From the EV1 to the Chevy Volt: a re-electrification of the American automobile industry

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Content FROM THE EV1 TO THE CHEVY VOLT: A RE-ELECTRIFICATION OF THE AMERICAN AUTOMOBILE INDUSTRY by Kristen Lynne Gonzalez A Thesis Presented to the FACULTY OF THE USC GRADUATE SCHOOL UNIVERSITY OF SOUTHERN CALIFORNIA In Partial Fulfillment of the Requirements for the Degree MASTER OF ARTS (STRATEGIC PUBLIC RELATIONS) August 2013 Copyright 2013 Kristen Lynne Gonzalez ii Dedication Mom and Dad, Mark and Stephanie, Brian and Laura, and Matthew—every word of encouragement, every piece of advice, and every hug and high five in this process, and throughout life, have pushed me further toward my goals. Thank you for fostering my imagination, inspiring my love for education and believing in me no matter what. It means more to me than you will ever know. My success is yours. iii Acknowledgements All of this would not have been possible without the help of a handful of special people. I would like to thank my committee chair, Jerry Swerling, for his insight and support. Thank you for recognizing my potential and holding me to the highest of standards at all times. I would also like to thank Burghardt Tenderich for pushing me to make this piece of work as perfect as possible and Brenda Lynch for constantly reminding me to be critical. I truly appreciate all you have done for me. Finally, I would like to thank my interviewees, Dave Barthmuss, Steve Harris, Linda Nicholes and Jeff U’Ren, for their patience and consideration during this process. I am forever grateful to all of you for sharing your time and knowledge with me. iv Table of Contents Dedication ii Acknowledgements iii List of Tables v List of Figures vi Abstract vii Preface viii Interviewees xi Introduction 1 Chapter One: The Current Landscape of Electric Vehicles in the U.S. 2 Chapter Two: The Psychology of Consumer Behavior in the Green Industry 11 Chapter Three : A History of Putting the World on Wheels 26 Chapter Four: The Past as a Model for the Future? 41 Chapter Five: Electric Vehicles Return with a Vengeance 54 Chapter Six: Is the Future Electric? 65 Conclusion 68 Bibliography 72 Appendix: Industry Interviews 80 v List of Table Table 1: EV availability (excluding HEVs) in the U.S. from 2012-2013 5 vi List of Figures Figure 1: Global Greenhouse Gas Emissions by Source 3 Figure 2: Plug-In Electric Vehicle Sales (U.S. Market) from 2010-2012 9 Figure 3: Series of Print Advertisements for GM’s 1996 Electric Vehicle, the EV1 24 Figure 4: Print Advertisements for the Third-Generation Toyota Prius 24 Figure 5: Print Advertisement for the Battery Electric Nissan LEAF 25 Figure 6: Print Advertisement for the Extended Range Electric Chevrolet Volt 25 vii Abstract This paper examines the successes and failures of General Motors in the electric vehicle (EV) industry from the EV1, released in 1996, to its predecessor, the Chevrolet Volt, which was introduced to the U.S. market in 2010. More importantly, this paper sets the scene for the future and explores the anticipated role EVs will play in helping breathe new life into the American automobile industry. By examining consumer behavior in the green marketplace, the changing American landscape and the ever-evolving needs of new drivers, marketers and public relations professionals working on behalf of GM will be able to better understand how to communicate effectively with key audiences, and ultimately raise awareness of and increase consideration for electric vehicles. The principal hypothesis motivating primary and secondary research concerns a pressing need for alternative means of transportation in the United States of America with soaring gas prices coupled with the reluctance for many Americans to buy into the EV industry. With an increasing number of vehicle models and manufacturers to choose from, it is imperative for GM to keep its commitment to advanced vehicle technology and maintain a high level of consumer satisfaction for its products and services in order to continue to increase its market share in every vehicle division, in every country in which it operates. viii Preface The key sections in this paper include an introduction to the current landscape of electric vehicles in the United States of America; an introduction to the psychology of consumer behavior in the green industry and, moreover, what motivates people to purchase EVs; a brief history of the rise and fall of General Motors, with a focus on American perceptions of the company; and an in-depth examination of GM’s first modern era electric vehicle, the EV1, and its influence on its predecessor, the Chevrolet Volt, a decade later. Additionally, this paper will evaluate the results of the author’s primary research, which includes findings from the 2013 North American International Auto Show in Detroit, Michigan, as well as content analysis of advertising and communications campaigns for electric vehicles. This paper will also share insights from two GM executives, a former EV1 driver and current owner of two Chevy Volts, and the former president of Plug-In America. Recommendations for GM listed throughout this paper based on the results of primary and secondary research may also be applied to similar communications campaigns and used as an example for other automobile manufacturers. Research Methodology Quantitative and qualitative primary and secondary research was conducted to accurately assess and understand consumer behavior in regards to electric vehicles. Personal conversations conducted on the showroom floor at the North American International Auto Show in Detroit, Michigan, surveyed 20 people in varying age ranges. The purpose of this ten question survey was to determine the awareness level of electric vehicles among average consumers and to better understand the motivations behind their car purchasing decisions. The survey not only allowed the researcher to obtain invaluable insight about consumer purchasing behavior, but also provided the opportunity for the researcher to engage with a variety of potential car buyers from across the United States of America. Additionally, the researcher analyzed electric vehicle ix advertisements from the past and present, addressing ways to improve the communication of electric vehicles to the average consumer. The researcher was able to glean information and insight into the communications practices and operations at GM from two executives, while interviews with two EV advocates provided an outsider perspective to the problems GM has faced. Secondary research included a comprehensive examination of the current landscape of electric vehicles in the U.S., the psychology of consumer behavior in the green industry, the rise and fall of GM and an in-depth analysis of the EV1’s failure and the Chevy Volt’s projected success. Purpose While much research has been done to explore the death of the EV1 from a business perspective, little research has been conducted regarding the external factors that led to its demise. By investigating these external factors (including gas prices, EV regulations, consumer awareness and others) and their weight in the environment, as well as the ways in which GM reacted to these factors, one can more accurately determine the challenges that EVs face in the marketplace today. A rapidly changing society requires companies, especially large companies, to always push the envelope, continuing to advance and progress. This forward-thinking business model requires significant investment and often means there is a greater risk for failure. While many ideas may later be deemed futile, it only takes one great idea to truly make a company successful—or in GM’s case, revive an American auto giant. x Interviewees Dave Barthmuss— Group Manager of Policy and Product for General Motors’ West Coast Communications Team As head of communications for the General Motors’ largest U.S. region, Dave Barthmuss is responsible for a wide variety of public relations assignments, including engaging GM and its brands with key stakeholder groups to help communicate the company’s environmental, technology and policy initiatives. He has served in various communications roles at GM for nearly 20 years and used to lead GM’s Environment, Energy and Sustainability communications activities at the company’s global headquarters in Detroit before moving to California with his family. Though he was portrayed as a villain in the documentary “Who Killed the Electric Car?” his reputation was restored in “Revenge of the Electric Car,” as was that of General Motors. He openly admits that the “old GM” made plenty of mistakes from a communications standpoint, but he firmly believes the “new GM” will be able to win back the hearts and minds of the American people and make the company a global success. Steve Harris— Partner at McGinn & Company, Former Vice President of Global Communications for General Motors Steve Harris, former Vice President of Global Communications for General Motors, has been the automotive communications go-to for more than 40 years with experience working for American Motors and Chrysler. In his years at General Motors, he helped lead the communications efforts leading up to the company’s bankruptcy, at the Senate hearing, through the government bailout and at the beginning planning stages of the extended range electric Chevrolet Volt. He is currently a partner at McGinn & Company, a communications consulting firm based in Arlington, Virginia. Linda Nicholes— Co-Founder of Plug-In America, EV owner and advocate A self-described “oil heiress,” Linda Nicholes co-founded Plug-In America, a non-profit organization that seeks to reduce petroleum usage through advocating for electric and other alternative fuel vehicles. Nicholes has long been involved in the EV movement, appearing in Chris Paine’s documentary, “Who Killed the Electric Car?” as the leader in the 24-hour vigils to stop the destruction of GM’s EV1 and Toyota’s RAV4 EV. Following the crushing of the EV1s, she and her husband vowed to never purchase a GM product. Now, more than ten years later, Nicholes and her husband are proud owners of a Chevy Volt, as well as two other electric vehicles—a 2001 RAV4 EV and a 2008 Tesla Roadster. And with a solar panel system installed on the roof of their house, they drive completely on sunshine. Jeff U’Ren, Member of Plug-In America, former EV1 lessee and current owner of two Chevy Volts After taking Kris Trexler’s EV1 (VIN 99) for a spin in 1996, Jeff U’Ren was hooked. Since then, and even more so after his EV1 was crushed, U’Ren has played an integral role in the EV movement. He is an active member and volunteer for Plug-In America and currently owns two xi Chevy Volts that he willingly loans out to most everyone he meets. He is arguably one of GM’s “unofficial” Volt salesmen. 1 Introduction Advancing vehicle technology and green energy has become the Space Race of the modern day. In a speech on March 15, 2013, at the Argonne National Laboratory, President Barack Obama called for continued support of his energy independence and plans to wean Americans off of foreign oil. He referenced the flat-lining of the American auto industry that took place just a few years ago and acknowledged that now “some of the most high tech, fuel efficient, pretty spiffy cars in the world are once again designed, engineered and built here in the United States.” 1 He explains that in order to maintain this edge, the U.S. must continue to invest in scientific research: We can’t afford to miss these opportunities while the rest of the world races forward. We have to seize these opportunities. I want the next great job creating breakthroughs whether it’s in energy, Nano technology or bio engineering. I want those breakthroughs to be right here, in the United States of America—creating American jobs and maintaining our technological lead. 2 Until recently, investment in the green industry has received little presidential and public acknowledgment since Jimmy Carter’s presidency in the late 1970s and early 1980s. The following thesis will explore the implications of this nationwide disregard for clean energy advancement in the U.S. and, consequently, how the electric vehicle industry has been affected. The researcher will also examine how a change in the American landscape over the course of a decade positively altered peoples’ perceptions toward EVs and transportation, giving the electric vehicle industry the potential to truly prosper. 1 Obama, Barack. “Remarks by the President on American Energy—Lemont, Illinois.” Office of the Press Secretary. Argonne National Laboratory, Lemont, Il. 13 March 2013. Presidential remarks. 2 Obama, 2013. 2 Chapter One: The Current Landscape of Electric Vehicles in the United States of America “With more research and incentives, we can break our dependence on oil with biofuels, and become the first country to have a million electric vehicles on the road by 2015.” -President Barack Obama 2011 State of the Union Americans make up four percent of the world’s population. 3 This particular four percent also “contributes 22 percent of man-made greenhouse gases to Earth’s atmosphere.” 4 Research shows that “greenhouse gases like carbon dioxide (CO2) trap the sun’s heat around the planet. Thanks to humans, more CO2 is in the atmosphere today than at any point during the last 650,000 years. Since Americans started burning fossil fuels in large quantities during the Industrial Revolution, atmospheric CO2 has climbed 35 percent.” 5 This has caused worldwide temperatures to increase by one degree, on average. 6 While a one degree difference in temperature may not be as noticeable to the average person, areas around the world are experiencing life-changing consequences. For example, “more than 20 percent of the polar ice cap has melted since 1979…and increases in air and water temperatures are creating more killer hurricanes and other extreme weather events around the globe.” 