Gary L.Cowger Pres GMNA Feb 6th Speech-Chicago Ill

Good morning, everyone. This is the first opportunity I've had to be with this illustrious group. I'm delighted to be here - and I hope I can say the same thing after taking your questions.

Actually, I think the Q-and-A is the fun part of meetings like this one. So, in the spirit of Abraham Lincoln, who always reminded people that the best speech is the shortest speech, I'd like to offer just a few observations in two areas: first, the outlook for the economy and the industry this year; and, second, my own passion - namely, product. I believe that great product remains the name of the game: those that have it will win; those that don't, won't.

In fact, we had our Cadillac dealers at a CTS/Escalade EXT product review this weekend in New Orleans. The dealers already knew the CTS gets its DNA from the Nurburgring; but when they had the chance to do some "hot laps" with professional drivers, they came away with a whole new appreciation for what this car can do. With 220 horsepower and 220 pound-feet of torque; a great multi-link rear suspension and double wishbone front suspension; traction control; StabiliTrak, and many other performance features . . . it's a real driver's car.

After that, we had the once-in-a-lifetime thrill of seeing what I consider to be arguably the best Super Bowl ever. Watching New England nail that field goal with the clock gone was unbelievable.

I also had the thrill and the honor to sit with Joe Montana at the Super Dome. He has four Super Bowl rings, but you'd never find a more modest or down-to-earth guy. As you can imagine, I got a lot of great insight into the game.

So, I was shocked when I read on Monday morning that John Madden said New England should have tried for overtime rather than risk the field goal.

I mean: didn't Madden know that Tom Brady went to Michigan?

And, more importantly, didn't he understand that Brady knew that the MVP would get that Cadillac Escalade EXT?

So, I don't know about you, but I would have gone for it - just like Brady did. As the great statesman Yogi Berra once said about adrenaline: "You give one hundred percent in the first half of the game, and if that isn't enough, in the second half you give what's left."

The real winners always have something left.

Actually, there are times when some of the football color commentary reminds me of one of Joe Theisman's greatest insights. Theisman had this to say about the true meaning of genius: "Nobody in football should be called a genius, a genius is a guy like Norman Einstein."

And there are also times when I think a lot of commentators would do well to heed the words of that immortal Texas A&M basketball coach, Shelby Metcalf. Shelby gave the following advice to a player who had received four F's and one D: "Son, it looks to me like you're spending too much time on one subject."

Well, I am an aficionado of sports wisdom as well as great cars and trucks . . . but I suspect that's enough sports for this hour of the morning.

Turning to a more serious subject, this will not be an easy year for our industry. The long-hoped-for economic recovery is still wobbly. One day I read that all indicators are pointing upward, then the next day they're back down: uncertainty still seems to be the common denominator.

For the auto industry, January sales were reassuring, with a decline of just 5 percent rather than the 12 percent that many analysts had predicted once the zero-percent financing programs ended. We're now running at an annual rate of just over 16 million units, which is better than December forecasts but still down considerably from more than 17 million last year. General Motors' own forecast for the industry has been increased from 15.4 to 15.8 million units but I am personally optimistic that we may do even better than that. Despite the continuing fluctuations and uncertainties, all the recent data show that the economy is doing better than the experts had expected it to.

In my mind, two issues in particular pose a major threat to the auto industry's health: namely, Asian currency exchange rates and CAFÉ. Neither of them is new, but both need to be properly addressed if we are to extend the beginnings of economic recovery.

You know, it's really ironic: General Motors has made huge investments in new product and facilities, and we have made tremendous improvements in productivity and cost-effectiveness, but it's a tough job to offset the 30 percent cost advantage that our Japanese competitors have gained over the past three years from the artificially low yen.

Don't get me wrong: I respect all the Japanese automakers. They have some terrific products. We want to take them on product-to-product in the marketplace, with each product standing on its own merits. That's what competition is all about, and that's what we want.

But is the playing field level when some products have a cost advantage because of government intervention in currency exchange rates?

I don't think so.

We are especially concerned that the government of Japan is causing the Yen to go downward to create a competitive advantage for its industry during a protracted recession at home. General Motors and the rest of the domestic auto industry have made it clear that we think our own government should put the pressure on Japan's government to stop doing it.

On the CAFÉ front, the real issue is not better fuel economy but rather the most effective way to achieve it. Make no mistake: General Motors is committed to improved fuel economy. We just don't see the wisdom of a policy mechanism that limits customer choice and gives some manufacturers an unfair advantage over others, which is what CAFÉ does.

