General Motors' Second Century
General Motors' Second Century
General Motors turns 100 years old today, a milestone for any company. And while like any centurion, the moment offers a chance to look back, GM is hellbent on looking at the road ahead -- where it's going, how it will get there, and whether it will idle and sputter to a halt before it regains the cruising speed it once enjoyed.
I've been chronicling GM's environmental opportunities and challenges for the past few years (and previously disclosed that GM is both a client of GreenOrder, with which I am affiliated, and a sponsor of GreenBiz.com, of which I am executive editor.) Along the way, there's been the company's push for flex-fuel vehicles, the move to revive the electric car, and the company's need to help create a plug-in infrastructure. All are part of the GM's vision to reinvent itself for its second century, moving away from its legacy of big, gas-guzzling vehicles to recapture its long-lost legacy as a design and technology innovator, this time focusing on electric vehicles and renewable fuels. It's about as big a leap as any major company has tried to take.
Will it work? That's the question of the hour. Forecasting the fate of Detroit's Big Three auto makers has become something of a parlor game in some circles, with even the allies of Ford, GM, and Chrysler pondering whether the automotive giants can survive their current spate of jaw-dropping financial losses (GM's losses since 2005 alone approach $70 billion). But nearly all agree that these companies, should they survive, will look very different in ten years than they do today.
That shift has been evident the past two days. I'm writing this from Detroit, where I'm moderating a webcast today on "the future of transportation" (viewable here). In preparation for the event, my five panelists and I spent yesterday at GM's Milford Proving Grounds, the massive testing facility located a half-hour from the company's Detroit headquarters. Milford, with its massive 67-acre asphalt-covered "black lake," is where cars get their punishing workout during development.
At Milford, we saw presentations from GM brass, including vice chairman Bob Lutz, and drove prototypes of forthcoming vehicles, including the Volt, the "extended-range electric vehicle" on which the company is, more or less, betting its future.
The Volt, for the uninitiated, is an electric vehicle with a small gas-powered motor. Unlike the Toyota Prius, which also sports both electric and gas-powered motors, the Volt's engine doesn't send power to the wheels. Rather, it recharges the battery. So, if you drive under 40 miles between plug-in charges, it's a pure electric vehicle; you use no gas. If you drive beyond that, the motor kicks in to recharge the battery, giving you hundreds more miles of driving before refueling. If your daily commute is a dozen miles or so each way, you potentially could use no gas at all.
There's plenty of skepticism whether the Volt is "real" -- that is, whether it will ever come out, as opposed to being a showpiece the company is using to green up its image -- greenwash, as some have charged. But the car is very real, and the company is on schedule to bring it to market -- at least the first 10,000 or so copies -- by the end of 2010. (One recent deadline, an August 26, 2008 goal of locking in "production-intent components," was missed by only two days.) The first vehicles will roll off the line next June, in showrooms a year later following testing and refinement. Unofficially, the company views the Volt as its ticket out of the doldrums -- and its vehicle back to profitability, if it all comes together. It's a high-wire act, to be sure, and will be one of the more interesting business stories of the next few years.
GM is hardly the only innovator, of course. Toyota, Ford, and most of the other auto makers are working on their green car plays, each company's strategy taking its own course. That's exactly as it should be. To succeed, the next generation of vehicles will need to move past the monocolture of gas-powered, mechanically propelled vehicles to embrace a range of fueling and propulsion technologies. And they'll need to address challenges beyond just energy and the environment, from urban congestion to safety to new vehicle ownership models for developing economies that provide the freedom of individual mobility without necessarily requiring each individual to own his or her own car.
Even if the Volt and its other strategies succeed, GM won't be out of the woods. It has legacy problems -- for example, high pension and health care costs that add $2,000 to the price of every vehicle (much of this will be handed off to an independent trust fund starting in 2010). The age of persistently high gas prices -- with the never-ending possibility that a border skirmish, petty dictator, or pipeline hiccup could further constrain supply and raise prices at the pump -- makes GM's current lineup of Hummers, Escalades, minivans, and full-size pick-ups vulnerable to the vagaries of the oil market. New, smaller and more nimble competitors are coming onto the scene with increasingly regularity, giving the major auto makers a continually changing competitive environment. It's possible that the leading auto makers of 2025 aren't yet even in business.
Given all this, something strange and potentially wonderful is going on here in Motown, a change in course that's been evolving for the past few years but which is now gently accelerating. It's a make-or-break moment for GM and its brethren -- and, by extension, all heavy industry -- to see whether these old-line companies' can adapt to the green economy's changing realities.