PBS Newshour looked at GM’s future, focusing on the Chevy Volt. TTAC editor Ed Niedermeyer was a featured guest. If you want to skip to Ed’s appearances, they’re at 4:19, 5:43, and 9:08 (Or, in the clip embedded above). Transcript below the jump.
I wonder if I’m the only person that found this ironic. Actually, I wonder if anyone at PBS Newshour even knows who Alfred P. Sloan was.
The Alfred P. Sloan Foundation provided funding for this project
The Alfred P. Sloan Foundation provided funding for this project
TranscriptJEFFREY BROWN: Now, GM’s big gamble on electric cars. NewsHour economics correspondent Paul Solman went to Detroit to take a look. It’s part of his ongoing reporting on Making Sense of financial news.
PAUL SOLMAN: One of the world’s premier car events, held every January in Detroit: the North American International Auto Show.
MAN: And the 2011 North American car of the year is the Chevrolet Volt.
(CHEERING AND APPLAUSE)
PAUL SOLMAN: Car of the year, hope of the decade — GM’s electric idea for resuscitating the company, reviving desolate Detroit.
GM vice chairman Thomas Stephens:
THOMAS STEPHENS, vice chairman, General Motors: Yes, it was a moon shot, but we landed it.
PAUL SOLMAN: And, according to GM, the Chevy Volt has company.
WOMAN: Please welcome U.S. marketing vice president John Schwegman.
(CHEERING AND APPLAUSE)
JOHN SCHWEGMAN, U.S. marketing vice president, Buick-GMC: Boy, what a difference a year makes. Sales were up in 2010 by 52 percent.
(CHEERING AND APPLAUSE)
Buick is now the fastest growing automotive brand in the U.S. That’s why were proud to introduce the all new 2012 Buick Verano.
PAUL SOLMAN: According to GM, Buick is booming. And even Cadillac is smoking the competition these days with regular gas-powered engines.
That would good news for you and me, since, as taxpayers, we still own a third of General Motors. That’s after the company helped pay off part of its bailout loan with a successful public stock offering last November.
But Buick and Cadillac are small players in the GM lineup. Seventy percent of the business is Chevy. And, so, the company is pinning its hopes for the future on the Chevy Volt.
GM President Mark Reuss:
MARK REUSS, president, General Motors North America: You know, emotionally, it’s very important for the industry. It’s important for the city. It’s made here in Hamtramck. And it really marks, you know, the leadership in technology again from the Detroit automakers.
PAUL SOLMAN: The newly crowned champ on the road, so quiet, pedestrians need a sound alert. And the Volt may even need to add noise to meet government mandates.
Engineer Micky Bly:
MICKY BLY, executive director, General Motors Electrical and Battery Engineering: Just like you have ring tones, people are even talking about have car tones.
PAUL SOLMAN: Or you could just have something like, hey, it’s an electric car coming; you all should watch out.
(LAUGHTER)
MICKY BLY: Or — or actually an engine running
PAUL SOLMAN: Oh, no. You would have a simulated engine running?
(LAUGHTER)
MICKY BLY: That’s one of the — one of the thoughts.
PAUL SOLMAN: Wow, you can really take this up. This thing goes fast. I mean, this is…
MICKY BLY: We designed this car to be fun and — and spirited, as well as efficient. And it’s a choice the driver gets to make. We actually have a little gauge there on the right-hand side.
PAUL SOLMAN: This kind of bouncing ball here?
MICKY BLY: Yes. If it’s right in the middle of that grid, you’re driving the most efficient possible. If you were to accelerate a little too fast, you will see, it goes up and says you’re being inefficient.
PAUL SOLMAN: Oh, it went to yellow.
Drive with maximum efficiency, and the Volt’s battery can take you 50 miles, after which a gas engine kicks in. A full charge takes eight hours on household current, costs about $1.50. At today’s gas prices, 50 miles for $1.50 is like getting 100 miles a gallon.
The Volts get priority parking at Detroit Hamtramck, the factory where they’re made. Inside, one in every five cars on the line is a Volt, long thought within the company to be GM’s secret formula for turning steel into gold.
TERI QUIGLEY, plant manager, General Motors Detroit-Hamtramck Assembly Center: For a long time, I wasn’t even allowed to say Volt.