7 The 2006 documentary, An Inconvenient Truth, followed former Vice President Al Gore on his quest to inform people across the world of climate change and influence them to take action. And, although it may have raised awareness, it also raised eyebrows. In 2008, GM’s former Vice Chairman Bob Lutz—coincidentally the same Bob Lutz that persuaded GM to invest billions into extended range electric vehicle technology in 2007—was openly honest about 3 “2010 Census Data.” Census. United States Census 2010. Web. 20 Nov. 2012. 4 Boschert, Sherry. Plug-In Hybrids: The Cars that will recharge America. Canada: New Society Publishers, 2007. Print. 5 Boschert, 2007. 6 Boschert, 2007. 7 Boschert, 2007. 3 his thoughts regarding climate change, saying it was a “total crock of shit.” 8 Truth or not, the possibility of global warming has helped rouse governments, companies and individuals across the world to discover more environmentally friendly alternatives for doing business, producing goods and just living. According to data from the 2007 synthesis report by the International Panel on Climate Change in Figure 1, transportation accounts for approximately 13 percent of all global greenhouse gas (GHG) emissions. 9 Additionally, for individuals, one of the most effective methods of reducing GHG emissions is to alter driving habits through driving less, ride sharing and driving a low- to zero-emissions vehicle, like the electric vehicle. 10 America’s dependence on oil has been a long standing issue for the country and several Presidents of the United States have sought alternatives. Former President Jimmy Carter, for example, had 32 solar panels installed on the roof of the White House in 1979 that were used to heat water. 11 Seven years later, former President Ronald Reagan had these solar panels taken down for routine roof work, but never re-installed them. 12 During Carter’s time in office, the administration invested significant resources into renewable energy sources in an effort to wean 8 Krolicki, Kevin. “GM exec stands by calling global warming a 'crock’.” Reuters. 22 Feb. 2008. Web. 3 Dec. 2012. <http://www.reuters.com/article/2008/02/22/idUSN22372976>. 9 “Climate Change 2007: Synthesis Report.” Intergovernmental Panel on Climate Change, 2007. Web. 29 Dec. 2012. <http://www.ipcc.ch/publications_and_data/ar4/syr/en/spm.html>. 10 Bonini, Sheila and Jeremy Oppenheim. “Cultivating the Green Consumer.” Stanford Social Innovation Review (2008): 56-61. Print. 11 Halperin, Carrie. “Changing Cities: Where Are the Solar Panels Mr. President?” ABC News. 23 Sept. 2012. Web. 28 Sept. 2012. <http://abcnews.go.com/blogs/technology/2012/09/changing-cities-where-are-the-solar-panels-mr- president/>. 12 Halperin, 2012. Figure 1: Source International Panel on Climate Change 4 the U.S. off of foreign oil supply. When Reagan took office in 1981, nearly all of Carter’s renewable energy initiatives went by the wayside to support relations with Saudi Arabia, the country that could help the U.S. fight off the Soviets and offer a rich oil supply during a time of high prices per barrel. 13 Living in a dramatically different America, but with similar intent to that of former President Carter, President Barack Obama has called for change. In his 2011 State of the Union address, President Obama set goals for the U.S. auto industry to put one million plug-in electric vehicles on the road by 2015, “affirming and highlighting a goal aimed at building U.S. leadership in technologies that reduce our dependence on oil.” 14 In his address, President Obama also asserted that this electric propulsion technology could power the future of America through job creation in the clean energy industry. Through the one million electric vehicles on the road by 2015 goal, the Obama Administration suggests that “electric vehicles (‘EVs’)—a term that includes plug-in hybrids, extended range electric vehicles and all-electric vehicles—represent a key pathway for reducing petroleum dependence, enhancing environmental stewardship and promoting transportation sustainability, while creating high quality jobs and economic growth.” 15 In order to reach this goal by 2015, the President suggested a three-pronged approach: 1. Make electric vehicles more affordable with a rebate up to $7,500 2. Advance innovative technologies through new R&D investments 3. Reward communities that invest in electric vehicle infrastructure through competitive grants 16 13 Bronson, Rachel. “The U.S.-Saudi Love Affair Predates Bush.” Council on Foreign Relations. 9 July 2004. Web. 24 Sept. 2012. <http://www.cfr.org/saudi-arabia/us-saudi-love-affair-predates-bush/p7175>. 14 United States Dept. of Energy. One Million Electric Vehicles By 2015: February 2011 Status Report. Washington: GPO, 2011. Print. 15 United States Dept. of Energy, 2011. 16 United States Dept. of Energy, 2011. 5 As can happen with any marketable product, electric vehicles were prematurely predicted to be a success by many automakers. They reported sales figures that were substantially below their original goals. This was cause for concern in the market and had journalists, automotive reviewers, EV advocates and average consumers wondering if electric vehicle technology would ever catch on in America. However, according to the U.S. Department of Energy, “over the past few years, interest in EVs in the U.S. auto industry has surged, with manufacturers beginning to introduce new generations of EVs.” 17 Table 1 shows 2012 and 2013 plug-in electric vehicle (PEV) model years, along with their respective manufacturer suggested retail prices (MSRP), which are or will be available for purchase and/or lease in 2013. In comparison to three years prior when only a few automakers were producing electric vehicles for the mass market, today there are 12, with many more slated for model year (MY) 2014. Without including hydrogen fuel cell electric vehicles, electric vehicles are generally categorized into four types: battery electric vehicle (BEV), hybrid electric vehicle (HEV), plug- in hybrid electric vehicle (PHEV), and extended range electric vehicle (EREV). The EREV is the newest EV technology, while the oldest form of EVs is the battery electric vehicle. Without any other propulsion source, a BEV is completely powered by batteries that obtain charge through 17 United States Dept. of Energy, 2011. Table 1: Current EV availability (excluding HEVs) in the U.S., as provided by auto manufacturers' individual websites. Manufacturer’s suggested retail price given – actual price is dependent on dealership. 6 plugging the vehicle into an outlet and, in some cases, through regenerative braking. 18 Many of the first cars on the market in the early 1900s were fueled by pure electricity. 19 GM’s EV1 (production from 1996-2000) is a later example of a BEV whose main competitor today would be the Nissan LEAF. Another degree of vehicle electrification is seen in hybrid electric vehicles, which have gained popularity thanks to Toyota’s nationwide release of the Prius in 2000. Hybrid electric vehicles are increasingly popular for their conventional-like nature and fuel-efficient motors. HEVs are gasoline vehicles with internal combustion engines that “also have an electric motor and a small bank of batteries that assist the engine, providing boosts of power or extending the range the vehicle can go.” 20 Essentially, HEVs have two motors working in unison with each other and providing energy from their respective sources at the appropriate times. For instance, when a hybrid electric vehicle is idling at a stop light, the electric motor will take over as the power source. Similarly, the gas motor will act as the power source when the vehicle is in motion and going above a specified speed, without any extra attention or action required by the driver. HEVs provide an easy transition from conventional internal combustion engine-powered vehicles and have increased in popularity among Americans with close to half a million HEV sales since their arrival into the U.S. market, accounting for 3.01 percent market share of total vehicle sales in 2012. 21 When GM introduced the Chevy Volt in 2010, it was the first extended range electric vehicle to enter the market, joined shortly after in 2011 by the Fisker Karma, which utilizes similar propulsion technology. The Volt is often categorized as a plug-in hybrid electric vehicle, 18 Boschert, 2007. 19 Boschert, 2007. 20 Boschert, 2007. 21 “Electric drive vehicle sales figures (U.S. Market) – EV sales.” Electric Drive Transportation Association, 2013. Web. 16 Jan. 2013. <http://www.electricdrive.org/index.php?ht=d/sp/i/20952/pid/20952>. 7 but there are notable differences in the way EREVs and PHEVs behave on the road. A PHEV has both an electric motor and an onboard internal combustion engine (ICE), where the “electric motor either assists the internal combustion engine or is the sole mechanical link to the wheels.” 22 True to its name, the PHEV has a series of batteries that can be charged by plugging the vehicle into a standard electrical outlet, which allows the vehicle to drive a certain mileage before the ICE turns on to support with petroleum. 23 An extended range electric vehicle, in comparison, offers a completely different propulsion system that “uses electricity to drive the car’s wheels at all times and speeds. The Range Extender is a compact gasoline-powered generator whose sole purpose is to supply electricity when you want to drive beyond the range of the battery.” 24 The Chevy Volt is an example of the range extending technology and “can travel up to 40 miles using power from its lithium-ion battery pack. After that, the Volt can travel up to 340 miles in extended range using its internal combustion engine electric generator.” 25 This means that the Volt “essentially behaves like a battery-powered electric car” 26 for the first 40 miles, which suggests that the average American would never need to use gas during their daily commute of 29 miles. 27 An added benefit to EVs that utilize both the plug and a limited gasoline supply is that they do not necessitate additional infrastructure—home fueling through a standard 120V electrical outlet and the occasional stop at the gas pump are all that is needed. Although several auto manufacturers have flirted with other alternatives to petroleum such as hydrogen, natural gas and ethanol, they have largely been relying on EV technology and electric propulsion systems to meet Corporate Average Fuel Economy (CAFE) standards that 22 “EV - BEV HEV PHEV.” EV-Info, n.d. Web. 12 Nov. 2012. 23 “EV - BEV HEV PHEV.” 2012. 24 “EV - BEV HEV PHEV.” 2012. 25 United States Dept. of Energy, 2011. 26 Lynley, Matthew. “Extended-range hybrids pick up steam.” VentureBeat. 30 August 2012. Web. 12 Sept. 2012. <http://venturebeat.com/2011/08/30/car-manufacturers-extended-range/>. 27 Boschert, 2007. 8 require all cars and light-duty trucks to have the equivalent of 54.5 miles per gallon (MPGe) fuel economy by Model Year 2025. 28 This will reportedly “save consumers more than $1.7 trillion at the gas pump and reduce U.S. oil consumption by 12 billion barrels.” 29 EV advocate and environmentalist, Linda Nicholes, believes fuel savings will be one of the biggest motivators for consumers to switch to electric driving, especially for those in California. In a personal interview with Nicholes she said, “right now in California, gasoline is about five times more expensive than electricity.” 30 Nicholes suggests that the state’s clean air mandates coupled with the fact that California is a “fuel island—separated by time and distance,” has led to high gas prices, some of the highest in the nation. 31 Not only is California different in regards to its high fuel prices, but it is also more progressive, according to Nicholes: I’m originally from Idaho and I frequently go home to visit my parents and the only EV I’ve ever seen there is a golf cart. My family, other than my dad, thinks I’m nuts. There’s just no exposure to EVs there. Also, aside from California, there is the electric highway that goes up into Oregon and Washington—those states, I think, are more open to EVs, too. It’s hard to believe though that those two states are next to Idaho because they’re worlds apart. I would say that the interior of the country isn’t as onboard with electric vehicle driving as other parts of the country. Whereas coastally, the mindset seems to be a bit more progressive in regards to alternative fuel vehicles. 32 28 National Highway Traffic Safety Administration. “Obama Administration Finalizes Historic 54.5 mpg Fuel Efficiency Standards.” NHTSA. 28 August 2012. Web. 3 Oct. 2012. <http://www.nhtsa.gov/About+NHTSA/Press+Releases/2012/Obama+Administration+Finalizes+Historic+54.5+mp g+Fuel+Efficiency+Standards>. 29 National Highway Traffic Safety Administration, 2012. 30 Nicholes, Linda. Personal interview. 2 Jan. 2013. 31 Nicholes, 2013. 32 Nicholes, 2013. 9 This type of indifference for electric vehicles across the country could cause the U.S. to fall short of President Obama’s goal of one million electric vehicles (not including HEVs) on the road by 2015. Sales data, shown in Figure 2, from the Electric Drive Transportation Association calculates that only 70,915 plug-in electric vehicles (BEVs, PHEVs and EREVs) have sold since December 2010 (when they were introduced to the U.S. market) through December 2012. 33 In comparison, HEVs— which were introduced to the U.S. market more than a decade before today’s pure- electric vehicles—are seeing much higher sales with 1,931,423 units sold between 2007 and 2012. Higher sales for HEVs can be partly attributed to the fact that they have been on the market for more than a decade, therefore automakers have had time to perfect HEV technology, ramp up production volume and ultimately reduce costs. It is also worth noting that because HEVs have been on the market since 2000, consumers are adequately primed for HEV technology and are much more likely to consider purchasing an HEV. The HEV has also introduced consumers to electrification in vehicles and has similarly prompted them to consider other electric vehicles. Evidence of this increasing consideration for electric vehicles can be seen in electric vehicle sales figures to date. Combined, the total electric drive market share makes up 3.38 percent of total vehicle sales in the U.S. today. Even though total electric vehicle sales have steadily increased year-over-year and plug-in electric vehicle sales nearly tripled from 2011 to 33 “Electric drive vehicle sales figures (U.S. Market) – EV sales.” 