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CLIMATE CHANGE AND ENERGY

SECURITY: PERSPECTIVES FROM

THE AUTOMOBILE INDUSTRY

HEARING

BEFORE THE

SUBCOMMITTEE ON ENERGY AND AIR QUALITY

OF THE

COMMITTEE ON ENERGY AND

COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

MARCH 14, 2007

Serial No. 110–19

(

Printed for the use of the Committee on Energy and Commerce

energycommerce.house.gov
COMMITTEE ON ENERGY AND COMMERCE

JOHN D. DINGELL, Michigan, Chairman

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

RICK BOUCHER, Virginia

EDOLPHUS TOWNS, New York

FRANK PALLONE, JR., New Jersey

BART GORDON, Tennessee

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

ALBERT R. WYNN, Maryland

GENE GREEN, Texas

DIANA DEGETTE, Colorado

Vice Chairman

LOIS CAPPS, California

MIKE DOYLE, Pennsylvania

JANE HARMAN, California

TOM ALLEN, Maine

JAN SCHAKOWSKY, Illinois

HILDA L. SOLIS, California

CHARLES A. GONZALEZ, Texas

JAY INSLEE, Washington

TAMMY BALDWIN, Wisconsin

MIKE ROSS, Arkansas

DARLENE HOOLEY, Oregon

ANTHONY D. WEINER, New York

JIM MATHESON, Utah

G.K. BUTTERFIELD, North Carolina

CHARLIE MELANCON, Louisiana

JOHN BARROW, Georgia

BARON P. HILL, Indiana

JOE BARTON, Texas

Ranking Member

RALPH M. HALL, Texas

J. DENNIS HASTERT, Illinois

FRED UPTON, Michigan

CLIFF STEARNS, Florida

NATHAN DEAL, Georgia

ED WHITFIELD, Kentucky

BARBARA CUBIN, Wyoming

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

VITO FOSSELLA, New York

STEVE BUYER, Indiana

GEORGE RADANOVICH, California

JOSEPH R. PITTS, Pennsylvania

MARY BONO, California

GREG WALDEN, Oregon

LEE TERRY, Nebraska

MIKE FERGUSON, New Jersey

MIKE ROGERS, Michigan

SUE WILKINS MYRICK, North Carolina

JOHN SULLIVAN, Oklahoma

TIM MURPHY, Pennsylvania

MICHAEL C. BURGESS, Texas

MARSHA BLACKBURN, Tennessee

PROFESSIONAL STAFF

DENNIS B. FITZGIBBONS, Chief of Staff

GREGG A. ROTHSCHILD, Chief Counsel

SHARON E. DAVIS, Chief Clerk

BUD ALBRIGHT, Minority Staff Director

(II)
(III)

SUBCOMMITTEE ON ENERGY AND AIR QUALITY

RICK BOUCHER, Virginia, Chairman

G.K. BUTTERFIELD, North Carolina

Vice Chairman

CHARLIE MELANCON, Louisiana

JOHN BARROW, Georgia

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

ALBERT R. WYNN, Maryland

MIKE DOYLE, Pennsylvania

JANE HARMAN, California

TOM ALLEN, Maine

CHARLES A. GONZALEZ, Texas

JAY INSLEE, Washington

TAMMY BALDWIN, Wisconsin

MIKE ROSS, Arkansas

DARLENE HOOLEY, Oregon

ANTHONY D. WEINER, New York

JIM MATHESON, Utah

JOHN D. DINGELL, Michigan (ex officio)

J. DENNIS HASTERT, Illinois,

Ranking Member

RALPH M. HALL, Texas

FRED UPTON, Michigan

ED WHITFIELD, Kentucky

JOHN SHIMKUS, Illinois

JOHN B. SHADEGG, Arizona

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

STEVE BUYER, Indiana

MARY BONO, California

GREG WALDEN, Oregon

MIKE ROGERS, Michigan

SUE WILKINS MYRICK, North Carolina

JOHN SULLIVAN, Oklahoma

MICHAEL C. BURGESS, Texas

JOE BARTON, Texas (ex officio)

PROFESSIONAL STAFF

SUE D. SHERIDAN, Chief Counsel

BRUCE HARRIS, Policy Advisor

JONATHAN CORDONE, Deputy Chief Counsel

DAVID MCCARTHY, Minority Counsel

CHRIS TREANOR, Legislative Clerk

(V)

C O N T E N T S

Page

Hon. Rick Boucher, a Representative in Congress from the Commonwealth

of Virginia, opening statement ............................................................................ 1

Hon. J. Dennis Hastert, a Representative in Congress from the State of

Illinois, opening statement .................................................................................. 3

Hon. Mike Doyle, a Representative in Congress from the Commonwealth

of Pennsylvania, opening statement ................................................................... 4

Hon. Joe Barton, a Representative in Congress from the State of Texas,

opening statement ................................................................................................ 5

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, prepared statement ...................................................................................... 7

Hon. Jane Harman, a Representative in Congress from the State of California, prepared statement ...................................................................................... 9

Hon. Steve Buyer, a Representative in Congress from the State of Indiana,

opening statement ................................................................................................ 9

Hon. Jay Inslee, a Representative in Congress from the State of Washington,

opening statement ................................................................................................ 10

Hon. Mike Rogers, a Representative in Congress from the State of Michigan,

opening statement ................................................................................................ 11

Hon. Tammy Baldwin, a Representative in Congress from the State of Wisconsin, opening statement ................................................................................... 11

WITNESSES

Ron Gettelfinger, president, International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, Detroit, MI ............. 12

Prepared statement .......................................................................................... 58

Answers to submitted questions ...................................................................... 68

Rick Wagoner, chairman and chief executive officer, General Motors Corporation, Detroit, MI ................................................................................................... 14

Prepared statement .......................................................................................... 123

Answers to submitted questions ...................................................................... 131

Jim Press, president and chief operating officer, Toyota Motor North America,

New York, NY ...................................................................................................... 16

Prepared statement .......................................................................................... 104

Answers to submitted questions ...................................................................... 113

Alan R. Mulally, president and chief executive officer, Ford Motor Company,

Dearborn, MI ........................................................................................................ 18

Prepared statement .......................................................................................... 78

Answers to submitted questions ...................................................................... 88

Thomas W. LaSorda, chief executive officer and president, Chrysler Group

of DaimlerChrysler, Auburn Hills, MI ............................................................... 20

Prepared statement .......................................................................................... 46

Answers to submitted questions ...................................................................... 49
(1)

CLIMATE CHANGE AND ENERGY SECURITY:

PERSPECTIVES FROM THE AUTOMOBILE

INDUSTRY

WEDNESDAY, MARCH 14, 2007

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON ENERGY AND AIR QUALITY,

COMMITTEE ON ENERGY AND COMMERCE,

Washington, DC.

The subcommittee met, pursuant to call, at 2:00 p.m., in room

2123 of the Rayburn House Office Building, Hon. Rick Boucher

(chairman) presiding.

Members present: Representatives Melancon, Barrow, Markey,

Wynn, Doyle, Harman, Gonzalez, Inslee, Baldwin, Hooley, Matheson, Butterfield, Dingell, Hastert, Upton, Whitfield, Shimkus, Pickering, Buyer, Bono, Walden, Rogers, Myrick, Sullivan, Burgess, and

Barton.

Also present: Representatives Stupak and Engel.

Staff present: Sue Sheridan, Laura Vaught, Jonathan Cordone,

Bruce Harris, David McCarthy, Kurt Bilas, Lorie Schmidt, Chris

Treanor, and Peter Kielty

Mr. BOUCHER. The subcommittee will come to order. We have a

recorded vote pending on the floor of the House, and we are going

to recess the subcommittee at this point for the purpose of recording that vote, but a number of members who were present at this

point wanted their presence recorded so that their priority in asking questions would be preserved. And so with that having been

said the committee stands in recess until 5 minutes after the conclusion of this vote.

[Recess.]

OPENING STATEMENT OF HON. RICK BOUCHER, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH

OF VIRGINIA

Mr. BOUCHER. The subcommittee will come to order. This afternoon we continue our focus on the proper United States response

to the challenge of climate change by examining the views of leaders in the automotive industry. Our goal this year is to produce legislation that has an economy-wide application. Each sector of the

economy will make a greenhouse gas control contribution. Applying

this broad measure to the transportation sector clearly poses special challenges.

Unlike some other industries, auto manufacturers are subject to

a pre-existing regulatory program, CAFE, which is designed to pro-
2

mote fuel economy but which also has a limiting effect on greenhouse gas emissions, notably the emission of carbon dioxide. Much

thought must be devoted to an effective means of integrating the

existing CAFE regulatory program into the new regulatory structure which will specifically target greenhouse gases.

While we have not made decisions at this point about the shape

of the greenhouse gas regulatory program, some form of cap and

trade system is obviously a major candidate for consideration when

an approach is adopted.

Therefore, in order to gain maximum benefit from today’s discussion, I would welcome views from the witnesses on how cap and

trade might apply to the automobile sector and how do we effectively integrate CAFE along with a cap and trade greenhouse gas

emission program. Some have suggested that because transport

emission sources are individually small, highly dispersed, and mobile, direct CO2 emissions monitoring per vehicle would be too costly to administer and that it is better to use proxies for each vehicle,

such as the fuel that contains the carbon, or in the alternative, the

fuel economy of the vehicle. Comment from our witnesses on these

possible alternative approaches would be very helpful.

If transportation fuel is chosen as the best foundation for a

transportation sector cap and trade program, where in the fuel distribution system should the accounting take place and tradable

credits be generated, should that be upstream at the refinery gate

and the port of entry, or should it be further downstream at the

point of final sale for the fuel? Another question that we are asking

is whether alternative transportation fuels pose special challenges

for emission trading system design.

As these questions suggest, designing a greenhouse gas regulatory program for the transportation sector is a formidable task.

While I don’t expect our witnesses this afternoon to have complete

and detailed answers to all of these questions, in posing them I

want to direct your thinking to obtaining the answers and sharing

those with use as we consider our approaches to structuring this

program.

We are pleased to have each of our witnesses here today, and

momentarily we will be turning to them for their statements.

I want to say just a word this afternoon about our schedule for

drafting a greenhouse gas control measure. Earlier this year the

Speaker assured me that this committee would have the time that

it needs in order to produce a carefully-constructed bill. That early

assurance was reconfirmed this week by the statement from the

Speaker’s office that climate change legislation will not be part of

the July floor agenda.

It is my intention to continue our hearing process through the

early spring and then begin the bill drafting process when the

hearing process is completed, with the goal of having the comprehensive climate change bill on the floor of the House later this

year. House passage this year will provide ample time for a conference with the Senate during 2008, and then completion of the

passage of climate change legislation and the presentation of a bill

to the White House during the course of next year. That is our intention.
3

Pursuant to a previous agreement between the majority and minority of the committee, the chairs and ranking members of both

the subcommittee and full committee will be recognized this afternoon for 5-minute opening statements. Other members of the subcommittee and other members of the full committee who are participating in our hearing today will have the opportunity to offer

a 1-minute opening statement. And then pursuant to the rules of

the committee, any member who decides to waive an opening statement will have added to the time for posing questions allotted to

that member the time that member could have used for an opening

statement.

At this time it is my pleasure to recognize the ranking member

of this subcommittee, the distinguished gentleman from Illinois,

Mr. Hastert, for 5 minutes.

OPENING STATEMENT OF HON. J. DENNIS HASTERT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

Mr. HASTERT. I thank the chairman, and thank you for holding

this important hearing to discuss CAFE proposals and the auto industry’s efforts to address climate change. Three weeks ago we

heard from the administration on its proposal to address CAFE as

part of the President’s 2010 initiative, with a goal of reducing U.S.

gasoline usage by 20 percent in the next 10 years.

I am very interested to learn about other initiatives that our domestic auto manufacturers are pursuing to reduce gasoline use and

then to learn about the industry’s reaction to the recent light truck

rule. As you know, this rule and the process that accompanies that

will be a precursor for how things may play out as we discuss

modifying CAFE’s standards for the passenger car fleets.

Reducing gasoline consumption in part by strengthening CAFE

standards addresses America’s need for energy security. It must be

part of our deliberations on energy and environmental policy. But

CAFE is not the only means.

We need to further increase our efforts to facilitate the use of alternative fuels, such as E–85 and biodiesel. For example, the E–

85 dispensing pumps still await approval by Underwriters Laboratories, who have been dragging their feet now for almost a year.

We also need to get more vehicles on the road that can actually use

E–85. I want to hear from all the panelists on their efforts to increase production of flex fuel vehicles and their alternative-fuel vehicles and how soon in their best estimates we can expect real

worldly results.

I realize markets don’t create themselves overnight. It will take

time for the mainstream consumers to learn and appreciate the

benefits of alternative fuels. And while I realize that industry is investing hundreds of millions of dollars in new advanced technologies like hybrid vehicles, fuel cells, and hydrogen vehicles,

clearly more needs to be done. We all know the number of flex-fuel

vehicles currently on the road remains relatively small, and the

number of drivers who know their vehicles are especially equipped

is even smaller. I am very interested to learn how the auto industry is currently working to address this and other lingering concerns that are hindering the advancement of these fuels such as decreased fuel economy, price sensitivity, and market availability.
4

To further complicate matters, even the transition to alternative

fuels at retail gas stations has been complicated by infrastructure

issues such as the UL suspending certification for fuel dispensers

for E–85 because of unfounded corrosion concerns. At this time

when others are being asked to do more to reduce emissions, does

the auto industry need to be doing more to work through all the

aspects of the market, from manufacturer to retail to fueling?

Regarding the CAFE and the CAFE bill that passed this committee last year, it like the administration bill, would have given the

Department of Transportation authority to establish fuel economy

standards for passenger cars on a model-size by model-size basis.

Had we enacted it, the CAFE reform process would already be well

under way, and we would have begun enjoying the fuel savings

much sooner. So now we have some catching up to do.

And while the administration has suggested a 4 percent increase

in fuel efficiency it is controversial. It is either too aggressive or not

aggressive enough. I believe any authority that is derived from a

rulemaking should take careful consideration of safety, cost to

automakers, the technologies involved, and the market and consumer choice. We in Congress are certainly not the experts on all

of these issues. The examinations this committee gave last year

yielded a bill with excellent balance in my view, and I am interested in hearing from our panelists where they are on these issues

today. I look forward to their testimony and yield back the balance

of my time. Thank you, Mr. Chairman.

Mr. BOUCHER. The Chair thanks the gentleman from Illinois and

now recognizes the gentleman from Pennsylvania, Mr. Doyle, for 1

minute.

OPENING STATEMENT OF HON. MIKE DOYLE, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

Mr. DOYLE. Thank you, Mr. Chairman. Mr. Chairman, I have

consistently voted against arbitrarily raising CAFE standards because I felt that that policy could threaten thousands of jobs across

our country. However, I must tell you I have grown extremely frustrated by the slow pace of the industry’s progress in achieving better fuel economy. It is time for excuses to end and time for us to

work together on a real solution for improvement.

The question is no longer if we are going to do something but

rather what are we going to do. And there is no silver bullet to fix

the problem. We are left with many options as to how to achieve

this goal. I look forward to hearing as to how our panel will work

as active partners in the pursuit of better fuel economy. I want to

know what they can and will do, and I would like to hear what

they believe we can do here in Washington to assist them.

Global warming is not a problem that can be fixed in Washington, Detroit, or any specific location. It is a problem that will take

comprehensive solution pursued by a diverse group of participants

from every sector of the American economy. By the end of this

hearing I want to know if the auto industry will be a real partner.