PAUL SOLMAN: Manager Teri Quigley:
TERI QUIGLEY: We didn’t formally announce that the Volt was going to be built here at Detroit Hamtramck until December 7, 2009. So, I had to refer to it as my favorite four-letter word.
PAUL SOLMAN: Better than B.U.S.T., though, which pretty much described this factory back in the dog days of 2009, when it looked like GM needed a miracle.
TERI QUIGLEY: We had 19 down weeks. The worst thing you can do to an assembly line and the work force is to not have them build cars. There were about three people in the plant. It was myself, a personnel director, my manufacturing director, and my shop chairman. And that was it in this 3.6-million-square-foot manufacturing facility, doing nothing.
PAUL SOLMAN: Now there are more than 1,000 folks working here, with a production goal of 25,000 Volts this year.
But the editor in chief of TheTruthAboutCars.com, which gets two million page views a month, speaks for many in saying: The Volt is just too expensive for most of us.
EDWARD NIEDERMEYER, editor in chief, TheTruthAboutCars.com: Right now, at $40,000 per car, and at $3-per-gallon gas, there’s absolutely not a market to support that.
PAUL SOLMAN: Now, the government will give a $7,500 tax credit to consumers who buy a Volt, but that doesn’t help GM’s bottom line. And right now, most people think Volts don’t make money for the company.
EDWARD NIEDERMEYER: They cost about $40,000 to build, and they cost — and they cost about $40,000 to buy.
PAUL SOLMAN: Editor Ed Niedermeyer says GM could copy Toyota’s Prius strategy: Price at a loss to begin with, and build volume, so the unit cost eventually comes way down.
EDWARD NIEDERMEYER: They stuck to their guns. That vehicle wormed its way into the heart of America when — when gas prices came up, and now it is their third best-selling car in America, and it’s extremely profitable for them.
PAUL SOLMAN: But will GM cut price to build volume?
When we talked to Mark Reuss, it didn’t seem like it.
MARK REUSS: We are in the first generation of the technology, so, as time goes on, you’re going to see costs taken out of that. You know, we don’t want to do anything that takes us off focus of developing that car perfect for our customers.
PAUL SOLMAN: And that means you need enough revenue to keep doing it?
MARK REUSS: Yes.
PAUL SOLMAN: GM has had to raise revenues and has had to cut costs — to the bone — including the cost of labor.
At the plant that turns out the Chevy Sonic, the only subcompact made in America, 40 percent of the workers were forced to take a pay cut to $14 an hour, based on seniority. That’s down to what the so-called second-tier new workers make.
EDWARD NIEDERMEYER: I can only imagine what happens to both morale and quality at a plant where workers are forced into the second tier of wages, to take a 50 percent pay cut.
PAUL SOLMAN: Bryan Moore, who works at the Volt plant, at $27 an hour, agrees that a pay cut would be tough to swallow.
BRYAN MOORE, General Motors Detroit-Hamtramck Assembly Center: I’m pretty sure there’s a lot of people who — who are resentful because their whole — your whole way of life has to change completely.
PAUL SOLMAN: But Mark Reuss disagrees.
MARK REUSS: We have seen no tension. And the reason why I say that is because, last Thursday, I was in there with a microphone and a handheld camera interviewing all of our employees as to how it’s going, because, you know, the tooling systems are — are coming online. And, in fact, yesterday, we made our first car there.
PAUL SOLMAN: And what about the people who wonder why any autoworkers should still make $27 an hour?
How many applicants did you have for each job at $14 an hour?
MARK REUSS: I don’t know, but we had a lot.
PAUL SOLMAN: Plenty.
MARK REUSS: Yes.
PAUL SOLMAN: If you can fill a plant with people at $14 an hour, why don’t you?
MARK REUSS: We have to be competitive, but every worker in this company went through a tremendous amount of financial and mental sacrifices. We went through bankruptcy. A lot of people don’t like to hear this, but manufacturing provides a huge basis for the middle class. I want people to be able to send their — their kids to college. I want people to be able to afford, you know, a good living in the middle class in this country.
PAUL SOLMAN: And, look, says legendary auto executive Bob Lutz, now retired from GM, labor costs are now low enough that they have ceased to be a competitive factor.