2013. Figure 2: Plug-‐in electric vehicle sales (U.S. Market) from 2010-‐ 2012. Source: Electric Drive Transportation Association 10 2012, it is unlikely that the automobile industry will be faced with nearly as much demand as is needed (929,085 interested plug-in EV customers) to meet the Obama Administration’s one million electric vehicles goal in two years. For many critics, this begs the question: how can the auto industry increase consideration for electric vehicles to the average consumer so that auto makers can meet future sales goals and continue to provide cleaner alternatives to driving? 11 Chapter Two: The Psychology of Consumer Behavior in the Green Industry “Economic advance is not the same thing as human progress.” -Sir John Harold Clapham, British Economic Historian The days of going to the grocery store and having to choose laundry detergent based on brand, price and preference have long been over. Consumers have always been faced with options—to buy Tide, All or the generic store brand? The 50-ounce bottle or the 234-ounce carton? Original scent or Fresh Linen? Before, when buying an apple the decision was between a Granny Smith or a Fuji, a Pink Lady or a Gala. With organic, free range, recyclable, biodegradable, high efficiency, energy saving, fuel efficient and other environmentally friendly products for sale, the “green industry” has added many more decisions for the average consumer. Consumer Behavior in the Green Industry A variety of research shows that a majority of consumers want to buy eco-friendly products in order to reduce their impact on the environment. However, this “want” does not always transfer into action. A global survey fielded by McKinsey & Company in 2007 found that of 7,751 consumers surveyed from eight major economies, 87 percent of consumers show concern for the environmental and social impacts of the products they buy. However, “when it comes to actually buying green goods, words and deeds often part ways. Only 33 percent of consumers in our survey say they are ready to buy green products or have already done so.” 34 This illustrates that there is a variety of factors that contribute to the purchasing decision of a green product. For example, in the retail space there are many deciding factors when it comes to making a purchase decision. Price, quality, quantity and brand reputation, among others all contribute to the purchasing decision. 34 Bonini and Oppenheim, 2008. 12 Green Buyers’ Intentions It is often assumed by makers of green products “that consumer involvement is higher when buying ‘green’ than when buying conventional everyday products.” 35 This is not always the case. The trendiness of the green industry has led many consumers to purchase products for superficial reasons, such as the “cool” factor. Carrying a product with an eco-label has become a status symbol for many buyers and has helped the green retail space experience a significant growth spike in recent years. While some are drawn to an eco-product because of a fad, others are drawn based off their internal locus of control, an individual’s belief that their actions are primarily responsible for the events they encounter in life. 36 Research into personality psychology suggests: There is a positive correlation between persons having an internal locus of control and an index of ecological concern and ecology scale. The ecology scale measures what an individual knows, thinks, feels, and actually does regarding ecology and pollution. Consumers like to feel that their actions will make a difference and will lead to a desired outcome. Therefore, a person would be more likely to purchase products that are environmentally friendly if the purchase provides them with a reward. 37 This reward, however, must not be confused with a reward that the company, another person or the environment receives. The person purchasing the environmentally friendly product must personally feel rewarded through health benefits, cost savings (short term and/or long term), a psychological or emotional feeling, or the like. Without this reward, most consumers will not be 35 Thogersen, John, Anne-Katrine Jorgensen and Sara Sandager. “Consumer Decision Making Regarding ‘Green’ Everyday Product.” Psychology & Marketing 29.4 (2012): 187-197. Print. 36 Bahn, Kenneth and Newell Wright. “Antecedents of Green Product Purchase Behavior.” Proceedings of the Academy of Marketing Studies 6.2 (2001): 51-55. Print. 37 Bahn and Wright, 2001. 13 motivated to purchase a green product because the return on investment (ROI) may not be as clear cut. Other green buyers seem to have a deeper interest in the environment and are legitimately concerned about the environmental issues that face the world. For these consumers, the personal benefit is not nearly as important as the environmental benefit. No matter what the intention of the consumer is when they purchase a green product or their level of involvement, research shows that the majority of consumers are unaware of the products that truly do benefit the environment. The top three lifestyle changes that individuals can make to reduce their own carbon dioxide emissions include driving a more fuel efficient vehicle, improving home insulation and eating less beef. However, when asked in the 2007 McKinsey & Company survey, consumers incorrectly identified using energy efficient appliances and recycling as the top two ways to reduce their own carbon footprint, followed by driving a more fuel efficient vehicle. 38 A survey by Chain Store Age, concluded that the majority of those who buy green products mainly buy food or energy efficient lighting and completely disregard all other green products. 39 With this, it is clear that there is a disconnect between a consumers’ intentions and reality. The key question is: Once companies build products that can competitively compare to their conventional counterparts, how can they market them successfully beyond green buyers to increase consideration and build brand reputation among a larger audience? Perhaps the answer is to replicate the strategies used by makers of conventional products rather than putting emphasis on the “environmentally-friendly” angle. While it may seem obvious to market a green product as if it were a conventional product, companies are spending billions of dollars each year on communicating that their products help the environment and will ultimately save the world. Instead, companies should look at the barriers 38 Bonini and Oppenheim, 2008. 39 Bonini and Oppenheim, 2008. 14 that consumers face when it comes to deciding between a green product and a conventional product. Through awareness of consumer behavior barriers in regards to green products companies can make and market products in a way that is most satisfying and effective for the average consumer. Barriers in the green industry As a self-proclaimed “early adopter” of green products, there is not much that stands in Linda Nicholes’ way of purchasing green products. In 2000, she and her husband were the first homeowners in the city of Anaheim, California, to install solar panels on the roof of their home. Nicholes is one of a small population of early adopters in the green space. The average consumer faces several barriers when it comes to purchasing green products as opposed to conventional, everyday products. 40 Barriers include lack of awareness, negative perceptions about green products, consumer distrust, high prices and low availability: 41 • Lack of awareness: The aforementioned McKinsey & Company survey, which concluded that consumers are unaware of the top three ways to reduce their carbon footprint is proof that the lack of awareness surrounding the environment and green products can mislead the average consumer. This confusion calls for serious and honest education about environmental problems and how to overcome them. Once a certain level of environmental awareness is achieved, companies can naturally start marketing products that quell environmental issues. • Negative perceptions: In order for a green product to ever be able to compete in the marketplace, it must be equal to, or better than, its conventional counterpart. In the early years, green products lagged behind conventional competition. The Toyota Prius, a 40 Bonini and Oppenheim, 2008. 41 Bonini and Oppenheim, 2008. 15 gasoline-electric hybrid vehicle released in 2000 to the U.S. market, offered consumers the opportunity to drive a car that could travel twice as far on a gallon of gas and help reduce carbon emissions. The problem? It lacked the performance and power that non- hybrid vehicles offered. Many early green products were not in line with their conventional competition, which has consequently created negative perceptions toward green products of today. • Consumer distrust: Consumers are often times conflicted with the legitimacy of green products. They are also wary of the advertised “greenness” of a product. With little regulation in the green industry, companies can slap a label on just about anything and call it “environmentally friendly.” In fact, a survey conducted by TerraChoice Environmental Marketing Inc. in 2007, “examined 1,753 environmental product claims and found that all but one were misleading or just plain false.” 42 Consumers also seek information regarding a company’s claims to be eco-conscious. More and more, companies are expected to exercise green practices on a daily basis, especially if these companies choose to market green products. Consumers find it hypocritical if a company does not adopt greener practices yet markets a green product—and rightfully so. • High price: Green products generally have a higher price point than their conventional counterparts. The difference is that green products typically offer an added return on investment, which unfortunately is not always communicated to the consumer. For example, a CFL (compact fluorescent lamp) light bulb costs on average three times as much as an incandescent light bulb. The sticker of a CFL could instantly deter a consumer from purchasing the high efficiency light bulb that actually lasts longer than an incandescent bulb (up to 10 years longer) and uses only about a quarter of the energy, 42 Bonini and Oppenheim, 2008. 16 saving the consumer about $30 in its lifetime. 43 According to the McKinsey & Company survey noted above, a majority of consumers want to be able to recoup the extra cost they spent on a green product in two years or less. 44 Thus, the challenge is marketing the products that have a more than two-year return on the premium price. Communicating the cost benefits to the consumer upfront can help increase consideration for consumers at the point of purchase. • Low availability: Low and limited availability of green products for the larger consumer base can be viewed as a turn-off. While the thrill of the search may excite some, many consumers do not want to waste time searching for a product. In 2000, the Prius was in limited production and it deterred many consumers from even considering the hybrid for their next vehicle purchase. It became such a significant issue that Toyota eventually addressed the availability problem by boosting production and running advertisements with the messaging: “We’ve significantly increased production on the hard-to-find, easy- to-drive Toyota Prius.” 45 Similarly, drivers of vehicles that run off alternative fuels like E-85 ethanol, compressed natural gas and other biofuels are forced to drive out of their way to find fueling stations because the infrastructure has not matured. With gas stations on nearly every street corner, it is no wonder why consumers are more apt to buy a gasoline-powered vehicle versus a car powered by biofuels. Nicholes agrees that these are valid barriers for eco-friendly products. Additionally, in regard to green driving, Nicholes said “habit and fear of change are huge barriers that consumers face 43 McLendon, Russell. “CFL vs. incandescent: Battle of the bulb.” Mother Nature Network. 15 Feb. 2011. Web. 14 Jan. 2013. <http://www.mnn.com/earth-matters/translating-uncle-sam/stories/cfl-vs-incandescent-battle-of-the- bulb>. 44 Bonini and Oppenheim, 2008. 45 Bonini and Oppenheim, 2008. 17 when it comes to considering an electric vehicle or alternative fuel vehicle.” 46 These barriers place the pressure on companies to not only make and market the products, but now also “to move customers through the entire purchasing process—from being aware of eco-friendly products, to considering their pros and cons, to paying for the products.” 47 What’s more, a majority of consumers do not let a product’s eco-label sway their purchasing decision: Only six percent of consumers consider a product’s environmental impact as a main factor in their decision to purchase it, behind past experience, price, brand recognition, peer recommendation, and convenience. Brand preference leads to green purchasing behavior when there is strong consumer recognition that the brand represents a green product. 48 Since a product’s environmental impact holds little weight in the average consumer’s purchasing decision, it is up to the companies to build products that offer more than conventional products and it is up to the communications teams to show the benefits to the consumer. The auto industry is no exception. How green is shaping the auto industry Up until recently, the term “electric vehicle” was used interchangeably with “Prius.” After about five years on the market, the Toyota Prius started to become a household name. Those who drove a Prius were able to claim environmental bragging rights with their green vehicle that produced less than four tons of emissions per year on average, compared to conventional four-door sedans of that time that were producing anywhere between five to seven 46 Nicholes, 2013. 47 Bonini and Oppenheim, 2008. 48 Bahn and Wright, 2001. 18 tons of emissions per year on average. 