As such, I will pursue policies that reflect that level of commitment. I yield back.
5

Mr. BOUCHER. I thank the gentleman and now call on the ranking member of the full committee, the gentleman from Texas, Mr.

Barton for 5 minutes.

OPENING STATEMENT OF HON. JOE BARTON, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

Mr. BARTON. Thank you, Mr. Chairman. I appreciate you holding

the hearing, I appreciate our witnesses being here today, especially

given the status in their industry. It is good to have you here, but

I want you to get back to your offices so we can keep the American

economy going as efficiently as possible.

We are having a series of hearings, and I want to thank Mr. Boucher and Mr. Dingell for these hearings on global warming and climate change. I am a skeptic. I don’t think we need to be rushing

to legislation on this issue given the fact that our Earth cycles in

thousands of years in terms of its climate warming or cooling. It

seems silly to me to have to rush to judgment in weeks or even

months on an issue of this importance.

I am glad that we have our automobile industry representatives

here today, both on the management side and the labor side. We

are going to look at the CAFE issue and how it has been addressed

in the past and how it may need to be addressed in the future. Last

year this committee passed a CAFE reform bill. It passed committee, did not go to the floor, did not go to the Senate, did not become

law. Had the bill that this committee passed become law, we would

be doing for automobiles what we have been doing for several years

for light trucks. We would have given the Department of Transportation the authority to establish a fuel economy standard on a

model-size by model-size basis. That bill did not pass, but I think

it was helpful in raising public awareness that there are current

problems with the current CAFE system, and the current CAFE

system is in need of reform

With the recent success of the light truck rule, the administration has further expanded these concepts in its 2010 proposal with

reducing gasoline consumption through increased vehicle efficiency

being one of its top priorities.

I am particularly interested in hearing today our panel’s reactions to the administration’s suggested yearly 4 percent increase in

fuel efficiency. How feasible is that goal? What kind of repercussions would occur within the industry if the administration proposal were enacted or if there were a number set in statute to accomplish that target? What market-based lessons have been

learned through the recent history of gasoline price spikes and declines, and what are the industry’s suggestions for moving forward,

especially if the current status quo is not an option?

I am also interested in hearing from our witnesses regarding the

administration’s proposal about tradable credits for manufacturers

to buy and sell CAFE. I would especially like to hear from Toyota

and GM, since Toyota has said they won’t sell them, GM has said

they won’t buy them. Some say that allowing the trading of these

kinds of credits could add flexibility in meeting CAFE goals, but

there are still strong concerns and several uncertainties with this

concept. So I really hope our witnesses address that issue today.
6

It seems to me that a CAFE standard must be based on science

and also on safety. We want people who know what they are doing

to get the right balance of mileage and safety. We expect them to

do it without destroying American jobs, especially jobs like the

2,000 assembly jobs at the GM assembly plant in my district in Arlington, Texas. This is one of the most complicated programs that

NHTSA administers, and frankly, scientists and engineers should

be better equipped to do it than activists and politicians.

With that, Mr. Chairman, I will yield back. Again, I want to

thank our witnesses for being here. This is a very important hearing, and I hope that all members will stay and participate.

Mr. BOUCHER. Thank you, Mr. Barton. The chairman of the full

committee, the gentleman from Michigan, Mr. Dingell0 is recognized for 5 minutes.

Mr. DINGELL. Mr. Chairman, I waive my right to an opening

statement at this time. I want to commend you for your leadership

and for the responsible and aggressive way in which you are handling these matters. I want to thank our witnesses for being with

us, and note the presence of our old friend, Dave McCurdy, the new

president of the Alliance of Automobile Manufacturers.

Mr. Chairman, I defer then my opening statement, I commend

you, and I thank you for your courtesy to me.

[The prepared statement of Chairman Dingell follows:]
7
8
9

Mr. BOUCHER. The gentleman from Michigan waives his opening

statement. The gentlewoman from California, Ms. Harman, is recognized for 1 minute.

Ms. HARMAN. Thank you, Mr. Chairman. I want to apologize for

having to leave at 3:30 to chair another hearing, but I come from

a part of the country where the automobile is more than just a

mode of transportation. In Los Angeles the car is a cultural symbol

and a way of life. It is no surprise then that the North American

headquarters including the credit and R&D facilities of two major

automakers are based in my district.

I had a longer statement which I will put in the record, but I do

especially want to welcome my constituent, Jim Press, and to salute the efforts that Toyota is making to make our planet healthier

and a bit safer. The witnesses today can either take the opportunity to shape change, or they can resist it. I hope they will take

the opportunity to shape change, because change surely will come.

Today is the first birthday of my first granddaughter, and I would

love to give Lucy, her name is really Lucy, a safer and healthier

world, and working together we can do that. Thank you.

[The prepared statement of Ms. Harman follows:]

PREPARED STATEMENT OF HON. JANE HARMAN, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF CALIFORNIA

I come from a part of the country where the automobile is more than just a mode

of transportation. In Los Angeles, the car is a cultural symbol and a way of life.

It is no surprise that the research and development facilities of two major automakers are based in my district.

Since I was first elected to Congress in 1992, I have watched with pride as my

constituents engineered leaps and bounds in automotive technology and design. Hybrid cars—to cite one example—represent the first step in meeting the energy challenges of the 21st century that we are here to discuss and resolve. I’m proud to say

that California has played an indispensable role in that technology.

But hybrids are only the first step. The breakthroughs of the future—including

plug-in hybrids and hydrogen fuel-cell vehicles—will be symbols of not only energy

efficiency and changing business models, but of good corporate citizenship. We will

rely on automakers to help us solve the climate change and energy independence

problems we face today.

The question is not whether we are pushing the ball forward—it is clear from the

testimony we will hear today that innovation in the automotive industry is alive and

well. The question is whether it will come fast enough.

The science is in, and the news from the Middle East depressingly repetitive. Energy independence and reductions in greenhouse gas emissions cannot come soon

enough.

I hope our witnesses can help us find ways to push the envelope on R&D. As I’ve

said before, done right, this is a win-win for both our planet and our economy.

Mr. BOUCHER. Thank you, Ms. Harman. The gentleman from

Michigan, Mr. Upton, for 1 minute.

Mr. UPTON. I am going to defer and reclaim my minute in questions.

Mr. BOUCHER. The gentleman defers. The gentleman from Indiana, Mr. Buyer, for 1 minute.

OPENING STATEMENT OF HON. STEVE BUYER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF INDIANA

Mr. BUYER. Thank you. I would like to thank all of you for coming. I agree with Mr. Barton. You live pretty busy lives, and I am

glad you are here. I am also glad that Mr. Boucher is chairing this
10

subcommittee. He is thoughtful, and he is deliberative, and I think

you are here because I am just as concerned.

Washington, DC, is a dynamic city that loves to make decisions

and judgments based on the emotion of the moment. Now, if you

gentlemen did that in your business, you wouldn’t last very long.

And Washington, DC, has a very poor reputation, and so your concerns are real, and I understand that is why you are here. In Indiana, obviously, we have a great history with the automobile invented there in Kokomo, Indiana. The 15 years I have represented

30 counties of Indiana, and I have got manufacturing facilities of

every one of you, and a lot of, you are successful because there are

a lot of great workers out there and innovators that are making it

happen. And they are equally as concerned.

So we will work through this, and I appreciate your presence

here today.

Mr. BOUCHER. Thank you, Mr. Buyer. The gentleman from

Washington State, Mr. Inslee, for 1 minute.

OPENING STATEMENT OF HON. JAY INSLEE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON

Mr. INSLEE. Thank you. I want to welcome Alan Mulally, native

little Boeing company out in our neck of the woods in Washington

State. I want to note our success in aeronautics because we believe

in game changing, changing the game in aeronautics, and I am optimistic now we are going to tackle this beast of global warming because we are going to have some game changers out of your industry.

And what I am interested in is how we can help create incentives

and conditions for those true game changers to hit the road, and

the reason I say that is that we have to reduce our CO2 emissions

by a full 80 percent to stabilize CO2 emissions to pre-industrialized

levels by 2050. Eighty percent reductions. We cannot do that by

modest baby steps, incremental even, improvements. We have got

to think of having whole revolutions in automobiles in this country,

and I believe it is our destiny to lead the world to do that, and you

have got the geniuses to do it.

So what I am interested in particularly is how we shape a regulatory environment to create an incentive that have true revolutions in the fuels we use so that we can move to advanced cellulosic

ethanol and have the pumps available and the flex-fuel vehicles for

Americans to use it broadly, not sort of on a marginal use. How we

move to a true electrical platform, how we get to fuel cells, how we

use the technology that is there today as quickly as possible to get

it on the road. And I just think we have been stuck arguing about

baby steps for now for 20 years, and we have got cars with less

mileage than they did when Jimmy Carter was President of the

United States.

So I look forward to this revolution. I would like to think this is

the start of that revolution today and look forward to working with

you.

Mr. BOUCHER. Thank you, Mr. Inslee. The Chair now recognizes

the gentleman from Michigan, Mr. Rogers, for 1 minute.
11

OPENING STATEMENT OF HON. MIKE ROGERS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN

Mr. ROGERS. Thank you, Mr. Chairman. Thank you for being

here. I think it is incredibly important that we find the balance in

this, and I want to commend all of you on the work that you have

done, and sometimes I don’t think that we in Congress give enough

kudos to the investment, the amount of dollar investment that you

make in research and development to get us to that next generation of alternative fuels. Your work on lithium batteries, your work

on the next generation of ethanol engine, your hybrid technology.

I know many of your companies are doing, you are looking at putting hybrids on heavier vehicles so you get a higher yield, a bigger

bang for the buck. I know many of you have many lines that are

over 30 miles per gallon.

So I hope that in this this is your opportunity to talk to us about

that kind of investment that you make and the success that you

think is right around the corner, and I think it is really exciting

where we are in cars. My generation was going to the moon. The

next generation was the E economy, and I think this generation is

going to be that alternative fuel vehicle that Americans want to

buy and park in their car and brag to their friends about. And I

can guarantee you, if it is designed by Congress, it ain’t going to

be all that attractive. If you design it and develop it and build it

and get it on those parking lots around those auto dealers, I know

Americans will buy them, and we are all going to be better off for

it.

So I am eager to hear how you can do that, how we can help you

and not punish you to that end. And I look forward to your testimony today. Thank you.

Mr. BOUCHER. Thank you, Mr. Rogers.

I am now pleased to recognize the gentlewoman from Oregon,

Ms. Hooley, for 1 minute. Ms. Hooley waives her statement. The

gentleman from Texas, Mr. Gonzalez, for 1 minute. Mr. Gonzalez

waives his statement

The gentlewoman from Wisconsin, Ms. Baldwin, for 1 minute.

OPENING STATEMENT OF HON. TAMMY BALDWIN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WISCONSIN

Ms. BALDWIN. Thank you, Mr. Chairman, and thank you to today’s witnesses. It is one of the largest industries in the United

States. The automobile industry plays an important role in addressing climate change, and in addition to being the major player

in ongoing discussions about CAFE standards, auto companies also

should be involved in conversations about increasing the energy efficiency through their day-to-day manufacturing operations. Both

emissions output and energy use will only increase as more cars

are on the road.

For far too long I think that Congress has failed to take action

or show the leadership required to meet today’s challenges. We

have not required that manufacturers take advantage of or make

use of the most energy-efficient and technologically-advanced products that are available today. We have set CAFE standards that

fall far below levels that we are currently capable of achieving.
12

Quite frankly, until recently we in Congress have taken the easy

way out. I think now is the time to push that envelope, and with

your cooperation and input show that the American auto industry

can be a leader in efficient and effective climate solutions.

I look forward to hearing your testimony today about how you

plan to contribute in that bold effort. Thank you, Mr. Chairman.

Mr. BOUCHER. Thank you very much, Ms. Baldwin. Now recognized is the gentleman from Texas, Mr. Burgess, for 1 minute.

Mr. BURGESS. Mr. Chairman, I will defer and save time for questions.

Mr. BOUCHER. Mr. Burgess waives his statement.

The gentleman from Oregon, Mr. Walden, for 1 minute.

Mr. WALDEN. Mr. Chairman, I am going to waive as well.

Mr. BOUCHER. Mr. Walden waives his opening statement. The

gentleman from Louisiana, Mr. Melancon, for 1 minute. Mr.

Melancon waives.

The gentleman from Kentucky, Mr. Whitfield, for 1 minute.

Mr. WHITFIELD. I will waive.

Mr. BOUCHER. Mr. Whitfield waives. And the gentleman from

Maryland, Mr. Wynn. Mr. Wynn also defers.

We now have an opportunity to hear from our witnesses, and I

want to say a word of welcome to them this afternoon. We have a

very distinguished panel of witnesses to share their thoughts with

the subcommittee today. Mr. Ron Gettelfinger is the president of

the United Auto Workers, which represents more than 640,000

workers and 500,000 retirees of the United States. Mr. Rick Wagoner is the chairman and chief executive officer of the General Motors Corporation, which is the largest passenger car and light-duty

truck manufacturer in the world with approximately 150,000 direct

employees in the United States. Jim Press is the president and

chief operating officer of Toyota Motor, North America, which has

operated in the United States since 1957. It directly employs approximately 34,000 workers in the United States. Alan Mulally is

the new president and chief executive officer of the Ford Motor

Company, headquartered in the district of our full committee chairman in Dearborn, Michigan. Ford employs approximately 280,000

workers in more than 100 plants world wide. Tom LaSorda is the

president and chief executive officer of the Chrysler Group of

DaimlerChrysler Corporation. The company employs more than

382,000 workers with more than 120,000 located in the United

States. We welcome each of our witnesses. Without objection your

prepared written statement will be made a part of the record, and

we would welcome your oral summary of approximately 5 minutes

each. Mr. Gettelfinger, we will be pleased to begin with you.

STATEMENT OF RON GETTELFINGER, PRESIDENT, INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE AND

AGRICULTURAL IMPLEMENT WORKERS OF AMERICA, DETROIT, MI

Mr. GETTELFINGER. Thank you. Mr. Chairman, my name is Ron

Gettelfinger. I am president of the UAW, and we appreciate the opportunity to testify before this subcommittee.

The UAW believes that climate change and energy security are

serious problems. We urge Congress to pursue initiatives that will
13

deal with these issues in an integrated and balanced manner that

protects jobs and benefits for American workers and retirees.

To address the problem of global warming, the UAW supports

the establishment of an economy-wide, mandatory, tradable-permits program that will slow the growth of and eventually reduce

greenhouse gas emissions in the United States. We believe this

type of cap and trade program should be done on an upstream

basis in order to minimize regulation and to ensure that all sectors

of the economy participate in a proportionate manner.

In considering auto sector policies to address climate change and

energy security, the UAW believes Congress should keep in mind

several key principles. To be effective, any policies must address

the fuels that go into vehicles as well as the efficiency of the vehicles themselves. The promotion of alternative fuels can make an

enormous contribution to reducing greenhouse gas emissions and

our dependence on foreign oil.

Furthermore, any auto policies requiring improvements in vehicle efficiencies should include measures to help level the playing

field in the automotive industry and to provide struggling manufacturers with the resources needed for retooling efforts. Any assistance should be tied to investments in domestic production that will

generate jobs for American workers and help the overall U.S. economy. It should also be structured in a manner that recognizes and

helps to address the fundamental imbalance in the auto industry

related to retiree healthcare legacy costs. Without such measures

the UAW would be deeply concerned about the economic feasibility

of any proposals to mandate significantly higher vehicle efficiency

standards.

