels that can displace them, like E-85 and biodiesel -- to electricity – whether it is stored or generated on the vehicle, with an internal combustion engine or a hydrogen fuel cell – we see a logical journey from stand-alone, largely mechanical automobiles to vehicles that run on electricity.