Automotive News World Congress

Tim Leuliette

Automotive News World Congress

January 19, 2005

Detroit, Michigan

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After this impressive array of speakers over the last few days, I am comfortable that all of the critical tactical issues of our industry have been discussed. It has been a memorable Automotive News World Congress, and I would like to thank Keith Crain,ne and……….. Peter Brown, Dave Sedgwick, Ed Lapham and the team from Automotive News for giving all of us a chance to come together and talk openly about the issues facing our industry. Automotive News has made an important contribution to the industry with these meetings for many years, and I commend them.

From a number of distinguished presenters, we have covered topics such as profitability, productivity, quality, commodity inflation, OEM/supplier relationships…just about every key issue on the front pages of Automotive News, or any industry journal or paper. There have been good discussions; there has been great insight.

But as this meeting comes to an end, I would like us to focus on what I consider the most critical, strategic issue facing this industry. Many of you expect me to once again talk about steel, price recovery, supplier/OEM relationships, etc.

But, that has already been discussed throughout these sessions. I talked about it two and a half years ago in Traverse City, when the steel/ferrous metal clouds were gathering on the horizon. Our only mistake then was not to address the issue at that time with a constructive industry wide solution.

That opportunity has passed and we must deal with the situation as it exists today whether we like it or not.

Sometimes accepting massive shifts in economic reality is difficult for institutions so used to the status quo, but that doesn’t change the facts.

That is all I will say on that subject because there is actually a more significant challenge for all of us in this industry and in this country. It’s an issue we raise periodically and then put away when concerns fade from the nightly news. It’s an issue we like not to talk about unless we have to. It’s an issue that with one senseless act, one government collapse, one hiccup in a global distribution system, will become our worst nightmare.

The issue is the drug that our industry, our society, is hooked on…it’s called oil.

Currently, this country has economic and foreign policies that are predicated on the availability of an uninterrupted supply of low cost oil for decades to come. We are betting our careers, our businesses, and our family’s financial health on the availability of an uninterrupted supply of low cost oil for decades to come.,… for decades to come

We get up everyday praying that Osama Bin Laden doesn’t figure out that a dirty bomb in a Saudi oil field will do significantly more damage to the U.S and world economies than another attack on U.S. soil of any kind.

We put together long-term forecasts rather than with the assumption assume that China’s oil needs will somehow be satisfied by massive new discoveries of oil, because no model balances with their forecasted thirst and the world’s known oil reserves. Any scenario that is contemplated puts more geopolitical power in the hands of the Middle-East Islamic militants.

At the same time, as the world faces critical decisions regarding energy sources, a splinter group of the Greens in Europe is lobbying against wind power due to its noise and visual pollution.

as well as Aanother group has taken advertisements out against hydro-electric power because of its impact on fish, the relocating of people and the impact on the natural habitat. Don’t even mention nuclear.

The world needs energy as you and I need oxygen to breathe. The United States relies on oil for our its very existence, and this industry, the auto industry, consumes 40% of every barrel produced. To deny the essential economic, geopolitical, and national security role oil plays in our society is to deny reality.

Balancing our energy needs with an environmental friendly solution is paramount, but to think there will not be compromises puts you into the twisted intellect of a Michael Moore.

I, In the brief, few moments we are together, I would like first, to convince you that the premise that is the availability of an uninterrupted supply of low cost oil for decades to come is a flawed premise. And then, I would like to propose an alternative path for your consideration.

Today, we are at a strategic fork in the road with respect to an energy policy. This fork in the road has three prongs, as there are three schools of thought.

First, there are those who doubt that we have a problem of any scale. Let’s call them the "complacent crowd.”

The complacent crowd is secure in the knowledge that, up until now, this crisis has always mitigated before it became unbearable. They admonish those concerned about this periodic “calamity du jour” by pointing out, correctly I may add, that over the last three decades we have found more oil than we have burned. In their planning models, they can tolerate the instability in Iraq and the Iranian theocracy next door as tolerable concerns that will not have an impact on global oil supplies.

They are comfortable that the house of Saud will overcome any siege by Islamic fundamentalists, as will other Gulf States that face similar issues.

The “Complacent Crowd”They sees the crisis in Nigeria as temporary, and they are not bothered by a Venezuelan president, who appears to relish the role as this hemisphere’s next Castro and whose policies pull maintenance investment from the country’s oil production infrastructure. They are also not troubled by the confiscation of the Yukos operations in Russia.

Russia, Nigeria and the Middle East; And these are the places that we’re counting on for more than half the oil we use in this country.