In light of the extremely serious financial conditions of General

Motors, Ford, and DaimlerChrysler, and the disparate burden they

face in retiree healthcare legacy costs compared to their competitors, the UAW believes that the imposition of stringent increases

in vehicle efficiency standards could lead to calamitous results.

This could include the closing of additional facilities and the loss

of tens of thousands of additional automotive jobs in this country.

It could also include the loss of healthcare coverage for 500,000 retired workers and their families.

The UAW urges Congress to explore the feasibility of establishing an additional carbon control policy requiring reductions in the

carbon emissions of light-duty vehicles, as well as reductions in the

carbon intensity of the fuels that go into these vehicles. This twopronged approach could make a major contribution to reducing

greenhouse gas emissions and contribute enormously to a reduction

in oil consumption.

The UAW also urges Congress to use tax or other incentives to

encourage domestic production of advanced technology vehicles and

their key components. As was demonstrated by a November 2004,

study conducted by the University of Michigan, this type of approach would help to maintain and create tens of thousands of

automotive jobs in this country. At the same time it would help to

accelerate the introduction of these advanced-technology vehicles

and thereby reduce global warming emissions and our dependence

on foreign oil.
14

The UAW believes Congress should pursue several policies to

promote the use of alternative fuels in motor vehicles. We would

support legislation mandating that certain percentages of all vehicles sold in the U.S. by each automaker must be flex-fuel capable

by specified dates. We also would support incentives or mandates

relating to the conversion of filling stations so they have the capability to distribute alternative fuels.

The UAW believes that changes in the CAFE Program are the

least desirable option for addressing the problems of climate

change and energy security. Moving to an attribute-based CAFE

system for passenger cars would enable auto manufacturers to offshore all of their small car production. Over 17,000 American workers are currently employed in five U.S. assembly plants that

produce small passenger cars. Almost 50,000 American workers

produce parts for these vehicles. To prevent the loss of these jobs

and to prevent the auto companies from upsizing their vehicles,

thereby resulting in worse overall fuel economy, the UAW urges

Congress to impose an anti-backsliding requirement on any new

CAFE rules.

In conclusion, the UAW appreciates this opportunity to testify

before this subcommittee concerning this critically-important issue

of climate change and energy security. We look forward to working

with this subcommittee to fashion measures that will enable the

U.S. to make significant progress in reducing greenhouse gas emissions and oil consumption while protecting jobs and benefits for

American workers and retirees. Thank you.

[The prepared statement of Mr. Gettelfinger appears at the conclusion of the hearing.]

Mr. BOUCHER. Thank you very much, Mr. Gettelfinger. Mr. Wagoner.

STATEMENT RICK WAGONER, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, GENERAL MOTORS CORPORATION, DETROIT,

MI

Mr. WAGONER. Good afternoon, Mr. Chairman and members of

the committee. I am Rick Wagoner, chairman and chief executive

officer of General Motors Corporation. Thank you for the opportunity to speak about advanced technology and the very important

subjects of climate change and energy security.

The global auto industry as a business necessity and as our obligation to society is developing alternative sources of propulsion

based on diverse sources of energy to meet the world’s growing demand for our products.

At GM we are committing massive resources to this effort, and

we think it is very important for us and for the American public

that we are working on the right things, things that will really

make a difference in reducing oil consumption and CO2 emissions.

At GM we are fully prepared to discuss these issues, including

carbon constraints on the U.S. economy, and we believe the discussion should begin with a frank evaluation of the Corporate Average

Fuel Economy Program.

The stated goals of the original CAFE Program were to reduce

U.S. gasoline consumption and oil imports. However, because the

number of vehicles on the road has nearly doubled since CAFE was
15

enacted and the total number of vehicle miles traveled has also

nearly doubled, U.S. gasoline consumption has increased by 60 percent and U.S. oil imports have increased by more than 100 percent.

These increases have occurred despite the fact that since CAFE

was enacted automakers as a whole have increased new vehicle

fleet fuel economy for light trucks by 60 percent and more than

doubled it for passenger cars.

I am proud to note that General Motors has improved its fuel

economy more than any other major auto manufacturer over this

period, and I hasten to point out that we are applying a broad

range of technologies to continue improving fuel economy going forward.

But clearly, no matter how you measure it, the CAFE Program

has failed dramatically in meeting its stated goals. And yet our, for

our Nation, the original goals of the CAFE legislation remain as

important as ever. In fact, more so. It is time to move away from

approaches that don’t solve the problem and on to solutions that

address not only the legitimate and important issue of reducing

U.S. gasoline consumption and oil imparts, but also the critical

challenges presented by CO2 emissions. And the good news is that

we now have these solutions within our grasp.

In the near term the best opportunity for reducing gasoline consumption, oil imports, and greenhouse gas emissions is through increased use of biofuels, and the biofuel with the greatest potential

to displace petroleum-based fuels in the U.S. is ethanol. Consider

the differences between CAFE and ethanol. A 4 percent per year

CAFE increase would be extraordinarily expensive and technologically challenging to implement. On the other hand, GM, Ford,

and DaimlerChrysler have already committed to make half of our

annual vehicle production biofuel capable by 2012.

Beyond that, a 4 percent per year increase in CAFE according to

the administration’s analysis—would save 8.5 billion gallons of gasoline annually by 2017. That is less than half of the projected

growth in American oil consumption. In other words, even with this

proposed CAFE increase, as difficult as it is, America will still be

using more and most likely importing more oil than ever before, as

well as producing more CO2 emissions.

On the other hand, if all the E–85 capable vehicles on the road

today, along with those that GM, Ford, and DaimlerChrysler have

already committed to produce over the next 10 years, if they were

to run on E–85, we could displace 22 billion gallons of gasoline annually. And if all manufacturers made the same commitment, we

could increase the savings to 37 billion gallons of gasoline annually.

That is more than quadruple the savings that a 4 percent per year

CAFE increase would achieve and very importantly, enough to actually reduce America’s oil consumption by more than 10 percent

versus today’s levels as well as CO2 emissions.

The potential of biofuels like E–85 is to significantly displace petroleum is within our grasp today. The vehicles are on the road or

in the works, but they are not being fully utilized because of the

constraints on E–85 supply and distribution. With continued push

from Congress and the administration to grow biofuel production

and distribution, including next generation cellulosic ethanol, we

can make a big difference very quickly.
16

So E–85 offers tremendous opportunities to reduce oil consumption and imports even within a decade. Is there even more we can

do beyond that? Absolutely, yes. And we are already working on it.

At GM we are making a major commitment to electrically-driven

vehicles, including development of plug-in hybrids, fuel-cell vehicles

like the Chevy Sequel concept, and range-extended electric vehicles

like the Chevy Volt. Why are we doing this now? Because of recent

advances in energy storage technology, specifically in lithium ion

batteries and hydrogen fuel cells. While not yet ready for prime

time, in our view these technologies are getting close to commercial

reality. And this is an area where Congress can really help by significantly enhancing funding for domestic advanced battery research and development and also expanding funding for development of hydrogen and fuel-cell technology.

In summary, we at GM believe now is the time for a new, more

comprehensive and forward-looking national energy strategy that

insures we are working on the right things, things that will really

make a difference in reducing oil consumption and CO2 emissions.

At GM we are willing and able to play a leadership role in helping

develop and implement that strategy.

Thanks very much, and I look forward to answering your questions.

[The prepared statement of Mr. Wagoner appears at the conclusion of the hearing.]

Mr. BOUCHER. Thank you, Mr. Wagoner. Mr. Press.

STATEMENT OF JIM PRESS, PRESIDENT AND CHIEF OPERATING OFFICER, TOYOTA MOTOR NORTH AMERICA, NEW YORK,

NY

Mr. PRESS. Good afternoon, Mr. Chairman and members of the

subcommittee. I am Jim Press, president of Toyota Motor North

America. I am both humbled and honored to have this opportunity

to discuss these issues of climate change and energy security with

you today.

Two of Toyota’s founding principles are the elimination of waste

and service to society. These principles permeate our products and

our actions now and well into the future. They are part of our

DNA, and they guide us as we address climate change as well as

energy security issues.

Toyota has long been mindful of and accepts the broad scientific

consensus that climate change is occurring and will continue unless

there are significant and coordinated global efforts to slow the

growth of man-made greenhouse gas emissions. Toyota is committed to continued action to address climate change and promote

greater energy diversity. We plan to increase the fuel efficiency of

our products, develop new markets for advanced vehicle technology

and alternative fuels, and reduce the greenhouse gas footprint from

our vehicles, manufacturing, and distribution portions of our business.

The motor vehicle industry has a responsibility to be part of the

solution, but these issues cannot be addressed by the industry

alone. U.S. action on both issues must, by definition, be national

in scope and involve a range of industries and sectors of the economy, as well as the consumers.
17

The centerpiece of our fuel efficiency efforts has been hybrid

technology, a revolutionary powertrain system derived from our inhouse research and development programs. This innovative system

is designed to substantially increase vehicle fuel economy and reduce emissions significantly. Toyota hybrid vehicles are over 70

percent cleaner for smog-forming emissions than the average new

vehicle and can offer up to twice the fuel economy. And beyond that

hybrid technology is an essential and enabling element of future

powertrains, such as plug-in hybrids and fuel cells.

The year 2007, marks the 10th year of our Prius, the first hybrid.

I am happy to say the introduction of Prius was a sound business

decision. Last year the Prius was our third best-selling passenger

car in the U.S. after Camry and Corolla. As of January 2007, we

have sold nearly half a million hybrids profitably in the United

States, and we now offer six different hybrid models.

Hybrid technology embodies our core belief that the most effective solutions are mass market solutions, and that is why we see

hybrid technology as critical to the commercialization of future

drivetrains. Many of the same components found in our current hybrids are being used in hydrogen fuel cell vehicles that we are currently testing here in the United States. The same can be said for

plug-in hybrids and other technologies we are pursuing.

It is not a lack of will that is keeping plug-in hybrids from commercialization. It is the absence of technical breakthroughs to address the issues of battery technology, weight, and cost.

While fuel cell and plug-in hybrid research continues, so, too,

does our application of advanced technology on conventional gasoline engines. We are aggressively pursuing clean diesel technology,

as well as vehicles capable of operating on renewable fuels such as

ethanol and biodiesel.

In addition to vehicle technology improvements, in-use impacts

from the existing fleet of vehicles can be reduced through a series

of measures. For example, smarter land use planning, increased reliance on mass transit, and greater use of so-called intelligent

transportation systems can reduce traffic, congestion, and energy

consumption.

Toyota supports the use of national performance-based regulatory programs, as long as the programs are fair, technologically

feasible, cost effective, and they do not discourage early compliance,

technological innovation, or safety. In this context, we support increasing both the passenger car and light-duty fuel economy standards and giving NHTSA the authority to reform the passenger car

standard.

The greenhouse gas impact from motor vehicles is inexorably

linked to their fuel economy. Toyota’s fleet in the United States has

exceeded the applicable fuel economy standards since their inception in 1978. In 2005, our combined car and truck fleet economy

was 28.9 miles per gallon, exceeding the combined average of the

rest of the industry by 4.1 miles per gallon. That is nearly 17 percent. We have done this while providing a full range of vehicles

from subcompacts to the best-selling passenger car, Camry, the

best-selling luxury vehicle line, Lexus, as well as a full line of

SUVs and trucks.
18

Toyota has a proven record of bringing advanced technology to

market and achieving high levels of fuel economy. Over their lifetime, the past 10 model years of Toyota vehicles sold in the U.S.

will use 11 billion fewer gallons of gasoline. That is 265 million

fewer barrels of oil than if we had just met the standards. These

same vehicles will emit over 100 million metric tons less of carbon

dioxide.

Our commitment to reducing the greenhouse gas footprint of our

products does not stop there. Energy conservation and energy efficiency are core considerations in the life cycle of our vehicles. In

2002, we set an internal target to reduce energy consumption from

our manufacturing operations by 15 percent per unit of production

by 2005, compared to a baseline of 2000. We have not only met but

we exceeded that target ahead of schedule, and we now have an

even more aggressive goal for the 2007–11, time period.

Tackling climate change and fostering energy diversity require

careful deliberation and balancing with other national priorities. It

also demands innovation, unconventional thinking, and most of all,

action. I believe the time is right to enlist the immense talent and

the might of the auto industry to help solve some of the key issues

of our time. As an industry we have an obligation to be part of the

solution, not the problem. Toyota pledges to do its part to lend a

hand and to work with the rest of the world to help create real solutions.

I thank the subcommittee for its interest in our views and for

this opportunity to share some of our current thinking. We will be

happy to respond to your questions. Thank you.

[The prepared statement of Mr. Press appears at the conclusion

of the hearing.]

Mr. BOUCHER. Thank you very much, Mr. Press. Mr. Mulally.

STATEMENT OF ALAN R. MULALLY, PRESIDENT AND CHIEF

EXECUTIVE OFFICER, FORD MOTOR COMPANY WORLD

HEADQUARTERS, DEARBORN, MI

Mr. MULALLY. Good afternoon. I am Alan Mulally, president and

chief executive officer of the Ford Motor Company. It is a pleasure

to be here and provide our perspective on these important issues.

Ford Motor Company operates facilities in 45 States. About one

in every five American autoworkers is employed by Ford. Beyond

direct employment of over 100,000 people in the United States,

Ford impacts nearly 2 million American jobs. Over the last 3 years

Ford has spent nearly $23 billion on research and development, the

vast majority of which has been here in the United States. Ford

was the first company in our industry to issue a report on the challenges of climate change for our business going forward, and I also

brought a copy of that I would like to add to the record for your

reference.

In addition, since 1999, we have had a specific focus on sustainability, the triple bottom line that addresses the environment, financial, and social impacts. Today I am here to tell you that Ford

remains committed to working with you to secure our energy future

and address climate change. But we need Government to be our

partners, not our adversaries.
19

Energy security and climate change issues are linked. An effective policy for both must reflect an integrated approach among key

stakeholders, including the automobile industry, the fuel industry,

Government, and of course, the consumers.

Yes, we need more efficient vehicles, but we also need lower carbon fuels and policies that affect travel demand, infrastructure development, and consumer decisions. But in the end it is the consumers that will decide what they buy and how much they drive.

This consumer demand, future developments in technologies, and

ever-changing markets and political uncertainties require flexible

solutions as well. The business strategy that Ford implements and

the policies that we encourage must have the flexibility to meet a

range of scenarios. There is, as was pointed out, no silver-bullet solution, and that is why Ford is investing in a broad range of innovative technologies.

CAFE isn’t a silver bullet either. When the CAFE law was

passed in the 1970’s, the goal was to reduce our dependence on foreign oil. Frankly, that did not work. Even though today’s average

light truck gets better fuel economy than a 1970’s compact car, the

unintended consequence was that as gas prices fell, people actually

drove more.

Ford will continue to do our part in producing flex-fuel vehicles

and improving fuel efficiency. We support increasing CAFE standards to the maximum feasible levels and reforming the passenger

car CAFE structure similar to the light-truck reform.

We also support taking the policies out of the CAFE decision.

Setting CAFE standards can only be properly accomplished after a

thorough analysis of the data; the technology data, economic data,

and safety data. We believe NHTSA has this capability.

Ford also recognizes that we must particular in the solution to

these issues, and we have invested substantial resource money into

the research and development of innovative vehicle technologies.

We are developing a range of advanced technologies that improve

fuel efficiency through advanced gasoline engines and accommodate

a range of alternative fuels including hybrid flex fuel vehicles,

clean diesel, hydrogen internal combustion engines, and hydrogen

fuel cells.