49 With more electric vehicle options on the market today, consumers now have the chance to buy into even lower or zero emissions vehicles, like the Chevy Volt or Nissan LEAF. Even with these new advancements and considerable federal, state and local incentives, the green car industry has not seen nearly as much growth as is needed to make a significant impact on overcoming the environmental issues that the world faces. To overcome perceived slow sales growth, the automotive industry has looked to advertisers and marketers to boost sales. The series of GM EV1 print advertisements from 1996 shown in Figure 3 (page 23) expressed some of the benefits of the electric vehicle such as environmental responsibility, speed and silence. However, the advertisements did little to communicate the benefits of driving an all-electric vehicle, such as convenient home fueling, cost savings and the fact that it was a fun car to drive. Similarly, Figure 4 (page 23) shows a series of print advertisements for the third-generation Toyota Prius, highlighting the environmental benefits the vehicle offers, but does not mention any reward for the consumer. The print advertisement for the battery electric Nissan LEAF in Figure 5 (page 24) also focuses on the environmental benefits of driving electric, such as zero tailpipe emissions and zero gasoline, but not the consumer benefits. According to some researchers: The objective of green advertisements is to influence consumers’ purchase behavior by encouraging them to buy products that do not harm the environment and to direct their attention to the positive consequences of their purchase behavior, for themselves as well as the environment. 50 While EV advocate Nicholes might agree with this statement, she realizes that not every consumer is as concerned about the environmental benefits as she is. As the former president of 49 “Fuel Economy Compare Side-by-Side.” U.S. Dept. of Energy, n.d. Web. 27 March 2013. 50 Rahbar, Elham and Nabsiah Abdul Wahid. “Investigation of green marketing tools’ effect on consumers’ purchase behavior.” Business Strategy Series 12.2 (2011): 73-83. Print. 19 Plug-In America, a non-profit organization aimed at building awareness for electric and other alternative fuel vehicles, Nicholes has seen first-hand the skepticism that troubles the EV industry today. In her opinion, when it comes to advertising and marketing electric vehicles, the rewards for the consumers should be emphasized: If the car is represented as just some granola car and some way to be green, it won’t work for the average consumer. If it seems like an obligatory car to make the world a better place, while it may be valid, it won’t sell the car. 51 As shown in Figure 6 (page 24), Chevrolet has taken a different approach to advertising its extended range electric vehicle, the Volt. Similar to the advertising efforts of the EV1 (the Volt’s all-electric predecessor), Chevy emphasized the performance of the Volt by mentioning its 150- horsepower electric motor. Performance, for some consumers, can be considered a personal reward. Although the message is not blatant, it is evident that Chevy is trying to steer away from advertising the Volt as a “granola car.” Before developing a campaign for an electric vehicle, other automakers’ advertising and marketing teams should always consider the notion that consumers are more concerned in finding out “what does this electric car save me?” and less concerned with learning “how can this electric car save the Earth?” Marketing Strategies—Good and Bad EV advocate Jeff U’Ren lives in Los Angeles and works in film production. In the 1970s and 1980s, if someone paid him to drive an electric car he would likely still choose to drive a muscle car. Today, he has a different outlook on electric vehicles. In fact, he has two Chevy Volts parked in his garage and used to be the proud lessee of a GM EV1 from 1997 to 2000. What changed his mind about electric vehicles? He claims it was sitting in his friend’s EV1 and 51 Nicholes, 2013. 20 actually driving it. 52 This is the experience that many researchers and now automakers are calling “butts in seats”—and it works. According to Green Car Reports, “it turns out the best way to make people aware that electric cars are now a viable option is to let them get in the cars and drive them.” 53 Like U’Ren, Nicholes was introduced to her first electric vehicle through a friend who drove an EV: I was absolutely in love with it before I even got out of the parking lot. I loved the silence, I loved the pep, I loved the effortless forward momentum, I loved the lack of vibration, I loved everything about it. I especially loved taking off from stop lights—and seeing some guy in a Porsche coming up next to me and thinking he could take me. Not a chance. I fell in love with speed and I fell in love with speed without tailpipes. It is hard to explain to people what driving electric is like because it is an entirely different driving sensation and it startles them. It’s hard to communicate it to your average consumer. You’ve got to either get their butts in the passenger seat, or even better, hand them the keys. It’s life changing. 54 In order to increase sales, automakers are looking for ways to increase their butts-in-seats metric. They are now taking their vehicles to community events and offering up test drives in their all new electric vehicle lineup. Some automakers, like General Motors, are going even further with test drive programs that allow average consumers the opportunity to drive a loaner electric vehicle for up to a week so they can see firsthand how the vehicle will fit into their daily lives. 55 Similarly, many EV drivers are offering up their own vehicles to their friends and family 52 U’Ren, Jeff. Personal interview. 27 Dec. 2012. 53 Voelcker, John. “How to boost electric-car sales? Get ‘butts in seats,’ experts say.” Green Car Reports. 11 Dec. 2012. Web. 11 Dec. 2012. <http://www.greencarreports.com/news/1081045_how-to-boost-electric-car-sales-get- butts-in-seats-experts-say>. 54 Nicholes, 2013. 55 Barthmuss, Dave. Personal interview. 9 Jan. 2013. 21 to test drive. U’Ren is one of those drivers. He hands over the keys to his Chevy Volt all the time, as if he were a Volt salesman. According to him, “getting butts in seats” is one of the best ways to show the benefits of driving electric: I think the greatest marketing strategy is that every Volt that gets leased or purchased makes a potential Volt salesperson. Because the product is so fantastic, every person that leases or buys the Volt becomes an automatic salesperson. And I see it happen all the time with the Volt. 56 While this strategy has seemed to work for General Motors and other automakers, U’Ren believes the typical “save the world” advertising for electric vehicles can only hurt sales. After seeing his fair share of electric vehicle commercials that solely advertise environmental benefits, U’Ren took matters into his own hands. He created his own Chevy Volt video testimonial about driving a vehicle with a plug. Through this amateur video, U’Ren hoped to drive home the point that electric vehicles are fun and plugging them in is easy. 57 This type of messaging, if shared with the masses, could help put to rest many of the myths surrounding the impracticality of driving an electric vehicle. Strategies for selling electric vehicles to future generations Another challenge facing automakers is appealing to younger audiences, such as the Millennial generation. As the current driving audience ages, automakers will continue to look for ways to reach newer driving audiences. Millennials will prove to be a key market for electric vehicle sales and automakers will be required to meet a variety of wants that this generation not only appreciates, but also demands. According to former Vice President of Global 56 U’Ren, 2012. 57 Read, Richard. “What's Wrong With Chevy Volt Ads & How To Fix Them.” Green Car Reports. 7 Feb. 2012. Web. 14 Oct. 2012. <http://www.greencarreports.com/news/1072659_whats-wrong-with-chevy-volt-ads-how-to- fix-them>. 22 Communications at GM, Steve Harris, consumer behavior when it comes to automobiles is rapidly changing. 58 Automobiles are not seen as the “must-have” item, and many younger people look for ways to get from point A to point B without having to purchase a vehicle. Public transportation, biking, car sharing and walking are all becoming popular transportation alternatives for Millennials, according to Harris: I really think that people’s perspectives of their cars today have changed and will continue to change. Younger generations don’t seem to attach the same importance to their cars as my generation and my parents’ generation did. It’s not that there aren’t a lot of younger people that don’t aspire to have a car, but many of them don’t see the value in having a car and would rather spend their money on other things. 59 According to research from the University of Michigan, “thirty years ago, nearly half of 16-year- olds had a driver’s license, their passport to independence. By 2010 that figure had dropped to 28 percent.” 60 Perhaps one of the most significant reasons for this shift in thinking, according to research, is the smartphone—the modern teen’s symbol of independence and connection to friends. This has created serious implications for the auto industry and calls for major changes to be made in the way that automakers build and market vehicles for new, young drivers. Those who do want to purchase a vehicle will be drawn to cars that offer just as much inside as they do on the outside. Many consumers are becoming more captivated by the interconnectivity of vehicles on the market today. Bluetooth and OnStar connectivity, satellite radio and the ability to access the Internet from a vehicle is certainly enticing. All of these 58 Harris, Steve. Personal interview. 15 Jan. 2013. 59 Harris, 2013. 60 Hirsch, Jerry. “Who needs a car? Smartphones are driving teens' social lives.” Los Angeles Times. 15 March 2013. Web. 15 March 2013. <http://www.latimes.com/business/autos/la-fi-hy-autos-teen-driver-20130316- 1,0,2937657,print.story>. 23 technological additions will likely be just as important to younger consumers as is horsepower and torque. Younger consumers will expect more for less, and it will be up to the automakers to meet expectations and produce high-performing, technologically advanced vehicles with an affordable sticker price. 24 Figure 4: Print advertisements for the third-‐generation Toyota Prius. Figure 3: Series of print advertisements for GM's 1996 electric vehicle, the EV1. 25 Figure 5: Print advertisement for the battery electric Nissan LEAF. Figure 6: Print advertisement for the extended range electric Chevrolet Volt. 26 Chapter Three: A History of Putting the World on Wheels “For too many years, Detroit companies' primary tactic for fighting back has been to shift consumers' attention to the future, while leveraging their past as a sentimental weapon that they have used to obscure the deficiencies of the present.” -Micheline Maynard Author of “The End of Detroit” General Motors has long been known for its role in the American economy, for creating the “American middle class” and for pushing the boundaries in respect to design, engineering and vehicle production. High sales of American-made vehicles bolstered the American economy and showed the strength of America’s big three: GM, Ford and Chrysler. For decades, GM, along with Ford and Chrysler, dominated the automobile industry in the U.S. with little fear that the American automobile dynasty would ever meet its match. That was until 1958, when foreign imports hit the American market and forever altered the way U.S. automakers operated. Early history and culture of General Motors At the turn of the 20 th century, General Motors Company was introduced to the American people by way of William Durant and Buick Motor Company in September of 1908. Soon after, GM acquired Cadillac, Oldsmobile and Oakland (what is now referred to as Pontiac). Just years later, GM added the legendary Chevrolet brand, along with Opel and Vauxhall based in Germany and the United Kingdom, respectively. Many of the early leaders at GM pioneered the concepts that have shaped what consumers of today know the auto industry to be. Yearly models, personal financing and concept cars can all be traced back to General Motors and its early innovators, such as Alfred P. Sloan and Harley Earl. In the early 1900s, automobiles were largely powered by steam and electricity. However, with major technological advancements in the internal combustion engine and an abundance of petroleum, automakers were able to produce gasoline-powered engines that would appeal to 27 consumers for their low cost and fueling convenience. 61 While the early years of General Motors were focused on producing a reliable motor vehicle that could compete with the Ford powerhouse, the 1930s and onward were dedicated to making beautifully designed cars that turned heads when they passed by. Automobiles became less of a luxury and more of a necessity, and owning a brand new automobile became revered. From a marketing and communications perspective, it was clear to then CEO of General Motors, Alfred Sloan, that the automaker needed to focus on the desire to have a brand new GM vehicle every few years or, better yet, every year. Perhaps most importantly, “Sloan decreed the company should never lose a customer. When the buyer outgrew a car on one level, he could move up a notch. The ultimate goal, naturally, would be to climb to the top of the ladder.” 62 An automobile for every purse and purpose was the early mantra of General Motors, and it has largely been carried on into the modern era. By 1939, times had changed. The Second World War was just underway and, in 1941, America was deeply involved. American families all across the nation were struggling to make ends meet and many mourned the loss of loved ones in the war. General Motors sprang to action and “supplied the Allies with more goods than any other company.” 