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Auto Business Isn’t Sustainable in Current Form, Warns GM Report

Maker calls for expanded focus on sustainability, connectivity.

by on May.20, 2014

The Cadillac ELR is the latest in the line-up of GM's electrified offerings.

The automobile industry is unsustainable in its current form, according to the latest version of General Motors’ corporate environmental and sustainability report.

GM – and its competitors – will need to make significant changes in the coming years to just about every aspect of the business, from the technology used to power vehicles to the high-tech gear that will keep motors connected. But even the basic manufacturing process will have to be transformed, the report stressed, with environmental issues at the forefront.

Beyond the Headlines!

“People care about more than the cars,” said GM CEO Mary Barra in the report’s covering letter. “They care how we build them, and how we engage with the world around us. This knowledge, and the discipline that flows from it, is transforming our approach to product design, manufacturing, safety, quality, the environment, customer care and a host of other areas at a remarkable pace,” Barra said.

GM, which has come in for heavy criticism of late for promulgating an engineering culture that has put cost over safety and the environment, is restructuring its global vehicle portfolio, rethinking manufacturing and collaborating with some unlikely partners to advance the industry, according to the report.

That includes traditional competitors such as Honda — which is working with GM to develop fuel cell systems and technology – as well as non-governmental organizations, such as the BlueGreen Alliance, Union of Concerned Scientists, World Wildlife Fund and Ceres, as part of efforts to create a greener economy and conserve the resources vital to the industry, the new report noted.

From smaller and cleaner high-performing engines to weight reduction and improved aerodynamics, vehicle efficiency efforts will reduce carbon emissions and increase fuel economy while meeting a variety of customer needs.

(Vehicle fuel economy takes an unexpected dip. Click Here for the latest.)

The company now has five models achieving more than 40 miles per gallon. By its own count, GM progressed in key product commitments, including fuel economy, electrification and emissions reduction, and has also committed to reducing the average carbon emissions of its China fleet by 28% by 2020.  That could result in an annual reduction of 2 million metric tons of CO2 and avoid the use of 1 billion liters – or more than 250 million gallons — of gasoline.

GM had more than 153,000 electrified vehicles on the road as of 2013, with a goal of reaching 500,000 by 2017. Last year the company launched two new battery-based vehicles the Chevrolet Spark EV and the Cadillac ELR extended-range electric vehicle. They join the Opel Ampera in Europe, the Chevrolet Volt, the best-selling U.S. plug-in electric vehicle of 2012 and 2013, and the Chevrolet Springo EV in China.

(California to spend nearly $50 mil to set up hydrogen fueling network. Click Here for the story.)

“Climate change, energy security, and congestion challenge our environment and our industry, but we see value in the disruption,” said Mike Robinson, vice president, GM Sustainability and Global Regulatory Affairs. “We are reimagining transportation using a long-term, customer-centric approach.”

Connectivity will be even more central to tomorrow’s cars, the GM report suggested, as more people expect their cars to have the technology they use everywhere else in their lives.  The maker is just launching its first 4G LTE-enabled vehicles through its OnStar subsidiary, and that could enhance route optimization to find ways around congestion and receive real-time feedback on how to drive more efficiently.

GM also is participating in industry efforts to develop systems and standards for connected vehicles that share information with each other and their infrastructure to help anticipate and avoid crashes.

“This innovation helps our products stay relevant and broadens the positive impact of a connected world,” Robinson said.

GM remains the only automaker to sign the Climate Declaration, which asserts there is economic opportunity in addressing climate change.  The company ranked among the top 10% of organizations that reported in the CDP Global 500 Climate Change Report 2013, demonstrating transparency in emissions and energy measurement and climate change strategy.

(VW boosts investment in “green” R&D to $14 billion. Click Here for more.

Last year, GM met the voluntary EnergyStar criteria at nine additional plants for an industry-leading total of 63 facilities worldwide, saving $162 million in combined energy costs. From removing the coal-fired boilers at its Detroit-Hamtramck assembly plant to saving $10 million in annual energy costs by using landfill gas at its Fort Wayne and Orion assembly plants, GM is reducing its global carbon footprint, plant by plant.

GM and its communities are seven years ahead of schedule, the company claims, in meeting its commitments to reduce total waste and volatile organic compound emissions by 10% each and to establish 25 non-manufacturing landfill-free facilities. It will now set new targets.

“We like the results we are seeing, but we fully recognize we have a tremendous amount of work to do,” Barra said. “We must innovate more, seize opportunities faster and work harder to achieve true leadership – a claim that only matters if our customers, employees, communities and other stakeholders agree.”

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6 Responses to “Auto Business Isn’t Sustainable in Current Form, Warns GM Report”

  1. Jorge M. says:

    The operating model for the big U.S. auto makers is over-production then discounts to sell the excess. That worked for decades but it no longer works very well and probably isn’t going to cut it in the future. We’ll see if the Big three learned anything from the last meltdown.

    • Paul A. Eisenstein says:

      So far, Jorge, it seems as if they’re playing by the new rules and, among other things, that has helped them sharply reduce incentives. The real question is how they’ll behave when the eventual down cycle returns. Curiously, a few imports, including Toyota and Nissan, have been more aggressive with incentives to boost demand. Is the paradigm reversing?

      Paul E.

  2. Jorge M. says:

    A recent TV commercial showed almost a $7,000 incentive/rebate deal on a GM or Ford truck so I don’t know how they can be playing by the rules? Time will tell if they learned anything. I’ll bet there won’t be any more tax payer bailouts for a long, long time if ever as the people got screwed by both GM and Chrysler.

    • Paul A. Eisenstein says:

      By and large, such extremes are becoming rarer but not entirely forgotten, Jorge.

      Paul E.

  3. D. Teeters says:

    Do we believe this? Does anyone or any competitor really accept this with any credibility or weight?. We thought significant internal changes were initiated after the bankruptcy reorganization. It’s really hard to see that the culture has changed. Externally, green initiatives, carbon reduction, and electric vehicles are nice but when it comes to the vast population of car buyers they don’t care about GM’s current and future initiatives when quality and reliability issues hit their pocketbooks. Today’s automotive business is not sustainable without world class quality, reliability, and building the trust of your customers. People do care about the environment but when it comes to the middle and upper middle class we won’t stand for safety issues or fixes even if they are covered by a warranty or recall. They are Inconveniences which cast doubt on GM as a trusted brand.
    How can GM promote a vision or agenda for the future when they need to continue looking deep inside the organization. The ship may have a fresh coat of paint on the outside, however, on the inside it takes new leadership and execution to change the culture. The question is; are there enough internal changes occurring to steer this ship in the right direction for the future?
    ou want a vision – Watch out for natural gas.

  4. Desmond Evans says:

    The traditional franchise/ wholesale model , based on market share and volume incentives is no longer valid. Total cost of use per mile or km will be the new incentive to buy use over ownership .

    Residual values, funding options, recyclability, environmental acceptance will be more important than low initial purchase price. This will require a new form of sales force or sales channel . Lots to do, lots to change. Bring it on!!!