We are proud that Ford produced the first American-made full

hybrid electric vehicle on the road, the Ford Escape hybrid. We

have been building flexible-fuel vehicles for over a decade and have

placed more than two million of these vehicles on American roads,

and that is only a start. Just a few weeks ago we introduced the

Ford Escape hybrid, electric E–85 demonstration project that combines two petroleum-saving technologies; hybrid electric power and

E–85 flex-fuel capability.

Though there are many technical and cost challenges to address,

if just 5 percent of the fleet were powered by E–85 hybrids today,

oil imports could be reduced by 6 million gallons of gasoline each

year. We stand ready with the technology, and we are willing to

lead the way, but we need a partner with Government and the fuel

providers. We must have renewable fuel infrastructure before we

can effect change. We believe that there is a substantial opportunity to use American-grown renewable fuels to reduce carbon

emissions and the nation’s dependence on foreign oil. Today’s corn
20

ethanol has the ability to reduce CO2 emissions by approximately

25 percent. Tomorrow’s cellulosic ethanol can increase the savings

to about 85 percent, all while reducing imported oil.

Ford also supports incentives that encourage the production, distribution, and the use of these low carbon renewable fuels and flexfuel vehicles capable of running on E–85. We can have a single

American solution to both of these problems. However, Congress

will have to make some tough choices. In the transportation sector

alone there are a number of possible ways to limit carbon emissions. Increasing CAFE too quickly and aggressively without appropriate engineering lead times or necessary customer incentives to

drive market demand will have a serious negative consequence on

the American automobile industry. And it would significantly reduce customer vehicle choice. We can’t lose sight of the benefits of

transitioning to low-carbon fuels. We need to have a serious dialog

with all key stakeholders, including Congress to develop real solutions to these problems.

Is the upstream cap and trade approach the answer? What about

low carbon or biofuel standard? Or increasing the cost of driving,

like a higher fuel tax the answer? How can we positively influence

the customer without negatively impacting small business and denying families their mobility. These are tough questions and will

require tough choices. At Ford we look forward to working with you

on a comprehensive approach that will be both effective and fair

without seriously impacting the U.S. economy.

I look forward to taking your questions. Thank you very much.

[The prepared statement of Mr. Mulally appears at the conclusion of the hearing.]

Mr. BOUCHER. Thank you very much, Mr. Mulally. Mr. LaSorda.

STATEMENT OF THOMAS W. LASORDA, CHIEF EXECUTIVE OFFICER AND PRESIDENT, CHRYSLER GROUP OF

DAIMLERCHRYSLER, AUBURN HILLS, MI

Mr. LASORDA. Mr. Chairman and members of the committee,

thank you for inviting me to testify before you on the subject of climate change.

DaimlerChrysler is committed to developing new advanced technologies which minimize the effects our products and processes

have on global climate and the environment in general. We recognize that climate change and national security are serious concerns

that require all of us; individuals, industry, and Government, to

take actions to help reduce our dependence on oil and emissions of

CO2, and we have already taken actions to do so.

We have produced more than 1.5 million flexible-fuel vehicles, or

FFV’s, capable of running on E–85. That is more than 10 percent

of our production over the last 9 years, a higher percentage than

any other automaker. We stand ready to make by 2012, along with

GM and Ford, 50 percent of our production as either flexible-fuel

vehicles or vehicles capable of running on biodiesel.

DaimlerChrysler offers seven clean diesel models this year, providing improved fuel economy of 30 percent and greenhouse gas reductions of 20 percent. And we are actively pushing for the adoption

of a national standard for B–20 biodiesel fuel to speed its adoption

in the marketplace.
21

We are partners in a global alliance in hybrid development with

General Motors, BMW, and our sister company, Mercedes Car

Group, in developing a new hybrid system that we expect will leapfrog the competition. The first Chrysler Group product, the Dodge

Durango, will make its debut in the first quarter of 2008.

DaimlerChrysler is a leader in producing 1,500 hybrid diesel electric buses through our Orion Transit Bus Company, and they are

being sold in New York, San Francisco, and other cities across this

great land.

We also have the only demonstration fleet of plug-in hybrids in

service through our Dodge Sprinter vans. As you may not know, we

are the world’s leader in fuel-cell vehicle production with more

than 100 vehicles ranging from small passenger cars to transit

buses in worldwide operation today. And we continue to put advanced technology into our gasoline engine vehicles. Last year we

introduced a new world engine for our four-cylinder cars and

trucks, along with a new fuel-efficient continuously-variable transmission to achieve 30 plus miles per gallon. We are doubling the

capacity of our four-cylinder engine plant to 840,000 units per year. Just last month I announced a $3 billion powertrain investment.

This investment will include development and production of more

fuel-efficient powertrains, a brand new V–6 engine family, new cutting-edge transmissions and axles for our products. All in all these

investments will further secure tens of thousands of jobs here in

the United States.

We are also addressing our product mix. Earlier this year we announced the 40-plus mile per gallon Smart city car that will arrive

in the U.S. early next year.

I have focused on where we are going from a technology perspective, to reduce petroleum consumption, and since they are directly

related, greenhouse gases. Now I would like to comment on calls

for a 4 percent annual CAFE increase over the next 10 years,

which translates to a 50 percent fuel economy increase. In fact, we

already do it. It is in Europe. The U.S. combined fleet averages

about 24 to 25 miles per gallon, and in Europe the fleet averages

36 miles per gallon. That is a 50 percent difference.

Why the huge disparity between there and here? We are the

same companies in Europe that we are in the U.S. with access to

similar technologies. The difference is the European approach to

energy and greenhouse gas policies. They have made some tough

political choices. They have highly taxed gasoline, making the price

three plus times higher than in the U.S., and they have incentives

on diesel fuel.

Through policies which affect consumer demand, the mix of vehicles sold in Europe is radically different than here. About 60 percent of the products are compact cars or smaller, compared to about

15 percent here in the United States. About 50 percent of passenger vehicles sold in Europe are diesel powered. The European

model, while far from perfect, is based on policies that leverage demand and market forces, not on policies that fight them.

However, in the United States our policies have historically addressed the supply side; light-duty vehicle fuel economy standards.

But consider how a 50 percent fuel economy improvement relates

to new vehicle technology alone. Assume if all the new vehicles sold
22

in the U.S. 10 years from now were hybrids or diesels, something

that no one really believes is even feasible, fuel economy would improve by only 25 to 30 percent.

U.S. policymakers must adopt a new and unique formula that

fits here. DaimlerChrysler supports a three-pronged comprehensive

approach to climate change and energy security in the transportation sector, one that includes a combination of vehicle efficiency

improvements by our industry, the expanded use of alternative

fuels such as ethanol and biodiesel, and the harnessing of market

forces to help drive consumer demand.

But the climate change challenge is bigger than any one industry. So today I am here to commit personally to work with you on

a broad-based climate change program that addresses all sectors of

the economy, not just automobiles, is market-based to insure that

greenhouse gas reductions do not significantly harm the economy,

is upstream, and is national, if not global, in scope.

Thank you, and I look forward to your questions.

[The prepared statement of Mr. LaSorda appears at the conclusion of the hearing.]

Mr. BOUCHER. Thank you very much, Mr. LaSorda, and thanks

to each of our witnesses for your presence here this afternoon and

sharing that information with us. I will recognize myself for a

round of 5 minutes of questions.

Under the current CAFE requirements and the system that those

requirements are effectuated through, there is no ability on the

part of the automotive manufacturers to trade CAFE credits. I

think you are allowed to bank those credits under certain circumstances and use them yourself at a later time, but there is no

opportunity to trade those within the industry.

Some have suggested that it might add to your flexibility if you

had that opportunity, and it might give you some early experience

with a trading program in the event that our climate change proposal leads to the imposition of cap and trade.

And so my question to you is whether or not you would support

legislation that we could perhaps pass at an early date that would

institute a credit trading program with regard to CAFE. Mr. Wagoner, do you have a comment?

Mr. WAGONER. Thank you, Mr. Chairman. It would be my personal view that it, such a program would not have a significant impact on addressing the issues that I think we are trying to address,

which is really to try to provide appropriately-costed energy to the

economy but at the same time reduce oil imports and reduce CO2

emissions. I think realistically from a manufacturer’s perspective

we are going to do our best to meet any standard ourselves, and

the prospect of if one is short, writing a check to your competitor

so they will have more money to invest is one that practically isn’t

consistent with my competitive spirit. So I guess I can’t say it

would never work, but I would have to say I don’t see it as a major

part of a solution to the issues that I think we need——

Mr. BOUCHER. So you are not recommending that to us?

Mr. WAGONER. That is correct. Yes.

Mr. BOUCHER. Mr. Press, very briefly.

Mr. PRESS. Yes. I think that we would be open to considering

that concept. But if a competitor had an expensive technology that
23

generated credits, and they could sell it to a competitor who could

buy it for less than the company spent on the technology, it really

wouldn’t do either company any good.

Mr. BOUCHER. All right. So you are not recommending that either. Mr. Mulally.

Mr. MULALLY. I sure agree with my colleagues. I think I would

also add that the idea though has a lot of merit of moving it up

to almost like a sector of transportation or even higher where the

real value would be trading between say the energy companies and

the automobile industry. I think it would be a lot more effective

and beneficial.

Mr. BOUCHER. All right. Well, we will certainly examine that opportunity. Mr. LaSorda, would you care to comment?

Mr. LASORDA. I agree with my colleagues here, and have nothing

more to add, Mr. Chairman.

Mr. BOUCHER. All right. Chairman Dingell and I are currently

working to draft a climate change control measure. Let me just

talk about some of the characteristics and then I am going to ask

you for your view of this. Our goal is to have a mandatory program

that would make a substantial contribution to addressing the challenge of greenhouse gas emissions. It would be digestible by the

economy. It would spread the burden equally across the economy.

It would assure that no sector of the economy will be dislocated or

disadvantaged in comparison with any other economic sector.

It will be a bipartisan measure. It will be an industry-supported

measure, and it would be capable of passage both in the House and

in the Senate and hopefully signature by the President during the

next 2 years. That is the goal that we have. We are soliciting the

views of all interested parties. We are particularly soliciting both

views and participation in crafting this measure from the industries that are greenhouse gas emitters, and we welcome your participation.

So my question to you, and I think a one-word answer would be

preferable, will you agree to participate with us? Mr. Gettelfinger,

let us begin with you.

Mr. GETTELFINGER. Yes.

Mr. BOUCHER. Mr. Wagoner.

Mr. WAGONER. Yes.

Mr. BOUCHER. Mr. Press.

Mr. PRESS. Yes.

Mr. BOUCHER. Mr. Mulally.

Mr. MULALLY. Yes.

Mr. BOUCHER. Mr. LaSorda.

Mr. LASORDA. Absolutely.

Mr. BOUCHER. This is a fabulous panel of witnesses. Thank you.

Thank you very much. Do you have any thoughts this afternoon on

what I think is going to be one of the major challenges that we will

confront, which is devising a way to bring the transportation sector

into the broader greenhouse gas emission control program. We are

probably going to be considering as a major approach to that measure some form of cap and trade, and so for purposes of discussion

this afternoon let us assume cap and trade is the approach that we

adopt. Do you have any thoughts today on how we might successfully integrate your pre-existing regulatory program, CAFE, with a
24

cap and trade regime. I wouldn’t expect detailed answers but if you

have any preliminary thoughts on that, we would certainly welcome that today. Mr. Wagoner.

Mr. WAGONER. A complex topic, as you indicate. I would say in

general we do believe there is merit to addressing the issue as you

have cited it. We think there are ways to go about this that could

lead to solutions. We have some specific guidelines that we would

like to suggest as part of that process and we would be pleased to

work with your staff towards that end.

Mr. BOUCHER. Thank you. We would welcome your information

on that. Mr. Press.

Mr. PRESS. Yes. Again, we would be open to considering any national program that would be fair and equitable, and that would

make sure that those that have already made investments in technology are not disadvantaged. While credit trading between companies may be one concept, another idea is to allow a company to

trade credits among its own fleets.

Mr. BOUCHER. Thank you, Mr. Press. Mr. Mulally. No comment.

Mr. LaSorda.

Mr. LASORDA. Based on what you said earlier about all sectors

in the economy being involved in the solution obviously we would

like to participate in the discussions on this.

Mr. BOUCHER. OK. Thank you very much. My time has expired.

I am now pleased to recognize the ranking member designate for

the moment of the—oh, I am sorry, Mr. Barton, the ranking member of the full committee for 5 minutes.

Mr. BARTON. Thank you, Mr. Chairman. I have nothing but supreme affection and respect for our full committee chairman and

subcommittee chairman. What Mr. Boucher just outlined would literally be a legislative miracle of Biblical proportions if he is able

to pull it off, so let us wish him well, and if there is a way, we will

attempt to be helpful but we are going to have to answer some very

tough questions. And I am going to start asking some of those

questions right now. My first question to the panel since everybody

has kind of nodded your head that you support cap and trade, I

want to make sure I understand that.

You support mobile sources being subject to carbon caps, is that

true? Everybody on this panel supports there being not just on stationary sources but on mobile sources like tailpipe emissions for

cars and trucks—the industry and labor union that represents

UAW supports a mandatory cap and trade system. Mr.

Gettelfinger.

Mr. GETTELFINGER. Yes, we support that, and we believe that

there is a lot of merit to it, and we believe if is it upstream if it

reduces the amount that goes into the fuel itself, and then on

the——

Mr. BARTON. I just want to make sure you understand what you

are saying.

Mr. GETTELFINGER. Yes, absolutely.

Mr. BARTON. You know that you are supporting a mandatory carbon cap on tailpipe emissions, you said yes.

Mr. GETTELFINGER. When you say tailpipe emissions——

Mr. BARTON. That is where the CO2 comes out.
25

Mr. GETTELFINGER. That is correct, and we refer to that as the

carbon burden, and that is correct, we do support that.

Mr. BOUCHER. Mr. Wagoner.

Mr. WAGONER. Yes, Congressman, we said we would support

that, and we would. I think to be honest we have to be clear the

devil is always in the details so with equity and fairness, et cetera,

et cetera, is a big caveat to that.

Mr. BARTON. Yes.

Mr. WAGONER. Absolutely.

Mr. BARTON. Mobile source CO2 is about 30 to 35 percent of

emissions man-made, and so are stationary sources. They are both

about the same. They are around a third so I am not happy with

that answer, but if that is your answer, that is your answer. Mr.

Press.

Mr. PRESS. Yes, I agree that we would be in support based on

what the actual details would allow us to operate within. I think

it is important for us to realize we have to be open to many new

approaches, and we need to look at the whole plethora of opportunities. As for cap and trade, I think the further upstream you go

the more efficient you are going to be.

Mr. BARTON. Mr. Mulally.

Mr. MULALLY. You bet. I just echo the upstream part because

clearly we are never going to get to our mutual objective unless we

include all the people that are associated with production of CO2,

and so our agreement is to help work with the entire industry, the

whole sector, not just what comes out of the tailpipe because we

need to have everybody involved.

Mr. BARTON. I understand that.

Mr. MULALLY. So cap the most upstream that we can.

Mr. BARTON. Mr. LaSorda.

Mr. LASORDA. The upstream, as I stated earlier, and the rest, is

absolutely critical. Also, that we look at all sectors and what can

be done upstream. And as my colleagues have stated, we would like

to get into the details with members of the committee.