63 GM factories went from producing shiny automobiles for the average consumer to producing resources and materials for warfare. Considering GM’s war contributions, it was no surprise that in 1940 “former GM president William Knudsen was chosen by President Roosevelt as Chairman of the new Wartime Office Production Management” and that by 1942 “one hundred percent of GM’s production was 61 Who Killed the Electric Car?. Dir. Chris Paine. Sony Pictures Classics, 2006. Film. 62 Holstein, William J. Why GM Matters: Inside the Race to Transform an American Icon. New York: Walker & Company, 2009. Print. 63 “History and Heritage.” General Motors Website, n.d. Web. 20 Oct. 2012. 28 in support of the Allied war effort.” 64 This equaled $12 billion worth of war materials including airplanes, trucks and tanks. 65 General Motors saw America through the bad times and was the first to point out its war contributions to the American people. In 1945, when WWII ended, it was clear that the experience had taken its toll on the country and its citizens. A sense of patriotism and pride surfaced because of the war, which undoubtedly helped stimulate the American economy and help GM go back to selling automobiles once again. 1950s-1960s: Mid-century dominance In the 1950s and 1960s, General Motors was faced with competition from both American automobile companies and foreign imports. This competition prompted GM to up the ante and expand its market share. In 1955, General Motors became the first company in America to pay taxes for $1 billion in profits. 66 According to an article by TIME magazine published in November of 1955, “never before in history has one corporation made so much in so short a time. In fact, after just three-quarters of 1955, GM's profits amounted to a staggering $912,887,537, or more than it had ever earned in the whole of its best previous year (1950: $834 million).” 67 This postwar boom helped GM recover all of its losses from the war, and much more. In these postwar years, “annual U.S. auto and light truck sales climbed from 7.7 to 11.3 million,” 68 and so the race to gain market share began. GM was looking for ways to beat their competition and gain market share so it began offering a variety of models for each brand. In 1950, Chevrolet only had one standard model with different trim levels, but by 1969 Chevrolet increased 64 “History and Heritage.” 2012. 65 “History and Heritage.” 2012. 66 “EARNINGS: Past the Billion Mark.” TIME Magazine. Time Magazine Online Archive, 7 Nov. 1955. Web. 12 Dec. 2012. <http://www.time.com/time/magazine/article/0,9171,807967,00.html>. 67 “EARNINGS: Past the Billion Mark.” 1955. 68 Crumm, Thomas A. What is Good for General Motors? Solving America’s Industrial Conundrum. New York: Algora Publishing, 2010. Print. 29 spending to be able to offer “six and a half models: the standard Chevy, plus the Corvette, Corvaire, Nova, Camaro and the Chevelle with an offshoot called a Monte Carlo.” 69 GM also began releasing model changes each year that enticed consumers with the desire to have an improved and newer version of the same car they loved. Not all automakers were able to afford offering a variety of models nor were they able to afford the increased spending for annual model changes: The extent to which models were changed each year spirited higher-income consumers into a game of keeping up with the neighbors… The intent of the scale race was to drive competitors out of business, and it worked. Studebaker, Kaiser Motors, Packard, Hudson, and Willys would close their doors forever. Just four percent of the market remained in the weakened hands of American Motors, International, and Jeep. 70 This “grow only in assembly and power-train capability” mentality would later come back to haunt GM. 71 Enter Toyota and Datsun—foreign imports from Japan that promised higher fuel efficiency and competitive prices. 72 In 1958, foreign automakers entered the American automobile industry with a completely new way of thinking: The initial Asian growth objective was to attract used-car buyers away from the Big Three. Prices on imports were set to match a two- to three-year old used car. Asian imports were advertised as an opportunity to purchase new with a two-year warranty at a used-car price. They established a beachhead in America; their 69 Crumm, 2010. 70 Crumm, 2010. 71 Crumm, 2010. 72 Vlasic, Bill. Once Upon a Car: The Fall and Resurrection of America’s Big Three Automakers—GM, Ford, and Chrysler. New York: HarperCollins Publishers, 2011. Print. 30 strategies included careful introductions of dealership and well-developed systems for getting cars to loading docks in Japan, aboard ships, onto unloading docks, and aboard rail transport systems that would carry them into the states from Vancouver and other West Coast ports. 73 While American automobile makers were focused on attracting new car buyers, foreign automakers wanted to get the attention of budget-conscious used car buyers. The imports were cheaper, more fuel efficient and offered more to the consumer than a two- to three-year old American-made used car. This strategy would help Asian automakers enter the American auto industry with ease and without having to go head-to-head with American automakers’ key market. Once Americans were introduced to the cheaper, reasonably well-made and more economical Asian imports, there was little that could slow their popularity. Soon after, American automakers were forced to outsource component manufacturing due to higher labor costs in the United States. This meant that not only were American automakers losing market share to imports, but they were also now “losing share of the value added work.” 74 Similarly, “negative growth was also evidenced by increasing capital expenditures for automation without more than offsetting reductions in operating cost.” 75 With imports growth from near zero to 1.1 million, it was clear that GM’s brand reputation and image—which had taken sixty years to establish—were being challenged by the rookies. 1970s-1980s: Import Infiltration Into the 1970s and 1980s, GM continued down the same path of focusing on gaining more and more market share by expanding each brand and making bigger vehicles. GM was not able to turn a big profit on smaller vehicles, so most time and energy spent was toward 73 Crumm, 2010. 74 Crumm, 2010. 75 Crumm, 2010. 31 improving light duty trucks (notorious gas guzzlers), while foreign imports took increasingly large chunks of the passenger vehicle market. 76 Continuing down the same path meant trouble for GM and the other two American automobile giants, Ford and Chrysler: When the second hiccup in oil supplies appeared in 1979, America’s Big Three were already on record as having done poorly in their attempts to design and develop small fuel-efficient automobiles…The Asian designers spent the six years between oil shocks working on upscale versions of their original entrants without changing the model names. The second wave of fuel-efficient vehicles from Asia could not have been better timed. Caught once again without an alternative to offer, the Big Three leaned on their foreign operations and imported small cars designed for other lifestyles and very different streets. The Asian designers were one design generation ahead of the Big Three. Sales of imports in 1979 climbed to 2.3 million and 17 percent market share. The German portion remained stable at 0.3 million, while the Japanese imports climbed to 1.6 million. 77 GM’s inability to learn from the first oil supply scare in 1973 gave its biggest opponent—the import brands—a definite advantage in the marketplace. Because of this second oil supply scare, GM had no other option but to take a lesson from the imports and build better performing and more fuel efficient vehicles. This meant changing over the entire American fleet to front-wheel- drive (FWD) and body-frame-integral (BFI) structures for better fuel efficiency and a lighter frame that offered the same integrity. GM wanted to imitate the foreign import vehicles that were selling so well. Unfortunately for GM, the changes did not come soon enough. It did not release its first FWD-BFI vehicle until years later in 1983 because “design and development had been 76 Harris, 2013. 77 Crumm, 2010. 32 expensive and the production acceleration was slow.” 78 This type of poor planning was not only apparent in the 1960s and 1970s, but it continued well into the 2000s. According to American political activist Ralph Nader, GM’s motto for decades has seemed to be: “going backwards into the future.” 79 1990s-2000s: Steady as she goes In an interview with Steve Harris, he noted that it was difficult for GM to be nimble due to its size: GM is huge. It’s such a large organization and the way it’s structured makes it hard for change to occur. People use the analogy, ‘it’s like trying to maneuver a battleship in a river.’ 80 Sailing into the 1990s, GM made several leaps to establish itself as a leader in advanced technology and innovative design. One of GM’s newer brands, Saturn, was made to appeal to a younger generation and small car buyers. The advertisements for Saturn painted the brand as a different kind of car company—one that hoped to make GM relevant again in an extremely competitive marketplace. Then GM vice chairman Bob Lutz believed that Saturn was the answer for the company at the time. 81 The 1990s saw a push toward electrification in vehicles with the Impact prototype, which later evolved to become the EV1, an all-electric two-seater coupe with futuristic styling and a range of approximately 100 miles. Although the EV1 was not tied to one specific brand, it was leased in Saturn dealerships in California and Arizona, and helped build Saturn’s reputation as being a brand of the future. The EV1 lease program, which was eventually 78 Crumm, 2010. 79 Who Killed the Electric Car?. 2006. 80 Harris, 2013. 81 Taylor III, Alex. Sixty to Zero: An Inside Look at the Collapse of General Motors—and the Detroit Auto Industry. New Haven: Yale University Press, 2010. Print. 33 terminated in 2000, would become a turning point for the automaker that would push it further away from the future and back into the past. Instead of continuing to advance the technology in its vehicles, the company would focus on building larger cars that helped turn profit faster. No matter the failures, the automobile giant could not turn back and ultimately continued down its same path—steady as she goes. Global expansion was a big trend in the 1990s with “annual vehicle sales outside North America exceeding three million units for the first time.” 82 GM formed a joint venture agreement in China in an effort to expand its market, a move that has proven to be highly profitable for GM. Back home in the USA, General Motors was still suffering from the impact that the introduction of small passenger vehicles from foreign automakers had on the market. A trend toward light duty trucks and the popularity of sport utility vehicles (SUVs) among families kept GM alive and reasonably well through the 1990s and into the early 2000s. Even with advanced vehicle technology and the ability to mass produce alternative fuel vehicles—or at least incredibly fuel efficient cars—from the early 1990s to the late 2000s, consumers demanded large, gas guzzling SUVs, trucks and vans. The more seats, cup holders and pistons, the better: The technological and engineering leaps of the last two decades have been poured into everything but fuel economy, according to the EPA’s statistics. Since 1981, the average vehicle has 93 percent more horsepower and is 29 percent faster in going from 0 to 60 miles an hour. It is also 24 percent heavier, reflecting surging sales of sport utility vehicles. 83 82 “History and Heritage.” 2012. 83 Hakim, Danny. “Fuel Economy Hit 22-Year Low.” New York Times. 3 May 2003. Web. 12 Dec. 2012. <http://www.nytimes.com/2003/05/03/business/03FUEL.html> 34 In the background, drastic changes were being made, but so were bad business decisions. From impractical healthcare benefits and unsustainable high wages for production line workers, to a handful of low-performing brands, GM was digging itself into a hole—a deep hole. 84 Yet the captains of GM were persistent—steady as she goes. The years leading up to the Great Recession were trying for the automobile industry— both the American automakers and their foreign counterparts. Harris likens car production to gambling. Predicting which vehicles will be successful is almost impossible. He claims that, “when you’re running a car company, you’re making billion dollar bets. And often times these automakers make losing bets—it’s when these companies make a series of losing bets that it becomes a problem.” 85 Unlike Ford, GM was not able to forecast just how big of a fall the economy would take and the impact it would have on its business. Ford realized it was in trouble just in time and was able to borrow money through normal lending practices. According to Harris, GM was not so lucky: Ford got in trouble before General Motors and so they went to banks and other lending institutions and borrowed $30 billion leveraging everything they owned, including their name. They received money to continue to operate and make changes. Whereas GM, by the time they realized how bad of shape they were in, those normal lending opportunities were not available so GM’s only course of action was to go to the government and then the government decided that the only course of action was to put the company into bankruptcy. 86 84 Harris, 2013. 85 Harris, 2013. 86 Harris, 2013. 35 General Motors and Chrysler were forced to go before Congress and “beg” for help. 87 Just months before, other companies also had to resort to asking the federal government for financial assistance. The difference, however, was that GM and Chrysler were required to testify in public hearings before Congress while other companies that received federal financial assistance, like AIG, were able to go to the government privately. Congress wanted answers from GM. They wanted to know “why GM and the rest of Detroit didn’t make the kind of cars that the American people need and want” and why “the world’s largest automaker seemed particularly inept at making passenger cars and hadn’t produced a bona fide hit in years.” 