2008 Automotive Management Briefing Seminars - DAY 5, TRAVERSE CITY

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MANAGEMENT BRIEFING SEMINARS-TRAVERSE CITY Day Five
Wrapping It Up
By Steve Purdy
TheAutoChannel.com
Detroit Bureau

A couple of politicians punctuated the discussions with their own brands of optimism today. Our own good lookin’ Governor Jennifer Granholm (who once flirted with a career as a fashion model) gave a pep talk touting Michigan’s advantages in the industry’s efforts to “transcend turbulence” - to put it in terms of the conference theme. After reminding the group that the vast majority of OEM headquarters, as well as auto suppliers, are still located here, she talked about a couple of new projects that illustrate Michigan’s potential for innovation and growth.

The first is a project in the pristine Upper Peninsula where a Massachusetts-based company called Mascoma is setting up the first commercial ethanol production facility in the US using exclusively cellulosic feed stock. She noted that Michigan has the most forest acres under public control than any other state. Mascoma expects to produce about 40 million gallons of ethanol per year at about half the cost of gasoline using renewable resources. Two Michigan public universities will be involved and major investors include General Motors and Marathon Oil.

The enthusiastic governor then talked about how Michigan has become the number one state for land-fills – not a particularly prestigious distinction. But, I suppose, when life gives you lots of trash, start making energy out of it. Recently back from a trip to Sweden she reports that they have no landfills there. Why? Because they recycle stuff and make energy out of everything they can. Since we have such vast trash resources here a Swedish company is locating a trash-to-gas (methane, I think) facility in Flint, one of the most economically distressed areas of the state.

Our imperturbable Democratic governor has presided over the worst economic troubles since the Great Depression in Michigan, having had to cut over $4 billion out of the budgets in recent years. She and the Republican-dominated legislature are universally credited with making an awful mess of their revamping of Michigan’s business tax structure, but her pervasive optimism is still infectious.

We then heard from Governor Ted Strickland of Ohio, trained as a Methodist minister, who wasn’t nearly as charismatic as his Michigan colleague. His news involved a large state investment in battery and fuel cell research. Ohio is making a total of $150 million investment in advanced renewable energy research. He also bragged a bit about the Edison Welding Institute, a world-renowned research and training facility specializing in all kinds of material bonding.

During the afternoon session on executive recruitment Shaun McAlenden, Center for Automotive Research president and research director, tried to shed some light on executive compensation. In response to a comment by pundit John McElroy, who said he didn’t quite get the justification for huge executive salaries in the auto industry as well as other sectors of the US economy, McAlenden proposed the “lottery theory,” that is, top execs get so much money because it makes the hundreds of lower execs work very hard in hopes of getting to the top post someday. Go to any Michigan party store, he says, to see this lottery theory of executive compensation in practice.

Human resource executives here spent a great deal of time talking about the looming deficit in skilled executive leadership likely to hit in the next 10 years. As boomers retire a shortage of good candidates for positions in the executive ranks will become a big problem. I’m not so sure. We have lots of youngsters in business schools these days. The bigger problem, as we talked about earlier this week, will be finding good engineers.

The most fun we had sitting at a conference table today was with Bob Boniface, director of design for the exciting new Chevy Volt plug-in electric car. Beginning as a pure concept in 2006 we’ll have the Volt on the market in 2010. Most readers of TheAutoChannel.com know about the Volt but its basics deserve review. In its current form (they’ll hope to have better battery technology soon) the Volt has a 40-mile range running on just electricity from the batteries. A small engine on board will run a generator to recharge the batteries if you need more miles. So if your daily commute is less than 40 miles you may never have to buy gasoline.

The fun part of the presentation was Boniface’s sharing of some of the styling and design details that will be part of the final car. The bodywork has been streamlined for less aerodynamic drag and styling details have been changed a bit for practicality. While he didn’t show the whole car he showed enough to get us excited. So far it looks like it manages to retain the dramatic look of the concept car more than we had hoped.

More talk of alternative powertrains, alternative fuel sources, better energy storage systems (batteries) and all manner of crucial technology dominated the last day in Traverse City. Nissan is promising a production fuel cell vehicle on the road by 2014 – way earlier than anyone was talking about just a few years ago. Toyota’s advanced technology guru talked about many different versions of hybrid power systems in addition to their popular Prius. David Vieau of Massachusetts-based A123 Systems talked about their pioneering nanophosphate lithium-ion technology that has the potential to become the big battery breakthrough the auto industry so badly needs.

So, have we had a productive week here in Traverse City, you ask?

By all means, I say. It has been like a quick education in the challenges of the auto industry. Conferees spent many hours talking about the amazing pace of change in the industry and how it has been going on for years without a hint of abatement. That pace will continue and probably even increase but there are a lot of smart, ambitious, insightful people here that make me think we’ll be all right. There is no question, though, that the US will not be dominating the business. It is inevitably becoming more and more a global business. Lines between national identities will blur until they disappear as international companies dominate the business and continue to partner up with others. Collaboration is the buzzword.

During this beautiful summer week in Traverse City we’ve also experienced 4 dramatic sunsets and a magnificent full moon. Between the hospitality provided by the conference and various PR agencies we’ve enjoyed some of the finest food a spirits imaginable while bringing you these highlights.

It’s really tough work – but someone has to do it.