Another concern for the complacent crowd should be China. China, which for decades was a net oil exporter, became the world's second largest importer of foreign oil in 2003, surpassing Japan for the first time. China has accounted for 40% of the world's oil demand growth over the past four years. China, which is forecast to require 9.4 million barrels per day of imported oil by 2025 could easily do to oil, what their its demand did for scrap iron and steel did over the last two years. And still, tThe complacent crowd says “don't worry.”

Then there are those that I call the “incrementalists”. They share the concern about our oil supply, but for reasons of economics and the fear of change, the internal optimistic trait that belies our specie is they wish to buy time and continue working the internal combustion engine. They see hybrids as a safe middle ground, and not just a transitional power source. The incrementalists pray that oil is found in large deposits in shale rock in this country, and believe that with conservation, prudence, and luck, we can push this problem out until the next generation…. so our children can solve it…. like they will have to solve Social Security.

Incrementalists find solace in attempting “good things,” like movie stars driving hybrids and college kids wearing t-shirts promoting solar power. But there is a risk, that the appearance of attempting “good things” will placate us with a false sense of security.

And lastly there is the third group: those convinced we need a fundamental change in energy policy in this country, and eventually the rest of the world. Some of these people, such as those of us at Metaldyne, are from the auto industry. This group has accepted that we must move from a carbon based energy model to a hydrogen-based model.

Since I am part of the group, and since thisit is my speech, with the power of the pen, I have labeled theis group the “realists." The “realists” accept that we need to move down the periodic table to the element with an atomic number of “1”: harness the most abundant fuel in the universe and move this industry to the most environmentally friendly energy source for as long as we occupy this planet. This path is not without challenges, including determining the best source for hydrogen, as well as perfecting the storage of it in the vehicle. We are at the beginning of a journey, and have many technological issues to overcome, but they can be overcome.

Those that who support this path, do so for three fundamental reasons. First, we must find an alternative energy source for geopolitical reasons. Second, we must find an alternative energy source for environmental reasons. And third, we must find an alternative fuel source for fundamental long-term economic reasons. How you rank these reasons is your own concern, but the answer doesn’t change.

Assuming you accept the path of the “realists”, where do we go from here? I suggest to you, that this decision is as important to this country as any it has faced in decades.

Short of all-out war, no single endeavor carried out by this nation will be as important. It will require a business-government partnership that rivals the transcontinental railway project of 1869, the Panama Canal project of 1904, the Manhattan Project of 1942 and putting a man on the moon which this country did in support of a vision laid down by President John F. Kennedy in 1961.

Each of these projects were was a significant economic challenge…each of these projects were was fraught with technical risk…but each of these projects helped define us as a nation.

It is a time for a new undertaking…a project of this century…a mission that will define us for generations. It is time for energy independence. It is time for the Hydrogen Project.

The $1.2 billion Hydrogen Fuel Initiative that President Bush announced in his State of the Union two years ago aims for fuel cell technology to reach the automotive consumer by 2020, and for hydrogen technology to significantly reduce this country’s oil usage by 2040. The current plan outlines a timetable ten times longer than the Manhattan project…and four times longer that putting a man on the moon.

Ladies and gentlemen, I am absolutely convinced that we don’t have that kind of time. We don’t have anywhere near that kind of time. I applaud the President for his Hydrogen Fuel Initiative. It very properly establishes a vision of a hydrogen society sometime in our future, and puts in motion a few steps toward realizing that vision. But $1.2 billion is a token gesture. General Motors, who introduced the hydrogen-powered concept car, “Sequel”. last week, DaimlerChrysler a long time proponent of hydrogen, Ford, Toyota, Honda, BMW, and others who are leading in the development of these products, outlined a case for more money…a good case…but this administration, this society was not ready to face the challenge. We need to revisit these decisions, and frankly it will take a lot of collective courage, vision and mutual support to get us through the mental trauma ahead. We all have to take a leap of faith for this industry and this nation.

I said that we will need a partnership between the auto industry and government. Let’s say, for a moment, that is thise industry is ready to support Project Hydrogen and commit our resources. But what how about the government?

The United States government is run ran by those we elect. I think we need to be more selective in whom we elect. And we need to hold our elected representatives responsible once they’re in office. They need to know what it will take to keep our support.

The auto industry is the country’s largest employer. The OEM’s employ around five hundred thousand XXX,XXX people. Suppliers add another three million to that number, with workers spread out in practically every state in the union. Another twenty million people earn their living from us…by selling us furniture…cleaning our clothes and building us houses.

This voice needs to be harnessed and focused once again. Management and organized labor need to make politicians earn our vote. We need to collectively demand that our voice, our needs, and our priorities be addressed.