88 GM didn’t have an answer. The federal government’s solution was to put the automaker into a quick bankruptcy, as opposed to the standard one- to two-year bankruptcy process. Harris, who helped lead the company through the bankruptcy from a communications perspective, said that the situation was one that he never would have been able to truly prepare for due to its unconventional characteristics: The government pushed the company through the bankruptcy period in about 30- 60 days, which was unheard of for bankruptcies of that size, and provided GM with the money to sustain the company at the other end. It was a highly unusual situation—and a lot of people were hurt in the process from shareholders to dealers to suppliers. Without government help, it would have thrown 500,000 to one million people out of work. The Obama administration decided that it was not worth the risk to let GM go under without help. 89 87 Harris, 2013. 88 Taylor III, 2010. 89 Harris, 2013. 36 The federal government will step away from the GM bailout at an estimated cost of $49.5 billion. 90 Some critics believe that the company should have seen the warning signs in 2005, to which Harris responds that “hindsight is 20/20.” Taxpayers are rightfully upset about having to spend their taxpayer dollars to bail out an auto company. Harris thinks that the GM bailout would not have caused so much uproar had it happened during another time in GM’s history when Americans valued the company more. He believes that in recent years GM had forgotten one of its most important communications strategies: One of the key learnings was that in GM’s early years—through the ‘50s, ‘60s, ‘70s and even into the ‘80s—GM spent a lot of time telling people their role in the American economy and being very active at the community level where their dealerships and factories were. People like my parents and, to a large extent, those in my generation, understood what GM contributed to the U.S. economy. So when we got to the bankruptcy period, we looked behind us and quickly realized that there were few people left that appreciated, respected and loved GM for what it had done to help the U.S. We had done a poor job and had walked away from that American pride communications that was so evident in GM’s early years. 91 Perhaps the bankruptcy and bailout was a blessing in disguise for General Motors—there was no more room for excuses. No longer could GM continue the steady as she goes attitude. If progress was not being made, GM would be held responsible for changing courses quickly to get the company back on track. Congress and the American people demanded change and it was up 90 Schroeder, Peter. “Treasury announces plans to end GM bailout.” The Hill. 19 Dec. 2012. Web. 19 Dec. 2012. <http://thehill.com/blogs/on-the-money/banking-financial-institutions/273677-treasury-announces-plans-to-end-gm- bailout>. 91 Harris, 2013. 37 to General Motors to make it happen. After all, the American economy and the survival of the automobile industry depended upon it. 2009-Present: A “New” GM and the Role of the Volt The year 2009 would mean the death of the “old” GM and the birth of the “new” GM. Under completely new leadership and the eagle eyes of the federal government, General Motors worked to become a leaner company. Through the closing of several production plants, the restructuring of its labor contracts and the dissolving of four of its brands, GM was able to cut costs and focus on building better products that would resonate with consumers. All of the above, coupled with positive communications, had the potential to turn GM around: If GM was to get any kind of positive reception on Capitol Hill and in the White House, it needed a powerful message. It could not come limping in and begging for a bailout. GM had to represent progress, innovation, and a bright future. That’s where the Volt came in. It was the one car that GM had that nobody else had, and the perfect blend of electric power and consumer convenience. When the battery ran down, a little motor kicked in and kept it going. What could be smarter than that? 92 The Chevrolet Volt was produced with the idea that General Motors needed a game changer, something that could rival one of the best-selling passenger vehicles in the market, the Toyota Prius. The extended range electric vehicle was unlike any other electric vehicle ever released. For the first 40 miles the vehicle could run off of battery charge. After that, the electric motor would seamlessly call for energy supply from the onboard gasoline generator that would supply electricity to the motor, allowing the vehicle to go an extended 340 miles. Even without the 92 Vlasic, 2011. 38 battery charge, the Volt could provide competitive fuel efficiency—approximately 40 MPG on the gas generator alone. For those consumers who preferred conventional gasoline vehicles, General Motors updated all of its models with styling and detail that could challenge a foreign import any day. Now operating under a new cost structure, GM “is designed to break even with industry sales at ten million cars and trucks a year” instead of the 16 million units it used to take to break even. 93 Additionally, in 2010 the company was able to raise $20.1 billion through its return as a public company with shares traded on the New York Stock Exchange. 94 Despite this success, it is fair to say that not everyone will agree with how the federal government and General Motors handled the situation: There are plenty of critics who maintain GM should have been left for dead and not bailed out at taxpayers’ expense. Others argue that to have done so would have cost the government even more in the long term. But what’s been lost in the debate is the importance of GM to the American psyche. As the IPO demonstrated, that link is alive and well. 95 The progress is continuing for the new General Motors and soon the federal government will sell off all of its shares in the company and hand back over complete control to GM. Without a government hand in the company, some wonder if General Motors will be able to return to its former powerhouse status. 93 Taylor III, 2010. 94 Baldwin, Clare and Soyoung Kim. “GM IPO raises $20.1 billion.” Reuters. 17 Nov. 2010. Web. 28 Dec. 2012. <http://www.reuters.com/article/2010/11/17/us-gm-ipo-idUSTRE6AB43H20101117>. 95 Kirby, Jason. “America’s Company: General Motors’ comeback is about more than cars—it has come to represent hope in the U.S. economy.” Maclean’s. 6 Dec. 2010. Web. 28 Dec. 2012. <http://www2.macleans.ca/2010/12/02/americas-company/>. 39 A Legacy of Powering the Motor City and Symbol of Patriotism The early philosophy and strategy behind General Motors was to produce a vehicle “for every purse and purpose.” To this day, it is evident that the same philosophy and strategy holds true with vehicles ranging from the Cadillac Escalade (eight-seater luxury vehicle starting at $63,000) to the Chevy Spark (five-seater youthful subcompact hatchback starting at $12,000). Early innovation branded GM as a leader in design and technology, with the 1927 Cadillac LaSalle surpassing its iconic competitor, the Ford Model T, in design and performance. During this time it became clear that cars were no longer just a means to get from point A to point B— they had become deeply rooted in the American culture and psyche. Since the beginning, GM has made it known just how much the auto company contributed to the American economy through job creation, charitable donations and technological advancements. Charles Erwin Wilson, who served as president of GM in the 1950s and as the Secretary of Defense for the United States of America, believed that because General Motors was such a big company that contributed so much to and relied so heavily on the American economy, “what was good for our country was good for General Motors, and vice versa.” 96 While Wilson’s words have been misquoted and criticized over the years, there may be some truth to his statement. GM has long been known for fueling the American economy through job creation. GM has helped the red, white and blue in times of need and turned its automobile manufacturing plants into war production factories to supplement WWII efforts. As one of the largest companies in the United States of America that employs more than 200,000 workers with more than 21,000 dealerships, it is understandable that when the American 96 Quinn, James. “As General Motors Goes, So Goes the Nation.” The Cutting Edge. 3 March 2009. Web. 12 Nov. 2012. <http://www.thecuttingedgenews.com/index.php?article=11128>. 40 economy takes a turn for the worst, GM is likely to be impacted. Similarly, when GM finds itself in troubled times, the American economy and morale suffers. 41 Chapter Four: The Past as a Model for the Future? “All that was great in the past was ridiculed, condemned, combated, suppressed—only to emerge all the more powerfully, all the more triumphantly from the struggle.” -Nikola Tesla, inventor of AC electrical supply system used in the Tesla Roadster The year 1996 re-introduced Betty Rubble to Americans as a Flinstone vitamin, honored the Yankees’ Derek Jeter as American League Rookie of the Year, and brought the arrival of the first mass-produced electric vehicle of the modern era, the EV1. In 1996, Jeff U’Ren was working at NBC Studios in Burbank, California. A friend of his, Emmy award-winning video and film editor Kris Trexler, was driving one of the first production EV1 vehicles as a part of GM’s limited production EV1 lease program. Trexler was enamored by his EV1 and let U’Ren test drive it. On June 14, 1997, U’Ren leased his very own EV1—a day he claims forever changed his life and his perspective on driving: I had muscle cars when I was growing up—I had a ’65 GTO that was built for racing and it had a 485-horsepower engine in it. I had a Pontiac Formula 400 Firebird. And when I was a young adult, I drove a BMW. I liked stylish cars, and cars that were fun to drive. So when I got the EV1 it had a new kind of style to it and it was really fun to drive, but it was different than my GTO in that my GTO didn’t get more than eight miles per gallon. And the other cars I drove never got more than 14 or 15 miles per gallon. I lived through the gas embargo of 1973 and I was working at NBC in Burbank when we went to the odd-even day gas rationing and it became hard to get to work because you had to sit in line to buy gas. That drove home the point that we were all slaves to gasoline. We needed gasoline to go to work. We needed gasoline to do everything. We needed this one fuel for this one mode of transportation for our entire lives to do everything. It 42 changed my view of automobiles and made me think: “Well, what do I really use my car for?” And I used mine mainly just to drive to work and during that time I was driving from San Juan Capistrano to the valley and back. I was pounding the same pavement every day and all I really needed was something that was not monotonous and that was fun to drive. And why not do it as cheaply as possible? 97 The GM EV1 was based off of a concept vehicle—“Impact”—which was introduced to media and influencers, such as Ronald and Nancy Reagan, in Los Angeles, California, on January 3, 1990. The Impact, an all-electric vehicle powered by lead-acid batteries, was part of a test drive program called “Impact Drive” where fleets of the electric vehicle were taken to 11 cities across the nation to give more than 700 consumers the opportunity to drive the vehicle for two- or four-week periods as if it were their own and provide candid feedback. At the introduction of the Impact in California, then Chairman Roger B. Smith seemed to express concern in his address to attendees by saying he wanted to both raise expectations and lower expectations for the Impact. In raising the audience’s expectations, he explained the technological advances of the vehicle from its performance capabilities to the environmental advantages of electric vehicles. The electric vehicle had the potential to change the world. In lowering the audience’s expectations, Smith pointed out that the vehicle was only an experimental vehicle and that there were several reasons why it was not ready for mass production, including: • Lack of charging infrastructure • Undetermined business plan 97 U’Ren, 2012. 43 • Long-term reliability and safety concerns • Lack of a sufficient and clean electric power source • Questionable consumer interest and demand • Higher costs to drive electric in comparison to conventional gasoline vehicle due to battery technology o Likely battery replacement every two years at an estimated cost of $1,500 per replacement would raise the vehicle’s operating costs to be twice as much as a gasoline-powered vehicle 98 Despite these concerns, General Motors continued to pursue the electric vehicle’s potential as a feasible, mass marketable product. Six years later the Impact prototype evolved into the EV1. As a limited lease-only program, the EV1 was GM-badged and available at a handful of Saturn dealerships in Los Angeles, Phoenix and Tucson. According to marketing materials released in the original EV1 media kit, the target customers were “affluent, college graduates, between the ages of 35 and 54 years old, with a household income of more than $125,000.” 99 As part of the EV1 lease program, GM deployed a team of EV1 specialists whose sole job was to boost awareness of the vehicle, offer 24-hour support to lessees, and market the vehicle using more intimate, grassroots tactics such as test drives and community event involvement. This program was the first in GM history to have its own dedicated marketing and servicing force, called the Electric Vehicle Marketing Services (EVMS) team. Dave Barthmuss, who currently leads the communications team for the West Coast—GM’s largest U.S. region—noted that the EVMS team proved to be successful during the lease program, but created unrealistic expectations for future programs. According to Barthmuss in a personal interview: 98 Smith, Roger B. “Introduction of Electric Car.” Beverly Hilton Hotel, Los Angeles, CA. 3 Jan. 1990. Press Conference. 99 EV1 Media Information Kit. General Motors, 1996. Media Materials. 