BOB LUTZ, former chairman, General Motors North America: Right now, only about 11 percent of the cost of a car is labor. In fact, with the low dollar, if you look at it in the international context, the United States, believe it or not, is one of the least expensive industrial countries in which to build automobiles. We should be exporting a lot more. We are — we’re now a highly competitive source.
PAUL SOLMAN: Lutz, a major investor in a company making electric motorcycles in Michigan, is betting on Detroit’s renaissance, as are neighboring exhibitors at the auto show, here to demonstrate their vision of the future.
Jason Forcier runs A123, an MIT-spinoff battery maker.
JASON FORCIER, vice president, Automotive Solutions, A123 Systems: I think what’s going on right now is the revitalization of Michigan. We’re diversifying the economy from the auto industry to the next-generation technology for the auto industry, but for other industries as well.
PAUL SOLMAN: Why are you here, as opposed to Boston?
JASON FORCIER: There is no richer talent pool from an engineering perspective around automotive than right here in the state of Michigan. And it was a unique time, because many of them were unemployed.
PAUL SOLMAN: So, Forcier’s company starts workers at closer to the second-tier $14 an hour than the UAW wages of the past, with no pensioners to pay for either.
JASON FORCIER: Wages have come down, and that’s what’s made Michigan attractive, frankly, is that it’s not $30 an hour, plus full benefits and pension for life.
PAUL SOLMAN: John Thomas runs a firm that retrofits vehicles to run electric.
JOHN THOMAS, CEO, ALTe: We’re in Auburn Hills, Michigan. We leased a 200,000-square-foot assembly facility near the Chrysler Tech Center and the Palace.
PAUL SOLMAN: And what’s the advantage of being here?
JOHN THOMAS: It’s — it’s — all of the resources for automotive are absolutely here.
PAUL SOLMAN: So, then, last question for skeptic Ed Niedermeyer:
Are electric vehicles going to save General Motors and save Detroit?
EDWARD NIEDERMEYER: No. The projections are — at the most optimistic, it’s something like 10 percent of the market by 2020.
BOB LUTZ: But, on the other hand 10 percent of the global market is — would be between 6.5 million and seven million units.
PAUL SOLMAN: Suggesting electric vehicles could eventually go a long way toward revitalizing GM and the city it made famous.
Thanks for posting this Ronnie… I still get bashful about my TV appearances.
Debate my answer to the final question of the pieces here.
Does Reuss actually think the workers are going to complain to him?!!!
Right now, many people would love to work @ $14 dollars and hour. People are free to find another job if they want to. But they aren’t likely to complain to him. My guess is that they would complain @ $28 dollars and hour. Look at what the UAW wants to do with Ford right now. They want more money because Ford is starting to turn a profit.
David, the workers at Detroit-Hamtramck are not shy and if they were unhappy you don’t think they’d tell the big boss and ruin his video shoot? Remember that GM could not have implemented a two tier wage system without the UAW’s and the local union’s approval. I haven’t directly interviewed any workers there who are not union activists, but my guess is that most of even the 2nd tier workers at D-H are happy to have a paycheck. If you watch the video, just before Ed’s first segment the plant manager discusses how the factory was down for 19 weeks in 2009.
No, they probably wouldn’t. I wouldn’t complain because I would have a job in Detroit… but I’m sure a lot of them are angered to a degree that they are getting treated as second rate employees.
Give ’em a year. The adrenaline of returning to work has a way of brightening your outlook, but it will inevitably grow darker with time and the resentments will grow among the Tier Deuce workers. It’s human nature.
Well Mr Niedermeyer where is your spotted PBS dicky-bow-tie..?
Sorry Bob, if the car market as a whole has 10% is buying EVs by 2020, I wouldn’t see that saving any company… maybe if you had 50% profit from each. They do need to start somewhere, but like Ed said, they need to get these into the hands of as many people as possible, with possibly taking a loss from each one. Don’t worry Detroit, the truck market will continue to be your bread and butter with the most sales for awhile.
Bob didn’t say it would save the company. He said 10% being an EV market is not something to be ignored.
@ Steven02: Yes, correct. But reading the transcript above, it asks if it will save Detroit. It won’t, but 10% is a chunk.
“Detroit Hamtramck, the factory where they’re made. Inside, one in every five cars on the line is a Volt, long thought within the company to be GM’s secret formula for turning steel into gold.”