The conversion of this society to a hydrogen based energy infrastructure is in the best interest of the auto industry and…thethe nation, everyone…but it is going to be up to us to be the catalyst for this change. We will need to elect officials in statewide and national offices that reflect this new reality, and support our vision.

LetsLet’s discuss this political issue a little more deeply. Republicans like me supported George Bush in 2000, but then watched his administration cave in to a well-organized steel lobby and slap unnecessary tariffs on steel imports that exacerbated an existing commodity inflationary spiral in ferrous-based products. The tariffs are gone, butThis the inflationary spiral created continues to bring undue harm to the industry and to the thousands of autoworkers and their families.

BushHe wasn’t looking out for us. I was in the front lines of the battle to get those tariffs removed, and I made it clear, both publicly and privately, that I expected better from those that I supported.

On the other side of the aisle, every four years the UAW endorses the Democratic presidential nominee as a matter of course, no matter whom he is.

In 2004, it would be pretty hard to find anyone in the U.S. Senate who has voted against the interests of autoworkers as long and as consistently as John Kerry had. Yet he got their endorsement, their money, and their votes.

In both cases, neither nominee worked for our vote. George Bush expected management’s support and got it. John Kerry expected UAW’s support and got it. Yet both candidates had public records that were at best, indifferent to the needs of this industry and its workers, and at worst, against this industry and its workers. The largest industry in this nation deserves better.

The conversion to hydrogen offers all of us a golden opportunity to assess who is with us, and who is not. The solution will not come from Washington…but enabling legislation and the money will. This is more important than sending a man to Mars, and it’s more important than subsidizing tobacco farmers to grow a product that we are, at the same time, trying to dissuade usage because of its health risks. It is more important than particle beam weapons, and it is more important than the $15 billion Big Dig project in Boston. We are talking about true energy independence. We are talking about eliminating the leverage that radical Islam has over this country. We are talking about disconnecting this nation from the oil thirst the new China will impart upon the world’s producers. We are talking about a true environmental friendly solution.

There will be many places to hide on this issue for politicians. The President barely had the words “Hydrogen Initiative” out of his mouth before his critics started complaining that he only wants to make hydrogen from natural gas and coal instead of renewables in order to protect the energy industry. In truth, we will need to tap both sources before evolving to a complete renewable path in the decades to come, but in the world of bloggers and 24 hour news shows, the critics will be out in mass and politicians will need our unwavering support, as we will need theirs to achieve our goal. Everyone in Washington has an agenda, and suspects everybody else of having one.

We need a group on both sides of the aisle that cares about our future with the same intensity we do. There will be many decisions, which method to create the hydrogen, and where should funds be deployed, incentivizing the consumer to move his or her purchase decision to a hydrogen-powered vehicle, etc.

Yes, there will be many tough decisions. Just as there was to unite this country with a transcontinental railroad, to dig a canal through the jungle in a foreign land, to harness the atom for a weapon to end a war, and put a man on the moon and for the first time.leave this planet.

We will need to generate tax revenue to support R&D, to help the states convert infrastructure, and provide financial incentives for the consumer to leave his gasoline-powered vehicles. Therefore, I would propose, as part of an omnibus Project Hydrogen:

1. / Establish a well funded and powerful industry consortium comprised of OEM’s suppliers and organized labor to provide interface and political singularity for Project Hydrogen.
2. / Immediately establish, through an industry technical society like SAE, a hydrogen powered vehicle design team to set industry practice and design rules.
3. / Target that 80% of the vehicles sold in this country and 100% of the vehicles imported to this country be hydrogen powered by 2020.
4. / A $.10/gallon gas tax beginning in 2008 and increasing by $.10/gallon per year through 2012 to fund R&D, infrastructure and incentive needsImmediately establish through SAE a hydrogen powered vehicle design team to establish industry practice and design rules.
Establish a well funded and powerful industry consortium comprised of OEM’s suppliers and organized labor to provide interface and political singularity for Project Hydrogen.

Consortiums, gasoline tax, and real targets for hydrogen cars in this country…nobody said it would be easy. Nothing important ever is. This is indeed, a project for a nation. But in the end, it is this industry, it is this group of engineers, it is this group of businessmen…those of us in this room today…that will get this country off of the oil drug. We cannot do it alone. We will needgiven the resources and the commitment of a nation. This industry has contributed more funds, taxes, and more contribution to this society than any other. It is now time to assist this industry in weaning this country from the greatest geopolitical economic threat it has: the reliance on oil, the reliance of foreign oil, the reliance on fossil fuels to drive this economy. No other industry has a bigger enlightened self-interest in a hydrogen society than this one. No other industry has as much to gain, or as much to lose.