44 We had this brand new sales force that was just dedicated to the caring of EV1 drivers and we didn’t have that kind of program for Cavaliers or Firebirds. We had a 24-hour go-to person if EV1 drivers ever had any issues with their car. Once EV1 consumers experienced this kind of full-time attention, they forgot what it was like without it. 100 If ever anything malfunctioned in one of the leased EV1s, it would be replaced with another brand new EV1. And if it wasn’t clear that the EV1 was not an average car through its customer service, it would be evident in the styling and performance of the vehicle. The styling of the EV1 was what some considered futuristic. The two-seater coupe was available in red, silver-blue and dark green with all of the same features of a conventional vehicle during that time, including air conditioning, keyless entry and cruise control. Consumers were able to apply for federal, state and local tax credits that could significantly decrease the mid-$30,000 lease price of the vehicle for a three-year lease agreement. 101 Costs of operation for the EV1 were minimal considering GM’s eagerness to fix or replace a vehicle with any malfunction at little to no cost to the lessee. Additionally, with less moving parts and no transmission, the EV1 needed little more than added washer fluid and a tire rotation about every six months. After leasing his EV1 in 1997, U’Ren instantly became one of GM’s biggest advocates, sharing his EV1 experience and his car with nearly every person he encountered. The EV1, he would tell people, could travel more than 80 miles per charge, was rocket-like and stylish. No matter what U’Ren told people about the car, it was something he believes they had to experience by sitting behind the wheel and taking it for a spin. He found that this first-hand 100 Barthmuss, 2013. 101 EV1 Media Information Kit. 1996. 45 experience behind the wheel is what moved peoples’ perceptions from the EV1 being just a “novelty car” to being a “practical car.” 102 Advertising and marketing efforts were deemed useless by U’Ren because they did little to show the benefits of the EV1, such as home fueling through a standard household outlet. GM hired award-winning advertising agency Hal Riney & Partners to create a commercial advertisement of the EV1 that would capture the attention of Americans and initiate their consideration for electric vehicles. The commercial, entitled “Appliances,” begins on a stormy night that cuts power to the home. As eerie music plays, all of the electrical appliances in the house suddenly come back to life and unplug themselves to run outside and greet the newest plug-in addition to their home, the EV1. The appliances gather on the curb “as an EV1 glides up in a surrealistic scene that evokes ‘Luxo Jr.,’ a short film from 1986 about lively desk lamps; the sequences from the movie ‘Star Wars’ featuring the robots R2-D2 and C-3PO, and episodes of ‘The Twilight Zone’ in which appliances develop personalities.” 103 According to U’Ren, equating a vehicle—the second largest financial purchase for most households—to an everyday appliance did little to incite enthusiasm for electric vehicles: The original EV1 commercials represented the EV1 as a household appliance like a TV, a washer or a toaster. When I saw the commercial I thought to myself, ‘Wow, these people don’t know the car at all, do they?’ I understand that advertisers have to advertise products. But sometimes the product is so great that an advertiser could oversell it and turn people off. 104 102 U’Ren, 2012. 103 Elliott, Stuart. “Electric appliances come alive to sell their G.M. sibling, the EV1.” New York Times. 4 Dec 1996. Web. 4 Jan. 2013 <http://www.nytimes.com/1996/12/04/business/electric-appliances-come-alive-to-sell-their-gm- sibling-the-ev1.html?src=pm>. 104 U’Ren, 2012. 46 Those at Saturn Corporation, according to The New York Times, believed that the commercials should reflect a reordering of how people perceive cars. Subsequently, $8 million was dedicated to a 12-week advertisement blitz, including print ads, billboards and a website—an advertising strategy that was traditionally only used for “national introductions of prestigious cars.” 105 According to a Los Angeles Times’ letter to the editor submitted by GM’s advanced technology vehicles brand manager Ken Stewart: In California, ad expenditures for the EV1—dollar for dollar—exceeded that of many conventional vehicles, such as the Chevrolet Corvette, Oldsmobile Intrigue and Pontiac Montana minivan. In fact, the EV1’s advertising budget was ten times that of conventional models when you consider how many sales…resulted from advertising. It was perhaps the biggest launch of any vehicle in California history. 106 GM’s investment of millions of dollars into the training and development of a team of EV1 marketing specialists who traveled throughout the launch markets to create awareness of electric vehicles also set the program apart from other launch vehicles. The EV1 was the only vehicle in the GM lineup that had ever received a stand-alone marketing team. 107 It proved to create a very intimate connection between the automaker and its key targets without pressuring consumers with traditional dealership tactics. 108 It is fair to conclude that GM not only took a risk in the development, production and release of the EV1, but the automaker also took a risk in the advertising, marketing and communications of the vehicle. 105 Elliott, 1996. 106 Stewart, Ken. Letter. The Los Angeles Times. 24 May 2000. Web. 10 Jan. 2013. <http://articles.latimes.com/2000/may/24/news/hw-33295>. 107 Barthmuss, 2013. 108 Barthmuss, 2013. 47 Even though the commercial advertisements produced by Hal Riney & Partners won several industry awards and the EV1 marketing team helped bridge a gap between GM and its consumers, the EV1 itself did not prove to be a big enough success for GM to justify its continuation. Chris Paine’s documentary, Who Killed the Electric Car?, paints GM as the ultimate villain and the main reason why the electric vehicle industry died for a decade after the EV1. In all fairness, there were multiple variables that played a part in the failure of the electric vehicle industry in the late 1990s and early 2000s that even a company as powerful as GM would not be able to overcome. CHEAP GAS — When the EV1 was introduced in 1996 and throughout its lifetime, the price of gasoline rarely exceeded $1.50 per gallon. 109 According to the Center for Transportation Research at the Argonne National Laboratory, the cost savings in fueling an EV1 in comparison to a conventional vehicle was great. 110 A GM corporate website dedicated to the EV1 provided the following cost-savings breakdown: Assuming your electricity costs 10 cents per kilowatt hour, and with a 100-mile trip, energy costs for the lead-acid EV1 is 2.6 cents per mile. Therefore, a 100- mile trip in the EV1 would cost $2.60. In comparison, a gasoline-powered vehicle that gets 22 miles per gallon has an energy cost of 6.82 cents per mile (assuming gasoline costs $1.50 per gallon). For a 100-mile trip in the gasoline-powered vehicle, the energy cost would be $6.82…For the same 100-mile trip and electricity cost in a NiMH EV1, the energy cost would be 3.0 cents per mile. The 109 “California Gas Prices (from February 1996 to Present).” Energy Almanac. The California Energy Commission, n.d. Web. 4 Jan. 2013. 110 Cuenca, R.M., et al. “Evaluation of Electric Vehicle Production and Operating Costs.” Center for Transportation Research. Argonne: Argonne National Laboratory: 1999. Print. 48 22 mpg gasoline-powered vehicle therefore has an energy cost that is more than twice the NiMH EV1. 111 No matter how great the fuel savings were at the time, there simply was not a pressing need for a cheaper means of fueling. From Barthmuss’ perspective, filling up an SUV or truck in the 1990s and early 2000s with gasoline was not nearly as much of a financial burden as it is today. What’s more, the EV1 did not offer the same conveniences as its conventional opponent. There were many barriers for the average consumer, according to Barthmuss: The EV1 was a terrific car. It did everything we said it was going to do. The issue was that it was a two-seater, with about 100-mile range, took overnight to charge, and didn’t have any trunk space for groceries or soccer equipment or things of that nature. So you had to make way too many transportation trade-offs in your daily lifestyle to make this car work for you versus having a big car that could haul eight people, tow a boat and would not take that much money to fill up. 112 Barthmuss suggests that the priorities for consumers during this period in time were vastly different from the priorities of today’s consumers when looking to purchase a vehicle. Barthmuss believes what “killed the EV1 more than anything else was cheap gas.” While a consumer today may be more concerned with price and fuel economy, customers back then were more concerned about use and convenience. LACK OF CONSUMER INTEREST — As the first mass-produced “modern day” electric vehicle, GM was positive that the EV1 would be the car to change the future of driving—and then the world. 113 It was not the first time the company had ventured into the electric vehicle market. GM had fielded extensive market research into the space and conducted 111 “EV Charger News.” General Motors Corporation, 2001. Web. 19 Nov. 2012. 112 Barthmuss, 2013. 113 Barthmuss, 2013. 49 numerous focus groups to gain insight into the minds of consumers and understand their perceptions of EVs. After testing the market with the Impact prototype, GM decided to invest millions of dollars into the research and design of its sibling, the EV1, only to take it off the market less than five years later. Many electric vehicle drivers thought that the EV1 was the perfect “disruptive technology,” an improvement to an existing technology that would enter an unsuspecting market to ultimately create a new market segment and a space of its own. U’Ren believes that there is no right or wrong time for disruptive technologies, like the EV1, although some GM executives would disagree. For example, Steve Harris acknowledged: The first EV1 drivers were very passionate and I don’t for a minute deny or doubt their feelings. But they were extremely biased toward that vehicle and that kind of technology. So they didn’t see any shortcomings in that car even though there were many for an average consumer. I understand that they honestly and truly believe that that was the answer and that the vehicle should have been kept on the road. 114 For many consumers, a major benefit of driving an electric vehicle is the long-term savings. Newer, more advanced technology equals higher prices to buy or lease an EV. Over a longer period of time, the small cost of fueling and servicing an EV can bring down the initial purchase price. However, because the EV1 was only offered as a three-year lease, consumers would not be able to reap the long-term benefits of driving this electric vehicle. Thus, leasing an EV1 could have been considered high risk for many consumers without the assurance of long term savings down the road. Harris explained that while the EV1 was a hit with a handful of eco-minded consumers, it lacked widespread popular appeal, which is what it needed to be profitable and actually make a 114 Harris, Steve. Personal interview. 15 Jan. 2013. 50 positive environmental impact. 115 According to a presentation made by GM executives in 2003 regarding lessons learned with the EV1, the product taught the company that new and disruptive technologies take time to catch on, which means it takes even longer for the automaker to see value in the product and the program. 116 A decade later, this principle would resurface and serve as a foundation for business decisions. CONDUCTIVE VS. INDUCTIVE — Before electric vehicle charging stations were standardized in 2011, automakers were able to use any type of plug suitable to charge the vehicle. Thus, every automaker manufactured its own plug. This meant that an EV1 plug could not be used to charge Ford’s Electric Ranger or a Toyota RAV4 EV. A war between inductive charging versus conductive charging ensued. Barthmuss equates this war to the videotape format war between the Video Home System (VHS) and Betamax, where VHS was the ultimate winner. 117 Similarly, the California Air Resources Board (CARB) ruled in favor of conductive chargers, rendering the inductive chargers used for the EV1s useless. Unfortunately for GM, “the charging infrastructure did not fully mature or develop like we thought it would,” Barthmuss explained. 118 The charging infrastructure seen in parking garages, malls and parks is particularly important for BEVs due to limited range and no alternative onboard power source. If a person driving an EV1 were to drive beyond the range of their battery charge—more than 100 miles—and were not near their home charging unit, they would need community charging infrastructure in place to be able to get home without a tow truck. Even though CARB set conductive charging regulations into place, a majority of the 115 Harris, 2013. 116 Barthmuss, Dave. “GM EV1 and Chevrolet S10 Electric: Lessons Learned.” 15 June 2004. Microsoft PowerPoint presentation. 117 Barthmuss, 2013. 118 Barthmuss, 2013. 51 infrastructure that was already established was never updated to reflect these regulations. Until recently, community electric vehicle charging stations sat untouched due to obsoleteness. NO “INCONVENIENT TRUTH” — Al Gore’s documentary An Inconvenient Truth, which was released in 2006, started the climate change debate on a global level. Before this, however, climate change was not at the forefront of the average person’s mind. Greenhouse gases were verifiable at the time; however, the effects of them were not. Climate change and global warming were not widely accepted phenomena. Because the majority of people living during the 1990s and Y2K era were unaware of the magnitude of the greenhouse gas problem, it was a “no harm, no foul” situation. UTILITY VEHICLE INCENTIVES — A federal tax break exploiting Section 179 of the U.S. Tax Code (called the “Hummer loophole”) allowed small business owners and self- employed citizens “to expense (or immediately write off) small capital investments,” 119 such as the purchase of a luxury SUV. According to Forbes, “as part of the 2003 Bush tax cuts, the maximum Section 179 write-off was increased from $24,000 to $100,000.” 