From wiki: “The 362 acres (1.46 km2) site was once an inner-city neighborhood known as Poletown, but was razed and converted to a $500 million assembly plant in 1985. Poletown was the location for 1,200 homes and businesses, including Chrysler‘s Dodge Main factory. The destruction of this neighborhood was the subject of five years of protests and court battles, but the city sided with General Motors, seeking new jobs and investment. The city took the land by eminent domain, and this decision was later criticized as a misuse of this power.
The 2,990,000-square-foot (278,000 m2) factory was one of the most high-tech in the industry when it was built, and was part of a modernization effort for GM that also included the Buick City complex in Flint. Some of the advances in place included a modular paint system, electric (rather than hydraulic) robots, just-in-time deliveries, and a plan for paperless operations.
Not everything worked as planned. The robots were notoriously unreliable and the plant’s reliance on them was radically reduced. The E-body personal luxury cars manufactured at Poletown were also poorly received and soon cancelled. Cadillac K-body production was consolidated there in the 1990s, but sales were weakening. By the late 1990s, industry analysts were asking what went wrong at the factory. GM too seemed to be losing faith, cancelling the Epsilon platform crossovers due to be manufactured there and moving the Cadillac Eldorado to the Lansing Craft Centre. But production continued, and Detroit/Hamtramck currently produces large front-wheel drive cars for Buick and Cadillac. The Detroit-Hamtramck Assembly has since received the contract for the production of Chevrolet Volt, which uses the Delta II/Voltec body. On April 21, 2010 GM Announced it will invest $121 million dollars into the Hamtramck factory to ensure GM could keep up with the demand for the next generation Chevrolet Malibu.”
Naturally, it was not the fault of the plant, the town, the water, or the workers. It was the management behind it all.
EDIT: got nailed for moderation again. i assume due to the embedded links. is there a tool which i can use to delete them?
I think it’s also important to put in perspective the cost of living in different parts of the country. $14 an hour would be almost impossible to live off in some parts of the country. However, in many of the rural parts of this country, $14 an hour would provide you with a comfortable life style.
$14.00 an hour does indeed go farther in Muncie, IN than it does in Bryn Mawr, PA. But it’s still only $29,000.00 a year. And that’s before a third of it gets sucked away by taxes, insurance and (maybe) some retirement savings. Among other things.
Even Muncie would be a stretch on twenty-nine a year.
Did you get a chance to ask Mr. Lutz if his pension turned out to be bankruptcy-proof?
When I talk to Lutz, it’s usually about cars. I will say this, in my experience corporate executives are more likely to answer an embarrassing question than politicians.
When Farago famously asked the Lutzter that question about his pension, Lutz gave him an answer.
When I asked John Dingell, “Mr. Dingell, do you think it was appropriate for you campaign to call your opponent a “rich doctor” when you yourself have become a millionaire while serving in Congress?”, Dingell dismissively waved his hand, turned away and then surrounded himself with aides, scowling all the while.
And I didn’t even ask about his wife Debbie being an heiress to the Fisher Body fortune.
Mr. Lutz’ answer to Mr. Farago’s question pretty much amounted to “I’m not really sure”. While that’s a half-step better than a professional politician—and about on par with the more amusingly blunt examples of the breed—it wasn’t an answer.
Best quote #1: “We have seen no tension”. I call shenanigans.
There is always enthusiasm surrounding the first shipment of a new product, so of course the workers won’t complain on that day. The bitterness will settle in later, and the UAW will have a real problem on its hands.
Best quote #2: “… the United States, believe it or not, is one of the least expensive industrial countries in which to build automobiles”
Hey Bob: If that was true, you’d see more low-margin economy cars being built here. Maybe the Sonic will be competitive because the workers are down to $14/hr. GM didn’t give it to the $28/hr plant.
Quote #2 is probably just about right though.
Auto worker wages in the US have come down, the value of the dollar is low and wages in developing regions like eastern Europe, Mexico and South Korea are likely to start catching up more and more.
VW just now starting to build cars in the US again is no coincidence, I bet their margins from building a car right here (well, in the neighbouring country) and then selling it in the US at competitive prices didn’t look all the healthy anymore these last few years. I think that’s probably the biggest part of the huge price drop on the new US built Passat compared to the previous one built in Germany (aside from some decontenting).
