Has GM Finally Made Some Hard Choices About Green Technology? Yes, It Has, And It Has Made Some Top Management Choices Also

Implications: Last week GM's most important 'car guy' let the cat out of the bag. GM Vice Chairman Bob Lutz let it be known that for the first time the market is driving GM's decisions on which products to take forward on a green path. The public clearly does not want a car for which there is no fuel available today and no plan at all to ever make it, the hydrogen fuel,  widely available. GM will therefore try to bring battery powered cars to the mass market along with diesel powered vehicles; its goal is to make those two power trains dominant in its product line by 2015. Some GM executives who aren't with this program will have to go.

Analysis: GM's Bob Lutz clearly speaks for GM's management, so when he said last week that 'global warming is a crock of s**t" he was announcing that what individual GM executives personally believe and what drives their marketing and vehicle development choices do not necessarily have to be congruent. This is a very big change in an industry where 'yes' men are traditionally the only ones who are retained by imperial CEOs.

Everyone knows that GM is terrified that the costs of lithium batteries may not be containable, so that the lithium battery may always need to be hand built and each one may have to be thoroughly tested before ever being installed in a vehicle; this would make them horribly expensive, so expensive, that customers would never buy them, so, in order to be useable, they would need to be leased to the customer and an entire system of refurbishing or remanufacturing them would have to be set up and put into operation to make them economically practical.

GM (and Daimler) have decided therefore to try and each make up to a maximum of 100,000 lithium batteries a year for 'several years' to test the batteries and get their manufacturing costs under control.

In the meantime GM has decided to cut its, so far, more than one billion dollars a year development costs for hybrid, battery, and fuel cell power train development by just focusing on trying to bring to market a lithium battery powered car, the Volt, which will have a small gasoline engine on board only to charge and maintain the charge on the battery.

While building and selling the Volt and learning how to service its power train along with how much service it will require, GM will continue, most likely to build Toyota-like hybrid power trains and its own, two mode, hybrid power trains which I predict will continue to first use nickel metal hydride battery packs and then switch over to lithium batteries first as a test to see how much performance is improved and then, if the mass production cost problems are worked out, the lithium batteries will replace the nickel metal hydride ones in the mid teens of the twenty-first century.

The voracious demand of current technology fuel cells for platinum has ended GM's interest in them; they are too expensive no matter whether there is a hydrogen fuel manufacturing and distribution system or not.

GM, while testing lithium batteries, will also begin to convert as much of its product line as possible to diesel and turbodiesel power trains in order to not fall behind on meeting CAFE standards. GM's goal is to be selling 40% diesel vehicles by 2014. 

GM's top management has made its decision; it will try to manufacture more than 505 of its 2015 model year vehicles with lithium powered or diesel powertrains.

Starting now CEO Rick Wagoner will concentrate on meeting the political challenges of producing a product line which reduces America's dependence on imported oil. COO, Fritz Henderson will concentrate on making the company profitable while implementing the new direction in product mix.

I predict that even yes men like Bo Andersson, the current global purchasing manager of GM, will not survive if they do not perform to Fritz Henderson's approval, and I think the clock is running out for Andersson's horribly mistaken China strategy as the Chinese currency predictably grows in value daily against the US dollar putting parts production in China intended for the US at far too high a price to be cost effective.

Daimler is following a similar path, but its management can't seem to admit that some ideas, such as fuel cells, are just economically unworkable, so it will continue to waste money on parallel power train developments, which it will never use or need.

Toyota is circling the wagons in  Japan proper; it will never give up its home market where short distance driving in small cars is the norm. Thus Toyota can mass produce short range so-called plug-in hybrids using smaller lithium battery packs, or continuing to use its nickel metal hydride battery packs, to power them. I think that on the larger car segment Toyota is going to watch GM and Daimler for a while, before it jumps headlong into the fray. 

As for Ford and Chrysler: If the GM experiment works then Ford and Chrysler will simply be, if they service, small manufacturers of traditionally powered small cars.

It looks very much to me as if the battle for dominance now will be among GM, Daimler, and Toyota with GM in the lead technologically.