Mr. BARTON. My next question is a simple question. If we want

to regulate greenhouse gases everybody seems to—right now the

hysteria seems to be that we need to do that. I am a skeptic about

that, but are we going to have greater impact regulating the greenhouse gases 0.01 percent or 95 percent? Which gives you the biggest bang for the buck if you decide to regulate greenhouse gases?

The greenhouse gas that is 95 percent of the atmosphere or the

greenhouse gas that is 0.01 percent in terms of man-made? It is not

a trick question.

Mr. PRESS. I fully don’t understand the question and can’t answer at this time.

Mr. BARTON. If you are trying to impact an outcome, do you manage 95 percent of the problem or 0.01 percent of the problem?

Which gives you the greatest likelihood of getting the outcome you

want?

Mr. WAGONER. Well, obviously if you can address the problem

the most comprehensive way you have got the greatest likelihood

of getting a cost effective outcome. To be honest, that is one of the

issues that I try to address in my testimony as far as improving
26

both energy security and emissions, really better to try to address

it by——

Mr. BARTON. My time has expired, but water vapor is 95 percent

of greenhouse gases and man-made CO2 is 0.01 percent, and you

gentlemen have just gone on record that you want to manage that

0.01 percent, and I will postulate that anything in any activity that

I have ever had any part in trying to manage, you do a better job

of getting your outcome when you tackle what causes the majority

of the problem instead of what even barely scratches the surface.

And with that, Mr. Chairman, I yield back and good luck on your

miracle.

Mr. BOUCHER. Well, thank you very much, Mr. Barton. Let me

just comment on your very generous offer to work with us assuming that challenging test is met, but if that test is not met, I can’t

vote for the bill either so thank you very much, and I appreciate

that.

Mr. WHITFIELD. Mr. Chairman, can Mr. Mulally make his comment? I think he wanted to make a comment.

Mr. BOUCHER. Absolutely. Mr. Mulally, we would be happy to

hear from you.

Mr. MULALLY. I think I certainly do understand what you were

asking, and I think our answer would be that what we really want

to do is to address the greenhouse gases that stay in the atmosphere the longest and clearly CO2 can stay in the atmosphere for

100 years. So the most important thing is to deal with the gases

that stay there the longest. The water vapor in the case that

you——

Mr. BARTON. Well, the water vapor is constant in the atmosphere. It goes up and down a little bit but it is a constant too.

Mr. MULALLY. So the one that you are adding that stays up there

the longest is the one that I think we want to address.

Mr. BOUCHER. The time of the gentleman has expired. I am now

pleased to recognize the chairman of the full committee, Mr. Dingell, for 10 minutes.

Mr. DINGELL. Mr. Chairman, I begin by thanking you for your

recognition but also commending you for the diligent, vigorous, energetic, and competent fashion in which you have been addressing

the difficult questions before us. I have been pleased to listen to

the comments made by Mr. Barton. I look forward as this matter

goes through the markup process to working with him. His comments on CAFE and caps on CO2 emissions remind me that for all

intents and purposes, these two things are somewhat different but

mostly similar versions of the same thing.

Gentlemen, our witnesses here, I have listened to all of your testimonies and almost all of you have exclusively discussed Corporate

Average Fuel Economy and Government incentives to encourage

advanced technology vehicles. I would observe several things. First,

I support incentives for the domestic production of advanced technology vehicles, and I believe this committee would too. We need

to find ways to develop and produce technologies for the new century here in the United States.

Second, I understand our current system of regulating fuel economy is dependent upon what consumers choose to buy, not what

your companies are capable of producing. It is not, I think, a per-
27

fect mechanism. Third, I understand that a statutory increase in

fuel economy standards may have unintended consequences in the

marketplace to the detriment of jobs, and so I think our good

friend, Mr. Gettelfinger, would observe vehicle safety and competitiveness of American manufacturers. And by that I am not simply

referring to Ford, General Motors or Chrysler alone. I want everyone to know that my position on this matter has been consistent

and is quite clear.

Fourth, I understand the administration’s proposal to increase

fuel economy standards by 4 percent annually is not currently feasible. I have my doubts about what an attribute based system

would be and how it would affect passenger, cars, jobs and everything else in this country. I have even greater doubts that any

manufacturer would utilize a CAFE credit trading system, and I

also doubt that it would provide any significant environmental benefits. The only thing I am certain of, with respect to these issues,

is that the administration has not done its homework, as we found

the other day, on this matter.

Fifth, the issue of global climate change must be addressed. It is

my view that everyone should be required to put an appropriate

contribution into the collection box. This includes the auto industry

and all of you gentlemen who are there at the committee table.

Fuel economy regulations have effectively regulated CO2 emissions

thus far. However, I question whether the current system, given all

of its flaws and your well-stated concerns today, remains the right

way to go forward. Gentlemen, I have heard from all of you previously what will not work. I agree with much of what you have

stated in that regard. What I have not heard, however, is what will

work, how this committee will put together legislation that will in

fact accomplish our national purpose of reducing imports and reducing the emissions of greenhouse gases here in the United

States.

Frankly, I think the American people are frustrated. Members of

Congress on both sides of the aisle are frustrated. And, very frankly, my dear friends, I am very much frustrated myself. I would like

to ask you questions about your testimony, and about the administration’s proposals or about bills that have been introduced with respect to fuel economy standards. Unfortunately, there isn’t time for

me to do that, and I would observe that most of this old debate is

pretty stale. The existing system of regulating fuel economy may

no longer be sufficient to address the needs of this country, so we

need more involvement and your leadership very much, and these

are needed for us to succeed in the difficult work that we have to

undertake under rather considerable time pressure.

So, gentlemen, I ask you, are you willing to work with this committee to produce mandatory regulations to address the issue of

global climate change? I would appreciate a yes or no response. Mr.

Gettelfinger.

Mr. GETTELFINGER. Yes.

Mr. DINGELL. Mr. Wagoner.

Mr. WAGONER. Yes.

Mr. DINGELL. Mr. Press.

Mr. PRESS. Yes, sir.

Mr. DINGELL. Mr. Mulally.
28

Mr. MULALLY. Yes.

Mr. DINGELL. Mr. LaSorda.

Mr. LASORDA. Yes, sir.

Mr. DINGELL. Gentlemen, I understand the inclination to stick

with the devil that we all know, but are you willing to go beyond

Corporate Average Fuel Economy standards and consider new regulatory regimes? Please respond yes or no. Mr. Gettelfinger.

Mr. GETTELFINGER. Yes.

Mr. DINGELL. Mr. Wagoner.

Mr. WAGONER. Absolutely, yes.

Mr. DINGELL. Mr. Press.

Mr. PRESS. Yes, we are open to considering any national——

Mr. DINGELL. Mr. Mulally.

Mr. MULALLY. Yes.

Mr. DINGELL. Mr. LaSorda.

Mr. LASORDA. Yes, sir.

Mr. DINGELL. Gentlemen, my own dad used to say something

that I thought was pretty useful. He used to say you can’t just sit

at your end of the boat and tell the fellow at the other end of the

boat that his end is sinking. Now the question here is, gentlemen,

are you willing to work together amongst yourselves and with us

to get beyond this old-fashioned thinking of CAFE and make real

environmental progress? Mr. Gettelfinger.

Mr. GETTELFINGER. Yes.

Mr. DINGELL. Mr. Wagoner.

Mr. WAGONER. Yes.

Mr. DINGELL. Mr. Press.

Mr. PRESS. Definitely, yes.

Mr. DINGELL. Mr. Mulally.

Mr. MULALLY. Yes.

Mr. DINGELL. Mr. LaSorda.

Mr. LASORDA. Absolutely.

Mr. DINGELL. Gentlemen, now are you willing to work with other

sectors in the economy to assure that we produce an effective regulatory regime that fairly distinguishes and fairly distributes responsibilities and obligations to all concerned? Mr. Gettelfinger.

Mr. GETTELFINGER. Yes.

Mr. DINGELL. Mr. Wagoner.

Mr. WAGONER. Yes.

Mr. DINGELL. Mr. Press.

Mr. PRESS. Yes.

Mr. DINGELL. Mr. Mulally.

Mr. MULALLY. Yes.

Mr. DINGELL. Mr. LaSorda.

Mr. LASORDA. Yes.

Mr. DINGELL. Are you then willing gentlemen, to consider a system that regulates the emissions of carbon dioxide from your vehicles alone or in tandem with carbon content of the fuels? Mr.

Gettelfinger.

Mr. GETTELFINGER. Yes.

Mr. DINGELL. Mr. Wagoner.

Mr. WAGONER. Yes.

Mr. DINGELL. Mr. Press.

Mr. PRESS. Yes.
29

Mr. DINGELL. Mr. Mulally.

Mr. MULALLY. Yes.

Mr. DINGELL. Mr. LaSorda.

Mr. LASORDA. Yes.

Mr. DINGELL. Gentlemen, I want to commend you for your testimony. We have a difficult task here before this committee and that

is to write a good, responsible, and balanced piece of legislation

that will serve the broad public interest and address the concerns

that the Nation has and that other countries have with regard to

the questions of greenhouse gas emissions and the risk that this

contains with regard to the world for climate change and with regard to global warming. I think that we can assemble here in this

committee members of Congress who will be willing to work beyond

the stalemate now before us to achieve real results in the environmental work that the American people want done today.

I hope that you will engage in that dialog and be a part of the

solution. Having worked with you before, I know that you are and

I want you to know that I appreciate that. I do observe that inaction will not work and telling us what doesn’t work is useful but

no longer sufficient. With that, gentlemen, so ends my catechism,

and I thank you for your presence and your assistance to the committee.

Mr. BOUCHER. Thank you very much, Mr. Dingell. The gentleman from Michigan, Mr. Upton, is recognized for 5 minutes.

Mr. UPTON. Thank you, Mr. Chairman, and I want to associate

myself with a goal of what you indicated. My only question to you

is will it also slice bread?

Mr. BOUCHER. We are working on that, and we are going to have

a hearing on that subject.

Mr. UPTON. I am sure that rises to the top. I want to say that

every American, we all want better fuel economy, and I say that

as a consumer and I say that as a family that is in the market for

a new vehicle as well. It is very important, and I think for most

consumers that is often a bottom line question that they ask. As

we struggle with this issue, I would be interested to know one of

two things, two things from each of the companies represented

here. One is how much is your company this year spending on research and development on fuel economy? I am not interested in

other things that you are looking at but just specifically on fuel

economy and what that number would be say over—the collective

number of what that is say over the last 5 or 10 years as well. Mr.

Wagoner, a ballpark number.

Mr. WAGONER. Just to give you an idea, we recently approved

projects to convert our four- and five-speed transmissions to sixspeed transmissions to give you an idea. That is a $3 billion investment for us to do something to get you something between 6 and

8 percent fuel economy.

Mr. UPTON. Is that all being done this year?

Mr. WAGONER. It is being spread out over a period of years, a period of 4 or 5 years, I guess. If you look at the development of a

fuel cell vehicle, that is going to cost well in excess of a billion dollars to get the first product really on the road. These are massive

dollar commitments so I think the response to your question if you

consider it comprehensively from the changes to conventional en-
30

gines and transmissions to pure R&D and fuel cell or ethanol type

fuels the investments are in billions of dollars on an annual basis

for our company, and I suspect our competitors, as well.

Mr. UPTON. Mr. Press?

Mr. PRESS. Yes, I think, from our perspective, almost all the dollars that we are spending in R&D, even the new products we are

introducing as an industry, have better mileage and our focus is to

have a better car with better mileage and still provide good customer satisfaction.

We are currently spending about $11 billion a year, or $23 million a day on R&D through the broad range of projects. In addition,

we are working with fuel companies and other partners to find solutions that will give us global application. Virtually our whole

R&D effort on new products is focused on how we can improve fuel

economy as well as other aspects of the product.

Mr. UPTON. Mr. Mulally.

Mr. MULALLY. Yes. Over the last 5 years we spent approximately

$23 billion on product development, and the real focus there of

course are the capability of the vehicles and the fuel efficiency and

the safety to make innovations in each of those areas.

Mr. UPTON. Mr. LaSorda.

Mr. LASORDA. Well, every year on total product development

spending, I will start there just to give you a scale of size, the

Chrysler group alone spend $6 billion on total product programs,

and then if you add Mercedes and our commercial vehicle division,

we are over $9 to $10 billion. On the fuel economy side, when you

look at new diesels, the new world engine that we put into the—

in Michigan we built a new plant. There will be new plants being

built over the next 4 or 5 years. We will be spending in excess of

$4 to $5 billion just in these areas.

Mr. UPTON. So you all are spending sizable sums every year. I

know when the administration announced as part of the State of

the Union address that they wanted to increase mileage by 4 percent every year beginning in 2010 for light trucks and 2012 for vehicles they asked for a 4 percent increase. If you were able to make

that target, how much more do you think you would have to spend?

I know Toyota makes that now but at some point because in the

out years it is 4 percent additional. The report that I had heard

was that you thought the response from most of the industry was

that it would be very challenging to make. What additional dollars

would that cost the industry? And I want to ask one more question

after this so if you can go quickly, go ahead. Mr. Wagoner.

Mr. WAGONER. The administration’s estimate for us was in the

$40 billion range. It is my assessment that that is low. The number

would be significantly higher than that.

Mr. UPTON. Mr. Press.

Mr. PRESS. I think it is very difficult without knowing more to

get to a definitive answer but the reality is there may not be

enough money. We have to really take a look at what the challenge

is.

Mr. MULALLY. I agree with the previous comments.

Mr. LASORDA. Similar to the group.

Mr. UPTON. The three of you met with the President last fall and

you talked, as I recall, you talked about battery research and devel-
31

opment, and I think you had presented a proposal to the President

asking for a ramp up of Federal funds of over $100 million per year

through 2012. The President’s budget for 2008 was released a couple weeks ago. It didn’t ask for $100 million. It asked for $11 million. And I would be interested to know what your reaction to that

is. And it is in this context, all of you are spending tremendous

amounts of money looking for research, as I look to what we want

to get to in terms of the final answer, I want the Government to

be able to in fact help you as we insist that you hit these targets.

If we do that, I want to make sure that we help you along that way

and at least on the surface of things as I look at this $11 million

isn’t anywhere close to where we ought to be as you look at that

final goal, but I would like you to say that, not necessarily me. And

I am saying that because I am 12 seconds in arrears. Mr. Wagoner.

Mr. WAGONER. I fully agree with your assessment, and it is a

shame because these are high leverage opportunities, so we will get

a huge impact if we can get breakthroughs in fuel cells and batteries, which we believe we can, so we are disappointed at that

number. It is way less than it should be.

Mr. UPTON. Mr. Mulally.

Mr. MULALLY. Agree.

Mr. LASORDA. Absolutely.

Mr. UPTON. Thank you very much. I look forward to working

with you.

Mr. BOUCHER. Thank you, Mr. Upton. Mr. Markey from Massachusetts is recognized for 5 minutes.

Mr. MARKEY. Thank you, Mr. Chairman, very much. Mr. Mulally,

you said that CAFE was not a success. You couldn’t be more

wrong, Mr. Mulally. In 1970 we were importing about 20 percent

of our oil. It has skyrocketed to 1977 to 46.5 percent of our oil was

imported. The Congress has passed a law, a law that mandated

that there was a doubling of the fuel economy standards in the

United States of America. Over the next several years there was

a decline to only 27 percent of our oil being imported by 1985,

1986. CAFE was a huge success, Mr. Mulally, and I think Ford deserves a lot of the credit for making that work. I think you are

making a mistake in taking credit away from you and Chrysler and

General Motors for the job you did technologically.

