GM FYI Blog

By Steven J. Harris
Vice President, Global Communications

UPDATE: Here’s an interesting perspective, by Josh Hendrickson of the Everyday Economist, on Friedman’s latest column that’s worth taking a look at.
Editor’s note: Yesterday, Thomas Friedman of The New York Times devoted 1,279 words, a full quarter of the Times’ Op-Ed page, to respond directly to this blog’s June 1 post by Steve Harris, which addressed Friedman’s earlier criticism of GM. That the Times would respond in that way to any blog posting is significant. Here’s Steve’s response to Mr. Friedman’s defense.

Although we have disputed the factual accuracy and reasoning of Thomas Friedman’s recent columns on GM, this debate has given us the opportunity to better inform the world of what GM is all about.

First, it’s worth noting that we, and Mr. Friedman, are really not in disagreement on the fundamental issue here: That the United States needs to reduce its fuel consumption and dependence on oil. Enhancing energy security is an appropriate national goal.

Unfortunately, many of his assumptions and the way he proposes to meet that goal are incorrect. He is correct, however, that consumers will increasingly make different vehicle choices, embrace new technologies and adjust the amount of fuel they use as its cost rises.

In other words, consumers are rational and markets do work.

We find it particularly curious that Mr. Friedman dismisses GM’s leadership in producing E85 vehicles as the result of a “shameful federal loophole.” In fact, the federal legislation that encouraged automakers to produce these vehicles is an example of a public policy incentive that actually did what it was supposed to do. It essentially broke the “chicken-and-egg” syndrome inherent to any introduction of an alternative fuel: Which comes first, the vehicles or the fuel?

There are more than 5 million E85-capable cars and trucks on the road today; more than 2 million of those are GM vehicles. The issue now is getting more E85 fuel produced and distributed, and that’s happening. Farmers are forming co-ops to build more ethanol plants, investors are lining up to help out, and we are working with distributors and the government to encourage wider distribution. It’s the market, driven by higher gasoline prices, that’s suddenly helping to build a consensus and momentum for E85.

Granted, E85 is not the complete solution. But it’s an important start — something we can do right now to reduce our oil consumption.

Look no further than Brazil for proof. Just three years ago, Brazil renewed its commitment to ethanol to end its “addiction” to foreign oil. Automakers, including GM, responded with new “flex-fuel” vehicles that run either on ethanol or gasoline. And how much foreign oil does Brazil import today?

Virtually none.

We believe that fuel cell-powered vehicles ultimately will prove to be the solution to ending our oil dependence, and we’re investing billions and making progress in driving the cost of this technology down to make it practical. In the meantime, E85 offers an immediate way to begin our transition away from oil.

GM’s strategy is to invest in many technologies with potential, including hybrid powertrains. In fact, we have put 449 GM hybrid public transit buses on the streets of 38 cities in the United States and Canada over the past few years. While they may get little attention in the media, they’re saving thousands of gallons of fuel every week.

We will introduce the Saturn VUE Green Line hybrid this summer, which will offer the best highway fuel economy of any SUV (EPA estimated 32 mpg) at a price significantly below its hybrid competitors. The Chevy Tahoe and GMC Yukon SUVs with our high-tech, two-mode hybrid system will hit showrooms next year. BMW and DaimlerChrysler have joined GM to produce this hybrid powertrain for their large cars and trucks, and thereby lower the overall cost.

Mr. Friedman questioned how we can compete in a world of $3.99-per-gallon gasoline prices. The fact is, we can and we do here and around the world.

So far this year, GM has sold more than 491,000 cars that get 30 mpg or better EPA-estimated highway mileage in the United States. By comparison, we’ve sold just under 7,000 Hummer H2s and 138 H1s — an aging model that we will stop producing this month.

Put another way, total Hummer sales represented less than half of 1 percent of total vehicle sales in the United States through May, or just 1.6 percent of GM’s total sales. My point is to put Hummer sales into perspective. It’s one of our lower-volume brands, but has a loyal following of off-road enthusiasts.

Interestingly, Hummer sales are up 156 percent this year through May — despite higher fuel prices. That’s because last year we introduced a more fuel-efficient midsize model, the H3, which can get an EPA-estimated 20 mpg on the highway. It has been a significant hit.

Mr. Friedman also was dismissive about the fact that our full-size SUVs have the highest EPA fuel-economy numbers. He cites one magazine that rates Toyota and Honda’s SUVs better overall on other criteria.

Of course, Honda doesn’t make a full-size SUV (Mr. Friedman admits, “I’m not a car expert.”) And actual consumers overwhelmingly rate GM’s full-size SUVs better than Toyota’s. This year through May, GM’s full-size SUVs are commanding 68.3 percent of the segment; Toyota’s Sequoia and Land Cruiser combined account for only 7.7 percent.

Another point that Mr. Friedman raised demands clarification. He implied I was misleading our readers by failing to mention rebates being offered on 2006 Chevy Suburbans and Tahoes. He failed to mention that we stopped building the ’06 models last year before the redesigned ‘07s went on sale, and that relatively few of them are left to sell. It’s common when new models are introduced for automakers to offer discounts to move the older models off the lot — customers aren’t going to pay full sticker for the old model when the all-new model can be had for about the same price.

Again, our 2007 full-size SUVs have been selling very well, without any national rebates.

As I said in my previous post, GM, like Toyota, is a full-line automaker. We offer something for everyone. Ultimately, consumers decide what they will buy based on their own calculation of their needs, desires and budgets.

We’ve been improving the internal-combustion engine for close to 100 years, and we have a tremendous record of innovation. We continue to invest in future technology that promises to get the car out of the debates on oil dependence and the environment.

I again invite Mr. Friedman to come to Detroit and learn more about our research, to speak with our engineers and get a firsthand look at what we’re doing to reach the goal that we both agree is desirable.