Jack Smith made our position clear when Secretary of Energy Abraham announced the FREDOMCAR partnership in Detroit last month. We share the vision of cars and trucks that don't run on petroleum and don't pollute. But we also remain committed to providing our customers with vehicles that are safe and give them the kind of performance, function, and value they need and expect for their money.

Even a vehicle that gets eighty miles-to-the-gallon means nothing in the real world if nobody likes it or can afford it.

Long term, we believe fuel cells offer the most promising answer to the real challenge of enhancing the customer's freedom and mobility and removing the automobile itself from the energy and environmental equation. Autonomy and freedom go hand in hand - which is why we chose AUTONOMY as the name for the revolutionary fuel cell concept we unveiled in Detroit. For the revolution to become reality, all parties must work together in resolving all the issues, including those related to the infrastructure as well as the vehicle itself.

We hope the US Senate keeps the market realities in mind in the current debate.

Regardless of what happens in the CAFÉ debate, cost reduction will be a priority for the entire domestic industry in this year's difficult economic climate. However, speaking for General Motors, I want to emphasize that one area we're definitely turning up the burner is product development. We will reduce our total capital expenditures by nearly a billion dollars this year, but capital spending for product programs will actually be at the same level as last year -- and higher than the preceding two years. We're doing that to ensure that the lifeblood of new product keeps flowing.

And that leads me to the second area I'd like to touch on before taking questions: namely, the product offensive at General Motors.

You all know the story of GM's recent product momentum - you reported it. Last year, we took home more major product awards than anyone else; we were Number One in trucks for the first time since 1994; and, we gained market share in the US market for the first time since 1990. We also passed both domestic competitors in the J.D. Power quality rankings. We're virtually tied with Nissan and are closing in on Honda. Quality has been our major initiative for the past two years, and we are now focused on quality leadership among all manufacturers.

In powertrain, what moves the machine, we have introduced more new engines in the past four years than in any time in GM's history - including a new generation of truck V-8s; the Ecotec 2.2 liter four-cylinder; the award-winning Duramax Diesel; and, of course, the Vortec I-6.

And there's a lot more coming in powertrain - soon. We're launching another major offensive that will include a new generation of V-6 engines; a new generation NorthStar; and new Vortec I-5; a new Vortec I-4; and, displacement-on-demand cylinder deactivation technology that will improve fuel economy in our truck and SUV Vortec V-8s.

General Motors wrote the book on powertrain, and this latest edition of the book will be a blockbuster.

The same goes for our new vehicles.

We will continue the market momentum in 2002 with a total of 16 - yes, 16 - new US product launches, including: the Cadillac CTS; the Saturn VUE; the Pontiac Vibe; the much-anticipated Hummer H2; new medium duty trucks; extended versions of our already-hot TrailBlazer and Envoy models; and, new full-size vans. On top of that, the much-talked about SSR will add a whole new image to the Chevrolet lineup late this year. And next year, the all-new XLR will do the same for Cadillac.

That's only the beginning. A product offensive is the commitment that Bob Lutz and I have made to our dealers as well as the entire GM team. And, let me tell you, I have never seen as much excitement within GM about our new products. There is a new sense of confidence, a new set of horizons: people are pumped up with what we've done in less than six months and are champing at the bit to do even more. The organizational changes we announced last week, with a new streamlined advanced product development group and a re-structured design team, will only add to the momentum.

You'll get a better look at what we're doing to unleash our product potential at the GM truck news conference shortly after this meeting adjourns. I have to tell you: It feels great to be Number One in trucks again - and we intend to stay there with the kinds of creativity, innovation, and product enhancements that you will see unveiled this morning.

Then, on Thursday, you will see how Pontiac is re-igniting the excitement - and doing it fast! In fact, one of the cars you'll see from Pontiac on Thursday, the Bonneville G/XP, went from concept to reality in less than three months - and we're working to bring it to market next year as a specialty vehicle.

I could go on and on with more examples of the depth and speed of our product offensive, but I want to stick to Abe Lincoln's dictum that short speeches are better than long ones.

My real message today is that the focus throughout General Motors is more than ever on the three basics of the business: product, product and product! And because of that great product, I believe the opportunity for the future has never been brighter.

With that, I'll be glad to take your questions.

Thank you.