Building and converting plants takes time. You can’t flip a switch and have a plant ready to go to build low margin cars. Besides, by the time you make the investment, get the plant up and running, the economic landscape may have changed again.
I’m glad to hear that Michigan is starting to compete again. No doubt some of the best minds in the country are in Michigan, and now that wages are reasonable, they can be put to great use again.
Cheap housing should help too. Its just too bad the state’s big city still feels like a ghostland. Otherwise, Michigan is a beautiful, great state. I just like my big cities fun and exciting. If Detroit was that, I’d be in heaven. Autos everywhere, brains, and a great town to live in. The burbs are fine, but burbs aren’t my thing.
Michigan’s newfound competitiveness has come with $38k in tax breaks per job kept by the Big 3.
http://www.autoblog.com/2010/10/28/report-detroit-automakers-pledge-2b-investment-after-michigan/
Having said that with a critical tone, I am a supporter of tax breaks vs. subsidies. Hopefully the trickle-down effect of having people employed will boost Michigan’s overall welfare.
EDWARD NIEDERMEYER: They stuck to their guns.
No arguments there.
That vehicle wormed its way into the heart of America when
That vehicle had plenty of help in emissions restricted states, perks no other types of vehicles were offered. If you had offered similar perks to people buying Yugos for example (and SUV tax credits notwithstanding), I’m sure Yugos would have wormed their way into the hearts of Americans, too. In fact, SUV tax credits DID pump the sales of the biggest beasts. And they wormed their way into the hearts of Americans, too. Gotta love creative taxing and specific perks.
— when gas prices came up, and now it is their third best-selling car in America, and it’s extremely profitable for them.
I have heard so many different stories about the profitability of the Prius. One source says it makes money, another says it doesn’t make money, no one seems to agree.
But the editor in chief of TheTruthAboutCars.com, which gets two million page views a month, speaks for many in saying
Yes…but he’s not speaking for me. Many of those who view and comment only do so to tell the editors that they don’t speak for us. I wished PBS mentioned that the editor here at TTAC earns a living from bashing GM and Chrysler. He joins George Will in disparaging the Volt just to smite GM and its federal benefactors. (Yes, TTAC also once bashed my OEM employer in Dearborn and its CEO, but it has since relented to minimize the appearance of stupidity.)
Your critique of TTAC’s journalism does not diminish the uncompetitive nature of the Volt, GM’s interiors, much of Chrysler’s product line, terrible quality, or the decades of market share loss and bad blood between these mfrs and the American public.
To be fair, Ford’s been part of it, too. But while TTAC expresses its own opinion on these matters, they also report the business facts as well as consumer opinion on these mfrs and their products.
You cannot discount then, the low opinion most taxpayers have of the bailouts for mfrs whose woes date back decades.
TTAC’s writers have lauded the Volt on its technical merits and driving manners. But GM has produced a money-losing car (by their admission) during a time of bankruptcy (now past), whose economic benefit to the consumer is very questionable. That’s not ‘disparaging the Volt just to smite GM’ – it is a fact. The Total Cost of Ownership for a Volt will be very high compared to competitive cars from other mfrs, not to mention GM. And the Volt’s ‘green-ness’ isn’t even in the same ballpark as a Prius, according to the EPA.
So, the Volt cannot seriously be called an economy car or a green car, but merely a technical novelty with limited application. That’s TTAC.
“I wonder if anyone at PBS Newshour even knows who Alfred P. Sloan was.” Probably not. I no longer expect old school of journalism, dinosaur media types to do their homework anymore. It is true that the United States is one of the least expensive places to build a car-for foriegn manufacturers, but not it seems for domestics, but that has more to do with managment than with economics.
Often new technology is exhorbitantly priced but then the price goes down as the product becomes more popular, we’ve seen that with VCRs, and DVD players. This could be true for the Volt if it were the first of its kind and truly a landmark innovation, but it is not. It was beaten tot he punch by the Pirus, and must compete with that well known brand, as well as with more conventional hybrids like the Fusion. GM should be lowering the price to generate a broader interest in the vehicle. But they won’t, what I’m sure they were hoping for is a demand that allows dealer markups in sticker price.