But since 1986, Mr. Mulally, with no new improvements in fuel

economy we are now 60 percent dependent upon imported oil. It

has gone up, in other words, 33 percent in the last 20 years. That

is a national security crisis. We have 135,000 young men and

women over in the Middle East right now. There are 20,000 more

on the way as part of a surge. We cannot allow that to continue

to skyrocket as the auto industry continues successful to block improvements in fuel economy standards. On that second issue, the

second issue is vehicle miles traveled that Mr. Wagoner raised. On

that issue, vehicle miles traveled has increased consistently for the

last 35 years. The only time it went down in terms of our total oil

consumption was during the time that the fuel economy standards

were hitting our economy. That is when we broke the cycle because

obviously there are more people and more vehicles but with increased fuel economy standard we actually imported less oil.
32

So this question of national security goes to the heart of this debate and since we import 70 percent of our oil, 60 percent of our

oil right now, we have got a crisis on our hands. Are you saying

that, Mr. Mulally, what Ford did back then was not a success and

that what we are asking for you to do this time is impossible?

Mr. MULALLY. I think that what we have done together to improve fuel economy absolutely has been a success, absolutely.

Mr. MARKEY. You call CAFE a failure.

Mr. MULALLY. My only thought about your second question is

that we are absolutely, all of us, committed to continuous improvement of fuel efficiency. It is what the customers want, it is the

right thing for the environment, and it is absolutely the right thing

for national security and our reliance on oil. So we are absolutely

in agreement on the objective. I think——

Mr. MARKEY. Mr. LaSorda, do you think the CAFE was a failure?

Mr. LASORDA. Well, when you take a look at the charts that you

showed, fuel prices skyrocketed in the 1970’s and early 1980’s. People consumed less energy and switched to other segments and that

is what happened as well as CAFE.

Mr. MARKEY. That is your answer. Do you think, Mr. Wagoner,

that CAFE was a failure?

Mr. WAGONER. Yes, sir. Against its stated goals of, and I am

quoting, ‘‘reducing U.S. gasoline consumption and oil imports’’ it

wasn’t effective. I think for the reason Mr. LaSorda mentioned, basically consumers make their choices very heavily influenced by

fuel price, so that is why in my comments, Congressman, I specifically endorsed that the initial ideas, the reasons behind the desired

outcomes of the original CAFE program are in fact excellent ones

and suggest, I think, very real approaches to move significantly in

the right direction to achieve those objectives.

Mr. MARKEY. I just can’t believe the testimony I am hearing. The

charts demonstrate conclusively that the testimony you are giving

is completely wrong, and I don’t know why you are going to maintain that a drop from 46 percent imports to 27 percent imports at

the same time that we have doubled our fuel economy from 13 to

27 miles per gallon is not something that is in direct correlation.

I find your inability to at least take credit for what you did so technologically to be troubling to me. You did the job. America was benefited from that. What we are asking for you now is to tell us what

you can do technologically going forward when it is hard to do that

if you continue to maintain that there was no success story for our

country from a national security perspective back in the 1980’s. I

thank you, Mr. Chairman.

Mr. BOUCHER. Thank you very much, Mr. Markey. The gentleman from Illinois, Mr. Shimkus, is recognized for 6 minutes.

Mr. SHIMKUS. Thank you, Mr. Chairman. So much to ask, so little time, but it is great to have you all here. In respect to Mr. Markey’s chart, I think there is one thing there was the change in

speed limits too that there was a major effect. And coming from Illinois, I always hate the debate on Europe, let me tell you, because

I lived in Europe for 3 years. You can drive across Europe in about

7 hours. You can’t get through the State of Illinois in 7 hours. So

these comparisons with Europe or Japan, if you want to talk about
33

how long it takes to drive across Japan, we are a big country that

likes to go places and we are going to drive those places.

And when this gets down to a local consumer level that is going

to be a big issue. First of all, a couple questions. Mr. Gettelfinger,

how many people do you represent?

Mr. GETTELFINGER. I think active workers would be somewhere

in the neighborhood of 500,000.

Mr. SHIMKUS. Mr. Wagoner, how many do you employ?

Mr. WAGONER. Globally 285,000, in the U.S. about 125,000.

Mr. SHIMKUS. Yes, let us stay with the U.S. Mr. Press.

Mr. PRESS. In the United States we have 34,000.

Mr. SHIMKUS. Thirty-four thousand. Mr. Mulally.

Mr. MULALLY. Approximately 100,000.

Mr. SHIMKUS. Thank you. Mr. LaSorda.

Mr. LASORDA. About 65,000.

Mr. SHIMKUS. How many of those have what you would consider

good paying jobs?

Mr. GETTELFINGER. I would say they are good paying jobs.

Mr. SHIMKUS. You bargained for them, right? Go on down the

line, please.

Mr. WAGONER. I would say 100 percent are good paying jobs.

Mr. PRESS. Every one.

Mr. MULALLY. Every one.

Mr. LASORDA. Every one, yes.

Mr. SHIMKUS. Health care benefits.

Mr. GETTELFINGER. Very good.

Mr. WAGONER. Good.

Mr. PRESS. I think probably among the richest in the country.

Mr. MULALLY. Great.

Mr. LASORDA. Excellent.

Mr. SHIMKUS. Thank you. Thank you for providing our constituents good paying jobs with health care benefits. We are not here

to be up on you. I am here to say thank you, and we want to keep

you a vibrant part of our economy. I have great respect, and he

knows this as the chairman of this committee, and we want to

make sure when he says he wants to bargain in good faith and

make sure that you are still a vibrant part of our economy, I take

him at his word. I am still a skeptic, but I trust Mr. Boucher and

hopefully we will do the least harm through this process. I like

Ranking Member Upton’s also questions on research and development because I was going to go in that direction also.

How many of your R&D dollars, Mr. Gettelfinger, you don’t have

to answer this, do not pay off, what percentage?

Mr. WAGONER. From GM’s side we certainly don’t bat about

1,000 on that. I think it depends a little bit how you cut it.

Mr. SHIMKUS. The bottom line is when you R&D there is sometimes that it doesn’t pay off and you have got millions of dollars

out there for no return.

Mr. WAGONER. Right, but what we try to do is the up front R&D

isn’t the expensive part. It is bringing stuff into production so we

really try to look at a lot of options up front so a lot of the real

basic research frankly doesn’t work out. It is not huge dollars. The

issue is picking the right ones to get in production.

Mr. SHIMKUS. And if I can get everybody. Mr. Press.
34

Mr. PRESS. I would agree. The reality is we probably learn from

those failures too, and so it does move forward and the dollars do

help.

Mr. SHIMKUS. Mr. Mulally.

Mr. MULALLY. I think a key element of your question is the fact

that we really do—we really cannot bet on what the single one

technology is going to be that is going to help us achieve our mutual objectives, and so we have continued to invest in multiple

technologies because we know it is going to be a basket of solutions

which is another important piece, I think.

Mr. SHIMKUS. Thank you. Mr. LaSorda.

Mr. LASORDA. Congressman, when you take a look at what has

evolved in this industry, we have moved more to joint research and

development projects than doing them on our own as well just to

try to minimize risk and bring in more technical science from the

different companies. I stated earlier, our hybrid technology is a

joint venture with BMW, General Motors, and Mercedes, and we

have a fuel cell venture with Ford Motor Company. You are going

to see more and more of that because of that very question you

asked.

Mr. SHIMKUS. Thank you. I have had a chance to do—I am on

the hydrogen vehicles, the van that was out, and I can’t remember

whose it was but it was $100 million. I tell kids about this. I drove

a hydrogen van. It had good pickup. We went on the interstate and

it is only at $100 million right now, the cost to buy that van. So

obviously we want to get there and it costs a lot of money, and you

ought to be congratulated for that for the money that you are putting in right now. I am a big flex fuel guy, you all know that. I

had an Explorer, Taurus, and now I have a Jeep Grand Cherokee,

22 filling stations. What are you doing about the compression ratio

so that we get miles per gallon competitive with gasoline? Anyone?

Mr. MULALLY. There is about a 20 percent drop off.

Mr. WAGONER. Yes, the energy density of ethanol is less so the

fact is there is always going to be some shortfall but we have been

working on the gasoline for 100 years and the ethanol for a much

shorter period of time. We will be able to improve it.

Mr. SHIMKUS. And I am going to stop with you because it is kind

of the same answer, but as long as we have ethanol 85 at 20 cents,

30 cents less a gallon it is a wash and it works out well for me.

Mr. Press, flexible fuel, when are you guys going to get on board?

Mr. PRESS. We have announced our first flex fuel vehicle will be

in 2009, and we are considering beyond that other products in the

future including hybrid flex fuel.

Mr. SHIMKUS. We went to welcome it to the community. You can

see now that everyone has embraced it. It has been a long haul.

We appreciate the leadership that the automobile industry, especially Ford on the 85 corridor, which has been great for Illinois and

Missouri and it has helped push at the retail level, and we have

seen great success. My time has expired. Thank you, Mr. Chairman.

Mr. BOUCHER. Thank you very much, Mr. Shimkus. The gentleman from Pennsylvania, Mr. Doyle, is recognized for 5 minutes.

Mr. DOYLE. Mr. Chairman, thank you, and you have set some

lofty goals for our committee. I want you to know that you have
35

my commitment that we are going to work together to achieve

those goals so I think we can do that. I want to share a lot of what

Mr. Dingell said. I think the way we are going to achieve this is

maybe thinking differently than how we thought about it in the

past, to start to think outside the box and it just seems to me that

the answer here is technology and initially with hybrid and flex

fuel vehicles eventually with fuel cells. I want to commend Toyota.

I have to tell you, I only buy American cars but you are to be congratulated because you are buying cars that Americans want to

drive, and you are able to meet standards that just aren’t being

met by some of your competitors here in America, and you got six

hybrid cars.

Now having said that, I have a Ford Escape hybrid, and I bought

one of the first ones off the line. I was glad to finally see an American car company make one I could buy, and you should be making

more of them and Americans want to drive these cars. And I want

to tell you, I haven’t done anything to that Fort Escape hybrid but

put gas in it and very little gas in it, and it runs perfect and I have

never had a problem with it. And I just don’t understand why you

don’t have a lot more of these kinds of cars on the road. Americans

do like to drive them. And it is frustrating for those of us that want

to see American car manufacturers compete in this market that

Toyota and other companies like them seem to get what you guys

haven’t got in the past and they are way ahead of you on some of

this.

Having said that I think it is technology that is going to do it,

in fact, I think some people are concerned if we were to raise CAFE

standards annually by 4 percent that a lot of people feel you may

start pulling away from your research from the next generation

type of vehicles to focus more on how you can improve the combustion engine to meet this 4 percent. I am wondering how accurate

you believe that kind of an argument is. And what I really want

to get to because we are talking about solutions, not want doesn’t

work but what can work. What would be the single most significant

incentive that the Government could provide through the tax code

or any other thing to help push this envelope of technology forward? What are the obstacles in the law that you think need to be

amended to encourage more advances in the technology? And I am

talking about helping you to roll out and deploy these technologies

sooner rather than later.

We know hydrogen fuel cells are way down the road, but the

sooner we get there the better, and what can we do to encourage

more of these bridge technologies until we get the hydrogen, what

can we do to help you do that? And I will just let you each take

a turn, just go down the line.

Mr. WAGONER. Thank you. First of all, Congressman, I would

like to point out we at GM will have four hybrid vehicles introduced this year. We introduced a couple last year, and we will have

12 on the road in 2008 so we will be glad to be in that game, and

we share enthusiasm for the importance of technology. If we could

ask the Congress for three things I think in the area of ethanol we

need radically ramped up distribution of ethanol, and it has been

sticky. It has been hard to break through, kind of 1,000 fueling stations out of 170,000 offering it, so any ideas or help on how to get
36

all these people who now bought the E–85 flex fuel capable vehicles

given the opportunity to use ethanol would be a huge help.

The second area, as was discussed by Congressman Upton, advanced battery research. We see a battery that will work and do

a lot of the stuff that you are talking about down the road. There

is some work that still needs to be done and other countries are

moving much faster. And then, third, I would say generally continuing incentives for consumers as the Congress has passed in the

area of hybrids to help defray the fact that they do cost more at

this stage are three things that I would suggest.

Mr. PRESS. Thank you for that question. First of all, the tax incentive really helps. You have to create the environment for new

technology. About 80 percent of the customers that buy a hybrid

buy it because of the fuel economy. The biggest reason they choose

not to buy a hybrid, about 45 percent, is the cost. And the reality

is if we get economies of scale we get lower cost for our suppliers

and we can increase the volume and really bring the cost down

substantially. And a lot of these technologies are like the old batteries in our cell phones you used to carry around on your shoulder.

Now these new technologies in hybrids are like a small cell phone.

They are getting miniaturized. The same thing for transitioning or

manufacturing costs to assist in domestic production of these products. Any way to reduce the cost difference and improve carbonbased fuel advantages and ethanol would be a very big advantage.

Another key is education. We need to bring the consumers into

this to understand the scope of the problem and get them to be

part of the solution.

Mr. MULLALY. I would add especially on the hybrids the available of batteries, which is our limiting factor right now. And, for

example, we don’t have a domestic, a United States source for the

batteries in the hybrids.

Mr. DOYLE. Where do you get them?

Mr. MULLALY. Right now we get them from Japan. And you

heard the collaboration that we all have going on on batteries, not

only today’s batteries but also lithium ion batteries, which clearly

can be part of the future so getting an available U.S. source will

help us but we are actually committed to the hybrid and the technology. Going back, I would like to just——

Mr. BOUCHER. Mr. Mulally, unfortunately the gentleman’s time

has expired.

Mr. DOYLE. That is exactly what I was going to say.

Mr. BOUCHER. Thank you very much, Mr. Doyle. The gentleman

from Michigan, Mr. Rogers, is recognized for 5 minutes.

Mr. ROGERS. Thank you, Mr. Chairman. I had some great advice

from a member of this committee who is a long and distinguished

member here, Mr. Dingell, who told me when I first got here when

you are suppering with the devil make sure you have a very long

spoon, which is great advice, Mr. Dingell. I appreciate it. I was a

little surprised to hear you all acquiesce so quickly to as it was

termed a regulatory regime. I own a small business and that scares

me to death, just the words in and of itself. And I sometimes wonder if we are not coming at this thing a little bit backwards. Did

anyone tell you to get into the lithium battery business for research

and development? Did the Government tell you to do that? Did the
37

Government tell you to develop a flex fuel vehicle? Is there any

rule that you know of that that—anybody? No.

Did the Government tell you to work on hydrogen fuel vehicles?

Was there some Government mandate that told Chrysler or Ford

or Toyota that you are aware of? You did that on your own, did you

not? Why did you do that?

Mr. WAGONER. From our side, I think that consumer concerns

about environmental issues, the availability of energy, the constant

ups and downs in oil prices suggested to us that eventually we

were going to need to come up with a better answer than the traditional one, so frankly having gone through a lot of them that we

knew were going to be higher cost and require customer trade offs

like our EV1 in California in the mid-1990’s, we said, hey, what is

something that can really work, and so we put a lot of efforts behind the couple areas you mentioned.

Mr. ROGERS. Wasn’t the EV1 really in reaction to a mandate in

the State of California for 10 percent electric cars at that time so

you tried to fill that market void, didn’t you?

Mr. WAGONER. Well, to be perfectly honest, I wasn’t here at the

time so I can’t give you the blow by blow but I can tell you unfortunately that obviously from a business perspective the battery technology wasn’t ready so it didn’t work. We learned something from

it but it didn’t work.

