Can this CEO paint GM green?

Rick Wagoner isn't likely to win applause from a Greenpeace audience--at least any time soon.

As the head of General Motors, Wagoner runs one of the biggest auto companies in the world. But more to the point, he directs the company most identified with big, gas-guzzling SUVs. GM also tends to come out with energy-efficient ideas, such as hydrogen cars or electric vehicles, that never seem to make it.

However, Wagoner says the Detroit giant is serious about fuel efficiency.

So far, GM has sold millions of flex-fuel cars that can run on E85 ethanol and is working with big box retailers to expand the supply of ethanol stations. GM also has invested in Coskata, an ethanol company whose technology promises to deliver ethanol from nonfood sources. At the same time, GM says it's on track to deliver the Chevy Volt, an electric car that runs primarily on batteries, by 2010.

Wagoner met with CNET News.com (and some other media outlets) at CES 2008 last week--and just ahead of this week's big Detroit auto show--to discuss these issues and some of the other concepts being touted inside GM.

Q: Can you talk about reported delays or glitches with the Volt?
Wagoner: No glitches. I think the biggest thing that's getting attention is whether we can stay on schedule with battery development. We still have plenty to do but we see that the chemistry can give you the 40-mile range (on a charge) and things of that sort have been favorable.

I've gotten hundreds of communications from customers who have bought their flex-fuel vehicles from us and they're frustrated that they don't have an ethanol station near their house.

Again, it takes about four years to get a concept car to market. You'll say, "Why can't you do it in two years?" and that's vehicle development. In this case we're basically doing kind of three things simultaneously: the vehicle side, which I have a high degree of confidence we can do; the battery side, which is progressing very well, but this is--we're basically pushing the technology needle to do everything that we want out of a battery technology. I would categorize that as emerging as opposed to highly developed; then just the electronic interface of all that is different, it's doable but it's different. We learned a lot back when we did the EV1, but there's a whole lot more electronics on a vehicle today than it was then. Going for 2010 was a stretch. It's still a stretch, but we're putting resources like crazy on it and we haven't seen anything to date which says that we've hit a glitch on it.

Why were you talking about moving away from petroleum-based power trains and petroleum-based infrastructure to electricity? Where is the electricity going to come from and is GM planning to get involved in the sustainability of electricity production?
Wagoner: We're just trying to get the vehicles that don't use so much oil right now. Our focus is this idea of diversity. I don't think it's going to be any time soon that we're not going to use oil. But in view of the world's growing demand for energy in the automotive sector, can we come up with alternatives that are effective in convenience, cost, safety, etc.? And the answer is yes: we're working on all those.

We've been pretty proactive in recognizing developing opportunities of biofuels, but we do not see our function as a company to be an energy provider. We're a transportation provider and we need to work within this constraint--this world that we're in, which is more expensive petroleum and greater sensitivities around emissions and ever greater demand for the product. We need to solve that equation.

Are you likely to distribute the biofuel in the future?
Wagoner: Well, we've been doing more than I thought we would need to. This is really an interesting issue. We have something that is a legitimate substitute for petroleum in the near term. If you look at really moving the needle over in say, the next 10 years, and having a chance to reduce the reliance on petroleum, it's the best thing in that time frame.

I've gotten hundreds of communications from customers who have bought their flex-fuel vehicles from us and they're frustrated that they don't have an ethanol station near their house. We continue to do what we can. We work with a number of so-called, big box retailers to encourage them. I guess the number of stations when we really started focusing on this was maybe 500 or 600 and I think we're up to maybe 1,400 now across the U.S. But that's out of a total of 170,000 (filling stations). We don't need 170,000 to solve the problem. We probably need 15,000 or 20,000, but it's been slow, painfully slow.

How do the petroleum companies feel about some of the things that General Motors is doing to shift the auto industry away from petroleum?
Wagoner: To be honest, I haven't really had direct conversations with them. It's a fairly broad-based issue. We're not saying that we don't see our sector continuing to use petroleum. But with the cost of petroleum these days and broader sensitivity and ever increasing demand for it, alternatives have to be developed. I note with interest a number of the oil companies talk about their positions as energy providers, rather then just oil companies. I'm not in that business, that's the way to think about the future.

GM has been a major proponent of ethanol and has particularly emphasized corn in some of their advertising. There was a preliminary study that came out a couple of weeks ago that seemed to indicate the increase in cultivation of corn in the U.S. maybe indirectly leading to increased deforestation in the Amazon as Brazil ramps up soybean production in response to a decline in soybean production in the United States. Do you have any second thoughts on promoting corn as a fuel source?
Wagoner: We've been promoting E85 and in the initial stages here in the U.S. it's been grain-based as opposed to say in Brazil, where it's sugarcane-based. Over time if we're going to realize the potential of ethanol, we're going to have to have breakthroughs in the cellulosic area because there's simply not enough agricultural capability to make the kind of dent that we think could be made, unless we get to the cellulosic process.

It's going to have to move beyond the grain-based (process) here in the U.S. and that's why we have such an interest in these alternatives.

A recent Toyota report came out where they expect sort of a flattening out of demand when it comes to hybrid vehicles in the U.S. in 2008.
Wagoner: Our own experience is that we're expanding production of a number of hybrids and we are introducing more products with hybrids. We'll undoubtedly sell more hybrid-powered vehicles this year than the last year. Obviously, our base is much lower. Beyond that, I really can't comment on Toyota's position.

One of the challenges with hybrids is they do cost more. So does the consumer see the value equation or is the manufacture going to eat the higher cost. This looks different with $95 a barrel than with oil at $55 a barrel. The consumer does have more skin in the game, as painful as that is.

What's your reaction to California trying to fight the exemption to improve their standards for emissions?
Wagoner: Well, the U.S. produced an energy bill which has ambitious objectives for our industry and frankly we'd like to be able to concentrate and do those. In that sense we appreciated the EPA action and hopefully that'll stand up to the challenges that are currently coming to them.

We heard your message today that with the fuel cell vehicle, the technology is closer than maybe it's commonly appreciated?
Wagoner: We've had a lot of progress in fuel cells and in a way more than some of the skeptics thought...some people think that fuel cells are never going to happen and I wouldn't agree with that.

Is the relatively high price of crude oil causing different planning in General Motors than ordinarily is the case. Are you now feeling a certain urgency to provide these alternative vehicles?
Wagoner: My sense is there's a fundamental change here and simply stated it's the growth of the emerging markets in places like China, which are huge consumers of energy and I don't see anything which is going to diminish that over time.