Mr. ROGERS. I guess my point here is that we all have agreed,

including all the companies here before us today, we want to do

something about CO2 emissions. That is a good outcome. We want

to do something about buying oil from overseas. That is a good outcome if we can lessen our dependency on foreign oil. You have

taken steps because the market is driving you that way already.

You are investing literally billions of dollars over the course of time

into these products. Back in World War II, we asked the car companies to help us out to build tanks and artillery tubes, and you

all stepped up to the plate.

There is a place in my district where they went from building

trucks to artillery shells in 8 weeks to meet the demand for World

War II. That is pretty impressive. So my argument is maybe instead of telling you and creating this big government regulatory regime to try and mandate and tell you exactly how to do it, won’t

you have to have people who are trying to figure out what that regulatory scheme is and how that fits into your development schedule

and what that means for projects that you will and will not work

on, is that right? I mean that is just the way it works now, does

it not? Is that correct? I don’t want to put words in your mouth.

Is that right?

Mr. WAGONER. Yes.

Mr. ROGERS. So what if we came up with a way to provide you

a different kind of incentive and say, listen, here is the problem in

America. We don’t want to buy foreign oil anymore if we can avoid

it, and we want to cut our CO2 emissions. That would be great.

And we also want a car that somebody would put in their driveway

and want to buy, right? That would be really good too, wouldn’t it?

So what if we let all the intellectual capital that you all have come

to those conclusions?
38

I am a big ethanol guy. I drive an ethanol vehicle. It is great.

I love it. It is like giving a good salute to Iranian Ayatollah every

time I step on the gas. I enjoy it a lot. Is there a better way, can

we provide capital in some way either through the free market

process that would allow you to spend money on research and development and help us get out of this problem and help you develop

a car that Americans want to buy? Mr. Wagoner?

Mr. WAGONER. Yes, I think so. I think the things we talked about

today to the extent that we can consent to production distribution

of ethanol the Government could play a big role in helping to reduce the oil imports. Helping with battery research would be a big

help. I just want to comment, Congressman Rogers, you talked

about us sort of being willing to be regulated. I think you know and

everyone on the committee knows, we have been heavily regulated

under CAFE for 30 years unlike a lot of other parts of the energy

consuming economy in the U.S., and our goal would be to have a—

if we are going to be regulated let us regulate in the direction that

actually solves the issues that are on the table which, as you highlight, oil imports, emissions, things of that sort.

Mr. ROGERS. Just quickly, if we came up with a Federal loan

guarantee that was very specific to research and development on

alternative fuels, and you decide what that is, you decide what the

market is, would you be interested in something like that that allowed you to make those decisions and maybe reduced the cost of

your loan?

Mr. WAGONER. Sure, because our own situation is such that our

credit rating is low and while we have a lot of capital in the business we need a lot of capital investment so anything that could

support in that direction would be appreciated.

Mr. ROGERS. Mr. Mulally.

Mr. MULALLY. Yes. That would be great.

Mr. LASORDA. Yes.

Mr. BOUCHER. Thank you very much, Mr. Rogers. The gentlewoman from Wisconsin, Ms. Baldwin, is recognized for 5 minutes.

Ms. BALDWIN. Thank you, Mr. Chairman. I mentioned in my

opening that the automobile sector is not only in the best position

to improve the fuel economy of its vehicles but also to reduce the

greenhouse gas emissions in the day-to-day manufacturing operations, and manufacturing automobiles is clearly an energy intensive enterprise. So as one of the largest industries in the United

States, you are in a position to lead by example, and I wonder if

you could each briefly address the steps you are taking to increase

energy efficiency in your plants across the United States. I am hoping I will get a chance for a second question so if you can briefly

respond to that, that would be great.

Mr. WAGONER. Yes. You are familiar, we have a plant in your

district, I think.

Ms. BALDWIN. Just next door.

Mr. WAGONER. We put, let me say, a broad-based target across

all of our manufacturing facilities in North America. We exceeded

the target. We reduced 23 percent between 2000 and 2005. We set

another target of 17 percent between 2006 and 2010 so we can

have a 40 percent reduction over that time period, and that we are

employing every single imaginable thing you can do from getting
39

people to turn off lights to buying more energy efficient equipment.

You name it. It is micro stuff that adds up to big numbers.

Ms. BALDWIN. Mr. Press.

Mr. PRESS. Since 2000 we have had a 30 percent reduction per

vehicle produced. We have very aggressive plans going forward on

a preventive basis, and this goes all the way to zero landfill. We

just finished a new plant in San Antonio, Texas where the energy

cost per unit is about a third less than anything we have ever built

before in the new plant. New plants allow us to do that and we will

continue these efforts.

Ms. BALDWIN. Mr. Mulally.

Mr. MULALLY. We also have improved I think a little over 15 percent in the last few years, and we have a target to improve each

year continuously. And we also joined the Chicago Climate Exchange where we can trade the carbon also. It is very important

to our business, and it is good business.

Ms. BALDWIN. And this is also through multi-faceted strategies

or anything in particular to get that 15 percent?

Mr. MULALLY. Just looking at every part of the operation on generating and using power.

Ms. BALDWIN. Mr. LaSorda.

Mr. LASORDA. Yes. Since 2002, our plants reduced about 20 percent. We used outside, experts as well in the energy business who

are running our power plants with us and it is a mindset to get

every employee—and, by the way, costs of energy have gone up so

much it is a natural fixed cost reduction. We have to focus on taking it down. So it is combined, both.

Ms. BALDWIN. Thank you. Mr. Wagoner, you noted the plant that

is just adjacent to my district in Jamesville. While the plant is located just across the district border, I know that many of the 2,600

employees who work in that plant are constituents of mine and we

are very proud of the work that they do, which includes producing

about half of GM’s 400,000 E–85 flex fuel vehicles in 2006. I want

to touch on just a little more detail on what Mr. Doyle raised in

his questioning about the challenges faced by owners of flex fuel

vehicles in terms of the fueling stations that have been slow to get

behind the growth of the availability of these vehicles, and what

steps are GM and the other automotive manufacturers doing to encourage the development of the infrastructure for delivery of E–85

to the consumer. Are you working with the oil companies? Are you

working with the industry and what steps should you be taking,

what steps should we be taking to move this forward?

Mr. WAGONER. Excellent question because it has perplexed us to

a certain extent. We have worked with several of the oil companies.

I think to be honest our biggest success has been working with

some of the so-called big box retailers, Meijers, for example, and

working with them on specific programs to convert some of their

fueling pumps over to ethanol. It is a slow process. We are talking

with some of the other major retailers to do the same. And I think

it is critical that we get over this because eventually people are

going to either not use the E–85 capability or lose interest in this

great opportunity that we have if we are not able to push that

more aggressively.
40

I know there are incentives to offer current gas station operators,

tax credit to convert. I don’t know if the level of that is adequate

to actually induce people to do so.

Mr. MULALLY. I might just add to Rick’s comment that it is really

tough for us to help move that infrastructure along as you know

because we are not in that business, but we will continue to go out

of our way to make sure that everybody knows the value of the alternative fuels and the benefit to all of us. And as far as the business proposition that they are dealing with, I think some encouragement and some help and some incentives to put in that infrastructure is absolutely going to be needed.

Ms. BALDWIN. One last comment. I understand anecdotally that

many people who are purchasers of flex fuel vehicles may not be

aware of that attribute so in terms of your education, consumer

education of the consumer to make them demand this service of

their local fuel stations is certainly a helpful component.

Mr. BOUCHER. Thank you very much, Ms. Baldwin. The gentleman from Oklahoma, Mr. Sullivan, for 6 minutes.

Mr. SULLIVAN. Thank you, Mr. Chairman. I would like to thank

all the panelists for being here today. I know that you face a lot

of challenging times right now in the auto industry, and I think

you are doing a good job. I think you will get through it all because

you guys are bright men, you got good teams. I think that the innovation and the technology is very exciting. Mr. Wagoner, I bought

a Suburban, one of those flex fuels, I haven’t been able to put ethanol in it though in Oklahoma. I can’t find a place to put ethanol

in it. I would have to drive to Kansas, I think, to do it, but I might

do that some day.

But one of the neatest things, one of the technological features

of it I think that is pretty cool is it operates on a V4 to V8, and

that is a neat technology too that saves a lot of fuel. I love that.

I think too I would like to refer to my colleague from Michigan,

what he said, is that you are doing these things already. You are

getting into this. No one is making you do it. It is really kind of

you have a constituency of a market like we have a constituency

of voters. We like to do what they want because we want to get reelected. You want to do what you want to do so you can sell more

cars.

I think if people wanted purple cars you would probably make

those if you saw in your data that they wanted them. And so I

think it is really market driven. You guys are doing a good job in

that, and the technology is really neat and I commend you for it.

But I would like to refer to another issue that no one has really

talked about, and it is about safety. And when you achieve the

technology to get to certain arbitrary standards that some people

over here might want to do, you would have to maybe downsize in

weight and other maybe aerodynamics and things that might jeopardize safety. And I just want to ask could automobile or highway

safety be jeopardized if the Congress decides to set these arbitrary

cap A levels and the companies have to consider downsizing or

down weighting vehicles in order to produce a fleet of vehicles that

will comply?

Mr. WAGONER. History would suggest that, yes, that is a risk. We

obviously do everything we can to mitigate that risk. We have
41

added a lot of safety equipment on vehicles but I think the historical data speaks for itself that it does bring that risk along with it.

Mr. PRESS. I may have a little different viewpoint from the

standpoint that technology may allow you to achieve safety and

emissions improvements, like a hybrid system applied to a vehicle

but it is an extra cost and it does take extra engineering. It depends and it has to be carefully considered when any rule is made

the impact it would have on safety and then how we execute it. It

has to be open and available so we can maintain safety and reduce

the fuel consumption.

Mr. MULALLY. Clearly, it is absolutely a key component and one

reason we have been very supportive of NHTSA doing that evaluation and helping us get the maximum feasible levels is that they

take into account the technology, he economics of doing it, and the

safety. I think that has served us very well, especially the last program was a light truck program. It took into account all those considerations because there are real issues. They are doing a good job

at it.

Mr. LASORDA. When we design a car, we start with obviously

something the consumer wants, and then we want to make it safe

because they need to be safe. Of course, the fuel economy, the aero,

these are all factors that we take into consideration almost 4 years

in advance before it hits the road. Some people think we can make

a car in a couple of months. These take a lot of time and a lot of

effort including new technology on materials that could be used for

safety and fuel economy for weight reduction.

Mr. SULLIVAN. Don’t you think that engineers and others are

more suited to make these decisions than career politicians, and

probably better than us as well. OK. Also, another thing I would

like to focus on is these batteries. I think that is a very neat innovation. I am interested in hearing more about that. It means battery advancements that may be—advancements that may be needed to allow your companies to consider producing plug in hybrid vehicles, what more do we need to learn to have usable battery packs,

and how soon do you think we might be able to get there where

you see them all over the place, and the batteries are smaller and

weigh less and cost effective.

Mr. WAGONER. The challenge is—I mean the chemistry is focused

in on this so-called lithium ion model for batteries. It has been very

successful in smaller applications. There is actually a company in

California that is going to be offering in the next couple of years

the opportunity to buy a vehicle that is powered by these small batteries. The problem is there is like 6,900 of them to power the car,

so that is as you can imagine pretty expensive. So what we need

to do is find a way to be able to get a more efficient application

of this battery technology. How fast can that be done, I can’t give

you an answer for sure but I think if we get on it and put all our

muscle behind it, it is more like a 5-year time frame than a 25-year

time frame. It is something that we made a huge amount of

progress in this battery technology in 5 years, and we are using the

technology and your cell phone or whatever, so there is a lot of

hope that we can scale that up and get the cost down.

Mr. PRESS. Obviously, the battery is a limiting factor right now.

If you took a Prius and made it a plug-in vehicle, the trunk would
42

literally be full of batteries due to the technology, but that doesn’t

mean that in the future that we won’t be able to achieve a great

deal of reduction in cost and weight and efficiency and safety of

batteries. These are issues we are all working on very diligently at

this time. In terms of the time, it really depends on how this whole

process plays out and the kind of support there is and the focus

and the amount of energy required from an electrical vehicle perspective. If that is stimulated then it becomes faster.

Mr. BOUCHER. Thank you, Mr. Sullivan. The gentleman’s time

has expired.

Mr. SULLIVAN. Thank you very much.

Mr. BOUCHER. The Chair now recognizes the gentleman from

Texas, Mr. Burgess, for 6 minutes.

Mr. BURGESS. Thank you, Mr. Chairman. I want to thank the

panel. This has been a very informative afternoon. I really enjoyed

all of the testimony. You have heard from every person up here

who drives a hybrid and who drives a flex fuel vehicle. I drive a

hybrid. I believe in the technology. But, Mr. Press, I have to ask

you, someone I think mentioned that we can’t predict the time line

or the duration of the technology or how quickly the technology can

come to market. You have had the hybrid in process for 10 years,

did you tell us, and 10 years ago did people think they had to hit

a home run with that?

Mr. PRESS. Ten years ago when we introduced the Prius, gas was

$1 a gallon, and it was a long range project. We really wanted to

start learning and getting some experience from it. What has happened is we have advanced much quicker than we thought. We

have been able to bring a second generation and soon a third generation version which has lower weight, lower cost, and a lot more

performance, and it has progressed quite well.

Mr. BURGESS. But at some point in the future we know that the

price of oil is cyclical and we may again see oil come down dramatically from where it is today. Do you see that as impacting your

business model with the future changes to the hybrid?

Mr. PRESS. From the standpoint of the market if you considered

creating demand and sow into the market, no. We need to start

marketing the products. We have to make hybrids attractive. We

have to make them cost effective and make sure that there is an

education of what the advantages are, and we and we can help create a mainstream hybrid market and that is——

Mr. BURGESS. Can I just interrupt for a minute because we got

this vote, how long did it take you to develop that technology when

you made the commitment that we were going to do this? How long

did that go from bench to the assembly line?

Mr. PRESS. The development of the program itself was about a

7-year project where we got into production. The concept of a hybrid though goes all the way back to the 1900’s and this technology

we have been working on for a very long time.

Mr. BURGESS. That 7-year interval, was any of that research and

development funded by the Government?

Mr. PRESS. No, sir.

Mr. BURGESS. So that was all just done under your own initiative?

Mr. PRESS. Yes.
43

Mr. BURGESS. And I appreciate you doing it. Mr. Mulally, I actually too was waiting for a Ford Escape hybrid but you only sold

them on the east and west coast, and being in middle America I

had to rely on Mr. Press for a hybrid, but it serves a purpose. It

gives me a good deal of moral superiority when I drive, and I like

that.

Now, unfortunately Mr. Markey is gone with his charts. When I

take a look back to the 1970’s and a mental image of the CAFE

standards, and what I envision is the Yugo, and I really don’t want

to see us go back there. I guess, Mr. Gettelfinger, at the time I left,

I am most concerned about the constituency that you represent.

These other fine gentlemen are all going to be OK one way or the

other regardless of whether it is corn or whether it is hybrid or

electricity or lightning bolts. They are going to be OK.

But the constituency that you represent is probably more at risk

when you hear, and everyone is gone from the other side, but we

heard terms like a 80 percent reduction in carbon emissions by

2050. Does that startle you when you hear talk like that?

Mr. GETTELFINGER. Well, not necessarily because if you look back

over time and then move forward to today there has been a lot of

change in the industry. What is of concern though is a loss of jobs

in this country.

Mr. BURGESS. Absolutely. And you have already heard that the

batteries are only made in Japan.

Mr. GETTELFINGER. That is correct. And that is the one difference I have here with Mr. Wagoner a while ago on the consumer

credit because what we are really doing is we are subsidizing then

the product that is made overseas. And as everybody here has testified, if you take one of these products that has got the power

train brought in from Japan you drop the content of that vehicle

from perhaps 80 percent down to 55. And so, yes, that is a concern,

and we tried to address that in our testimony because we are losing a lot of jobs in this country and we are not replacing them either.

Mr. BURGESS. Correct, and if I may, when you couple that with

the fact that the wages are good, the health benefits are significant, and the retirement benefits are significant, and a lot of that

can be overcome by outsourcing overseas that is of concern to me

because you individually represent a constituency that is as large

as all of the other gentlemen at the table combined if I did my

math right as we were going through the employment numbers.

And I just wonder if we have talked about people thinking outside

the box. I just wonder if you should be thinking of using the power

or equity that you have in collective bargaining to work with your

partners to your left at the table there to insure that they do.

Don’t rely on us. You see how we are going to fight about CAFE

standards. Don’t rely on us to do that job for you. I would say it

is incumbent upon the union to use their power or collective bargaining to go to General Motors, to go to Ford, and see what can

be achieved together to make these products deliverable and

achievable within our natural life time because there is a very popular television show that begins in about an hour that talks about

the war on the middle class, and I would submit to you that the

CAFE standards and that the carbon tailpipe emission standards
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may well represent the new war on the middle class, and unfortunately it will be your constituency that suffers the greatest.

Mr. GETTELFINGER. It would depend on how it is designed and

put into place. But again everybody at this table, NUMMI, the GMToyota joint venture and with all these folks here at the table that

are represented here, we work with the companies. In fact, we go

through presentations like with Mr. Wagoner, we just had a presentation on what they are doing as far as advance technology vehicles, Mr. Mulally, as well as Mr. LaSorda, so we do try to stay on

top of that. Because in the final analysis everybody to my left is

in good shape financially. If the jobs go away the impact on the

community or whatever they are going to be all right. But we deal

with the day-to-day worlds of the people that have lost their jobs

and they have got nowhere to go. And so we do have a very big

interest in that, and that is why we have pointed out the University of Michigan study that said as far as advanced technology vehicles, we should give incentives to everybody here to produce those

products in this country, but also to help move the needle forward

quicker as far as technology goes by incentivizing.

Mr. BURGESS. And I couldn’t agree with you more. I know the

committee will work with you. I would just say you can’t tell when

a carbon monoxide molecule comes out of the tailpipe whether it

originated from fossil fuel or part of the carbon cycle for corn but

every one of those carbon dioxide molecules has a union label on

it. Thank you, Mr. Chairman, I will yield back.

Mr. BOUCHER. Thank you. The gentleman’s time has expired. I

am pleased to recognize now the ranking member of our subcommittee, the gentleman from Illinois, Mr. Hastert.

Mr. HASTERT. I thank the chairman. The energy policy act that

we passed at the last Congress among other things encourages the

development and use of E–85 fuel. Exploiting America’s domestic

agriculture resource to achieve energy security and provide jobs for

Americans, I think is of utmost national importance. Mr. Wagoner,

what is General Motors doing to promote the use of E–85 flex fuel

vehicles?

Mr. WAGONER. First and foremost, Congressman, we are obviously radically expanding the number of vehicles and the types of

vehicles we offer this option on, first and foremost. Second of all,

we are spending a lot of money educating consumers about it. We

have run a big marketing campaign, Live Green, Go Yellow. We

have actually put different color gas caps on our E–85 vehicles so

people are reminded every time they go to a fuel station that they

have the capability to use flex fuel. And finally I was mentioning

earlier that we worked with some of the big retailers to encourage,

help them offer ethanol distribution, which I think is at this particular moment having adequate stations for consumers to use on

a convenient basis is probably the biggest bottleneck we see in the

system although there could be others.

Mr. HASTERT. As you know, there is somebody that got their fingers around the hose and the stopping ability—you know, if you

build automobiles that is fine. People buy them and expect to be

able to use E–85 but if you have to drive 40 or 50 miles to get the

fuel that is a difficult situation to be able to crack. Underwriter

Laboratories, UL, has been working to certify E–85 fuel dispensers
45

since last summer. This is just to certify. In the meantime, big box

retailers as you say are delaying the roll out of additional E–85

pumps around the country pending UL certification.

This represents thousands of refueling stations across the country. How does this impact the sale of flex fuel vehicles, and is your

company working with UL to try to expedite this process?

Mr. WAGONER. I am aware of one very specific large case where

that is exactly the issue that you cite that we could significantly

increase the number of fueling stations but they don’t want to proceed this retailer unless there is clarification of this issue. It is a

liability issue. So we are frankly continuing to produce and continuing to talk about the benefits of flex fuel but behind the scenes

obviously our own people in R&D have offered to and to the best

of my knowledge are continuing to work with UL to understand

what the issues are that are leading them to withhold that approval, and we continue to be available to try to work through

those. We obviously have a lot of experience in this in places like

Brazil so we know it can work.

Mr. HASTERT. The U.S. Air Force uses it. The military uses it.

Brazil has used it. I don’t know what the hang up is, and we have

used E–85 in engines for a long time. As a matter of fact, Mr.

Mulally, I have been told that UL doesn’t even have enough information about the effects of E–85 on fuel tanks and pumps. I think

the original Model T was capable of running on ethanol, is that correct?

Mr. MULALLY. Absolutely, because Henry Ford also cared about

farming too and so he was the first one—actually the first Model

T ran on ethanol. They had a long time to take a look at it.

Mr. HASTERT. Mr. Mulally, I assume that before your company

began producing flex fuel vehicles you did significant testing on the

effects of E–85 on fuel tanks and other components within the car,

I assume, is that correct?

Mr. MULALLY. Absolutely.

Mr. HASTERT. Have you shared this data with UL?

Mr. MULALLY. Maybe I better get back to you on that specifically.

I am sure we have because we have been like all of us a real proponent of moving towards flex vehicles.

Mr. HASTERT. Well, I am reminded that we have a vote that we

have to get to. I really appreciate this panel. I am sorry that I got

pulled off on another meeting for part of your testimony. You are

a major producer of what Americans are proud of and use every

day. The automobile is part of our way of life. We need to know

how to adapt it and what we have to do to meet requirements and

make, quite frankly, our environment healthier. But there are ways

to do it. We appreciate your testimony and look forward to working

with you. Thank you very much.

Mr. BOUCHER. Thank you very much, Mr. Hastert. The gentleman from Mississippi has arrived, and, Mr. Pickering, we have

2 minutes left to cast our votes on the floor. However, I note that

348 Members have not voted yet so I have a feeling that this one

is going to remain open for a little while, but I would ask the gentleman to be as expeditious as he can with his 5 minutes of questions.
46

Mr. PICKERING. Mr. Chairman, I will be very brief, and I will use

my time basically just to make a few comments and so then we can

adjourn and end this good day. But I thank all the leaders of the

American automotive industry and manufacturers. And I want to

personally welcome Mr. Press with Toyota. He is now our Tupelo

honey. The birthplace of Elvis Presley will now be the birthplace

of many cars, we hope, flex fuel cars, new hybrid cars, fuel cell

cars. And the American spirit and the American car go together.

It does represent and symbolize freedom.

I do not think mandates, CAFE mandates, are the best way to

go. I think research and opportunities develop technological solutions and incentives for people to find a way to solve our problems

on security, on fuel independence, and on environmental issues is

the best way. I appreciate what you all are doing and look forward

to working with you as we go forward in this process.

Mr. BOUCHER. Thank you very much, Mr. Pickering. I want to

express appreciation on behalf of the committee to all of our witnesses. You have spent a long afternoon with us today. I know each

of you is very busy, and we do appreciate your time and the very

valuable information that you have shared with us. I also want to

say thank you for your commitment to work with us as we undertake the major challenge of drafting a greenhouse gas emission bill.

We will be consulting closely with you and those with whom you

work, and we very much appreciate your cooperation. That being

said, the hearing stands adjourned.

[Whereupon, at 4:50 p.m., the subcommittee was adjourned.]

[Material submitted for inclusion in the record follows:]

STATEMENT OF THOMAS W. LASORDA

Mr. Chairman and Members of the Committee, thank you for inviting me to testify before you on the subject of climate change. DaimlerChrysler is committed to

developing new, advanced technologies, which minimize the effects our products and

processes have on global climate and the environment in general. We recognize that

climate change and national security are serious concerns that require all of us—

individuals, industry and government—to take actions to help reduce our dependence on oil and emissions of CO2. And, we have already taken actions to do so.

DaimlerChrysler has long been committed to reducing petroleum consumption and

emissions of greenhouse gases of its motor vehicles.

• We have produced more than 1.5 million flexible fuel vehicles (FFVs)—vehicles

capable of running on E–85—in spite of the limited availability of E85 fuel to consumers. That is more than 10 percent of our production over the past nine years,

a higher percentage than any other manufacturer. We stand ready to make, by

2012, 50 percent of our production as either FFVs or vehicles capable of running

on biodiesel.

• DaimlerChrysler offers seven clean-diesel models this year—providing improved

fuel economy of 30 percent and greenhouse gas reductions of 20 percent. As we announced at the Washington Auto Show in January, our new heavy-duty Dodge Ram

diesel meets the stringent, 50-state, 2010 emission standards TODAY. And, we are

actively pushing for the adoption of a national standard for B20 biodiesel fuel to

speed its adoption in the marketplace.

• We are partners in a global alliance in hybrid development with GM and BMW

in developing a new hybrid system that we expect will leapfrog the competition. The

first Chrysler Group product—the Dodge Durango—will be on sale in 2008.

• DaimlerChrysler is a leader in producing hybrid diesel-electric buses through

our Orion transit bus brand. We also have the only demonstration fleet of plug-in

hybrids in service—our Dodge Sprinter vans.

• As you may not know, we are the world’s leader in fuel cell vehicle production,

with more than 100 vehicles—ranging from small passenger cars to city transit

buses—in worldwide operation today. Thirty-two of these are in the U.S. We are
47

putting significant resources into developing these new types of propulsion with the

objective of significantly reducing greenhouse gases.

• And we continue to put advanced technology into our gasoline engine vehicles.

Last year we introduced a new World Engine for our 4-cylinder cars and trucks,

along with a new fuel-efficient continuously variable transmission.

• Just last month we announced a $3 billion powertrain investment. This investment will include the development and production of:

• A significantly more fuel efficient V–6 engine family; and

• New cutting-edge transmissions that improve fuel economy by an additional 5–

10 percent alone.

• Plus, we will double the production capacity of our 30 plus mpg 4-cylinder engine plant in Michigan to 840,000 units per year.

• All in all, these investments will further secure tens of thousands of U.S. jobs

associated with the engineering and manufacturing of the vehicles that will benefit

from these new technologies.

• We’re also addressing our product mix. Earlier this year, we announced a 40-

plus mpg ‘‘Smart’’ city car that will arrive in the U.S. early next year.

I’ve focused on what we are doing, from a technology perspective, to reduce petroleum consumption—and, since they are directly related, greenhouse gases. But I

need to mention one more item in this vein. For those who advocate 4 percent annual CAFE increases over the next 10 years—which translates to a 50 percent fuel

economy increase—we know how to do that, too.

In fact, we already do it—in Europe. The U.S. combined fleet averages 24–25 mpg,

and in Europe the fleet averages 36 mpg. That’s a 50 percent difference.

Why is there a huge disparity between our fleets there and here? After all, we

are the same companies in Europe that we are in the U.S., with access to similar

technologies. The difference is the European approach to energy and greenhouse gas

policies. They’ve made some tough political choices. They’ve highly taxed gasoline,

making the price three times higher than in the U.S., and they have incentives on

diesel fuel. As a result of these policies, fuel economy is always high on a customer’s

list, and not just when there’s a spike in fuel prices.

Through policies which affect consumer demand, the mix of vehicles sold in Europe is radically different than here—about 60 percent compacts or smaller, compared to about 15 percent here; and about 50 percent of passenger vehicles are diesel powered.

There’s no magic at work here. A gas-engine mid-size car in Europe gets the same

mileage as a gas-engine mid-size car in the U.S. It’s just that customers demand

a very different mix of vehicles in Europe.

The European model, while far from perfect, is based on policies that leverage demand and market forces, not on policies that fight them.

However, in the U.S., our policies have historically addressed the supply side—

light-duty vehicle fuel-economy standards. But, consider how a 50-percent fuel-economy improvement relates to new vehicle technology alone. If all the new vehicles

sold in the U.S. 10 years from now were hybrids or diesels—something that no one

really believes is feasible—fuel economy would improve by only 25–30 percent.

U.S. policymakers must adopt a new and unique formula that fits here.

DaimlerChrysler supports a three-pronged, comprehensive approach to climate

change and energy security; one that includes a combination of:

• vehicle efficiency improvements;

• the expanded use of alternative fuels—such as ethanol and biodiesel; and,

• the harnessing of market forces to help drive consumer demand.

We all need to be very clear on one point—new vehicle efficiency improvements

alone will never result in the overall decline in petroleum consumption and greenhouse gas emissions we need. The demand for fuel will continue to grow, as more

drivers enter the market and vehicles are driven longer distances.

There are more than 230 million light-duty vehicles currently in use today in the

U.S. which travel nearly 3 trillion miles. That is nearly 13,000 miles traveled by

each vehicle, each year—an increase of about 30 percent since 1985. Thus, greenhouse gases and the demand for petroleum will not be offset by only addressing efficiency improvements among the 16–17 million new vehicles that enter the U.S. market each year. In order to decrease total greenhouse gas emissions and petroleum

consumption, we need to accelerate the adoption of alternative fuels such as E85

and bio-diesel, which will affect a greater proportion of the population of light duty

vehicles.

And by the way, while travel is growing in the U.S., it will grow exponentially

as China and India increase the global automotive market dramatically. The com-
48

bined Indian and Chinese existing car fleet will almost triple during the next 10

years to about 90 million vehicles, while the U.S. fleet is forecast to grow 25 percent.

To address this increase in demand, we need a comprehensive approach that addresses energy use and greenhouse gas emissions from all sectors of the U.S. economy, and encourages the most efficient reductions in energy use. Our approach

should not just address the supply of energy-efficient products, but also spur demand for them, while establishing reasonable time-tables for compliance and realistic levels of reductions.

Although it should go without saying, I’ll say it anyway: This effort needs to be

national in scope. We need to avoid an unacceptable and inefficient patchwork of

inconsistent Federal, State, and local approaches. In fact, to truly be effective in

curbing greenhouse gases, we need a global solution.

On the vehicle efficiency side, we at DaimlerChrysler recognize the need for action. And we’re taking it. Every day, our engineers are working to reduce greenhouse gases and petroleum consumption. We absolutely will be part of the solution

and we will accelerate our efforts. We also support reforming the CAFE program

to base it on vehicle attributes and pledge to continue to work with NHTSA to establish maximum feasible levels of fuel economy—levels that are based on sound

science and that recognize the limits of technology, cost, and consumer demand.

But again, if we intend to make meaningful progress in reducing petroleum consumption in this country, in addition to vehicle technology improvements, we look

to the Federal Government to establish policies that address consumer demand and

bend the bias of transportation fuels toward lower carbon alternatives.

Thank you and I look forward to answering your questions.
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