120 Even before the increase in tax credit was adopted, tax payers were able to claim significant tax breaks for purchasing large SUVs or trucks weighing between 6,000 and 14,000 pounds. These tax breaks, however, were not available to those driving smaller passenger vehicles or alternative fuel vehicles. Thus, for small business owners and self-employed workers, driving a smaller and more fuel efficient vehicle at the time was not as cost-effective. CALIFORNIA MANDATES DROPPED — In 1990, the California Air Resources Board passed the Zero-Emission Vehicle mandate, which “originally required that, starting in 119 Novack, Janet. “How To Take A 100% Tax Write-Off For A New Porsche, BMW or Cadillac.” Forbes. 8 April 2011. Web. 13 Dec. 2012. <http://www.forbes.com/sites/janetnovack/2011/04/08/how-to-take-a-tax-write-off-for-a- new-porsche-bmw-or-cadillac/>. 120 Novack, 2011. 52 1998, two percent of the in-state new light duty vehicle sales of major automakers had no emissions of criteria pollutants…the required ZEV percentage would be increased to five percent in 2001 and ten percent in 2003.” 121 This California mandate was installed to reduce emissions generated in the state. While automakers were initially onboard with the mandate, they soon became less compliant with the restrictions and demanded changes. From the automakers’ perspectives, investing more money to produce clean air vehicles just to comply with the state of California’s strict regulations seemed absurd. If nothing else, the automakers wanted a single set of vehicle standards that would be acknowledged by every state. To this day, there is no such nationwide standard. However, the automakers did win the battle in the 1990s and the California ZEV mandate was dropped. 122 The End of the EV1 The fate of the EV1 was ultimately left up to the hands of God (read GM). After each EV1 lease had ended, as stated in the contract, the vehicles were returned to General Motors. In Who Killed the Electric Car?, Barthmuss explains in an interview that each EV1 will be used in one of four ways: for educational purposes at colleges and universities; for display at museums; for further testing by GM engineers; and recycling. In the documentary, just after Barthmuss insists the EV1 “is going to be recycled, we’re not just going to crush it and send it off to a landfill,” the film cuts away to a landfill at GM’s Proving Grounds in Mesa, Arizona, containing dozens of crushed EV1s. 123 The crushed EV1s shown in the documentary (which were reportedly going through the dismantling and recycling process) angered electric vehicle advocates who 121 Collantes, Gustavo. The California Zero-Emission Vehicle Mandate: A Study of the Policy Process, 1990-2004. Diss. Institute of Transportation Studies, University of California Davis, 2006. Print. 122 Neff, John. “CARB backs off a bit on ZEV Mandate, orders 66k PHEVs sold by 2014.” Autoblog. 31 March 2008. Web. 28 Dec. 2012. <http://www.autoblog.com/2008/03/31/carb-backs-off-a-bit-on-zev-mandate-orders-66k- phevs-sold-by-20/>. 123 Who Killed the Electric Car?. 2006. 53 started a series of unsuccessful attempts at bringing down the automotive giant, claiming they were conspiring with the oil industry. Is it fair to say that General Motors holds some responsibility for the EV1 failure? Absolutely. Could GM have found a way to compromise with the lessees who so desperately wanted to keep their EV1s? Of course. Was there an auto/oil conspiracy? In the words of Pulitzer Prize winning Wall Street Journal automotive columnist Dan Neil, “I don’t believe that for a minute. GM would sell you a car that ran on pig shit if it sold.” 124 The aforementioned factors, including cheap gas, consumer disinterest, charging infrastructure wars, lack of awareness and urgency regarding global warming, availability of SUVs, dismissal of California’s clean vehicle mandates—and many more—all contributed to the demise of electric vehicles in the early 2000s. Barthmuss defends the position that there was never one lone factor that killed the electric car: There was not an oil-auto conspiracy. It was the fact that the time was just not right. Gas was a little more than a dollar at that point in time. We still had the Twin Towers in New York. We didn’t have this fascination for climate change. We didn’t have wars in the Middle East. We didn’t have $4 to $5 to $6 gasoline prices. And at that time, when the EV1 came out, it was the ‘90s—it was the most prosperous time in our history. And these new vehicles came to life—sport utility vehicles, SUVs, living rooms that drove like cars. 125 It would be these “living rooms on wheels” coupled with an array of fatal business decisions that would portend trouble for General Motors. 124 Who Killed the Electric Car?. 2006. 125 Barthmuss, 2013. 54 Chapter Five: Electric Vehicles Return with a Vengeance “"It's not a car for everyone, but it's the first step toward a new kind of car for everyone." -Mark Phelan, reporter for Detroit Free Press After Jeff U’Ren’s EV1 contract ended, he was obligated to return the vehicle to General Motors even though he loved the car and wanted to buy it. The last thing U’Ren wanted was to go back to driving a gasoline-powered vehicle. He casually looked into buying a Toyota RAV4 EV, but the styling and characteristics of the car did not fit his standards as something “fun” to drive. Soon, work became hectic for U’Ren and he needed to get on with his life: I was really pissed off at General Motors. I kind of felt like this type of thing would happen in the back of my mind because the oil companies are so powerful and gasoline cars were so popular and big corporations would want to stay with the status quo. But at the same time, the car was so popular for so many people and I thought they should have continued with the EV1 program. I thought it was so short-sided and an ignorant thing to do on GM’s part. 126 U’Ren purchased a BMW 3-Series and tried to forget about his experience with the EV1, but always felt like he had been duped by GM. In his opinion, “it was the ignorance that came from the top down that ruined GM and made them go bankrupt.” 127 Years later, after hearing so much about Chris Paine’s documentary, Who Killed the Electric Car?, U’Ren decided to watch it. He cried seeing his EV1 specialist, Chelsea Sexton, in the documentary visit the Petersen Automobile Museum to see Kris Trexler’s red EV1 on display. It was the exact same car that 126 U’Ren, 2012. 127 U’Ren, 2012. 55 inspired U’Ren to lease his own EV1. From then on, U’Ren decided to dedicate his free time to advocating for electric vehicles through Plug-In America. Following the federal government’s bailout of the once mighty General Motors, the company had no other choice but to make significant improvements to its vehicle lineup. The Chevrolet Volt, a concept car that was first introduced at the 2007 North American International Auto Show in Detroit, was GM’s promise that improvements were on the way. Unlike most concept cars, the Volt evolved into a full production vehicle that was available for purchase in late 2010. Its launch gave birth to a brand new type of EV, the extended range electric vehicle. With a small onboard gas generator, the Volt could travel up to nearly 400 miles on a full charge (40 miles) and a full tank of gas (9 gallons), and its total equivalent miles per gallon checks in at just under 100 MPGe. 128 The vehicle itself offered drivers a new alternative to the traditional hybrid vehicles like the Toyota Prius that had been on the road for a decade. It also buried the idea of range-anxiety that troubled many battery electric vehicle drivers. After the Volt’s battery charge ran dry, the electric motor would pull power from the gas generator. While other EVs, such as the Nissan LEAF, could leave a driver stranded due to battery charge depletion, the Volt never would. U’Ren was quite intrigued by the Chevy Volt when it was first introduced as a concept car, but he had not forgotten about his poor experience with GM at the end of his EV1 lease. And GM had not forgotten about him. The automaker personally invited U’Ren, and a handful of former EV1 lessees, to test drive the pre-production Volt: By the time GM invited me to drive it, I knew about the car. I even went and bought $3,000 worth of GM stock. And when I finally drove the Volt, I was just blown away. It was so far beyond the EV1 and it was so competitive with gas cars 128 “Fuel Economy Compare Side-by-Side.” 2013. 56 that I just knew it was going to be a homerun. I immediately wanted one—and I wanted one of the first ones. 129 U’Ren could see that General Motors was, in fact, a completely changed company. Even though the Volt came more than ten years after the first EV1, U’Ren believes that GM had truly learned its lesson: It was hard for people to believe, but from my perspective, GM really listened to the feedback they received from the EV1 program. The consumer satisfaction from the EV1 was really high. And as far as the Volt is concerned, I think when customers see huge efforts, no matter how effective it is, it means something. 130 Behind the scenes, not everyone at General Motors was convinced that the Chevy Volt would be a hit, but Bob Lutz sure did. Although he may have had a personal bias toward the Volt because it was his project, GM’s Bob Lutz believed the Volt would be the ultimate “game changer.” Steve Harris was in the conference room with other GM executives when Lutz pitched the idea of the Volt: While [Lutz] may have personal views about global warming, he’s also a very good businessman and realized that we were missing a market that we needed to address and that it was hurting us from a reputation and image standpoint. He thought that GM had a better idea than Toyota, which was this extended range technology. Unless battery technology gets a lot better with a battery that can truly give consumers significant range, extended range may be the best bet for most consumers. 129 U’Ren, 2012. 130 U’Ren, 2012. 57 During GM’s rebirth, the company made several bets on alternatives to gasoline-powered vehicles—not just the Volt. In 2009 in fact, “the company had eight hybrid models available for sale, and it was pushing ahead on fuel cells, biofuels, and other technologies such as hydrogen, which was used in the Chevy Equinox.” 131 GM was positive that with a new, leaner company, and a brand new electric vehicle portfolio, the automaker would be able to win back the hearts and minds of American consumers. Unfortunately for General Motors, the Chevy Volt became a political punching bag and a point of controversy for many Americans. The bailout had angered many taxpayers who did not believe the federal government should have picked up and dusted off the weakened automotive giant. President Barack Obama’s public approval of the Chevy Volt made the situation that much worse. The extended range electric vehicle became victim to political abuse and name calling (including “Obamamobile”). Soon it was clear that the name “Volt” left a bad taste in the mouths of many Americans. Consequently, initial sales for the Volt were unimpressive. It made critics question if the Volt would be a success or if it, too, would fail like its predecessor, the EV1. Stressing how different the U.S. landscape is today, Dave Barthmuss holds firm in his belief that the Volt is already a success and will continue to be: The time was just not right for the EV1. People wanted their big cars because they were cheap to drive. Today, it’s vastly different. There’s a completely different landscape. Gas is hugely expensive. We had 9/11. We’ve got people dying in the Middle East every day mainly because we’re there for oil—whether we want to admit it or not. And, of course, we know what’s happening with the polar ice caps. And that’s why EVs like the Volt, Spark and ELR have much more of a chance of succeeding today. We still have to sell these cars in big numbers to 131 Holstein, 2009. 58 have a profitable business case. But instead of limiting it to one purpose-built vehicle like the EV1, we’re spreading it across multiple platforms with multiple types of electrification. 132 Today’s Chevy Volt, in comparison to the EV1 of the 1990s, has more to offer and has a better chance for long-term success for a variety of reasons, such as high gas prices, incentives and environmental issues, among others. HIGH GAS PRICES — Since the recession, national gas prices have floated between $4 and $5 per gallon, 133 with higher prices seen in states like California—what Linda Nicholes considers a “fuel island.” 134 With continued uncertainty and instability in the Middle East and an increased dependence on foreign oil sources, Americans are looking for a cheaper alternative. Spending upwards of $50 to fill up a tank of gas hit American pocketbooks hard, especially during the recession. Now, drivers are asking themselves the same question that Jeff U’Ren asked himself in the 1990s: Why not find a cheaper means of transportation? Electric vehicles are today’s answer for many consumers who seek cheaper travel. The EV market currently makes up 3.38 percent of the total vehicle market share in the U.S., and the Volt has certainly played a part. CONSUMERS ARE PRIMED — When the EV1 was released in 1996, it was the first modern day electric vehicle to hit the market. Consumers were not accustomed to electricity powering cars. Now, “conventional hybrid electric vehicles (HEVs) have been on sale in the U.S. for over ten years, and today sales have grown to almost three percent of total light-duty vehicles.” 135 The introduction of the Toyota Prius to the market in 2000 has helped prime 132 Barthmuss, 2013. 133 “Gasoline and Diesel Fuel Update.” U.S. Energy Information Administration, n.d. Web. 3 March 2013. 134 Nicholes, 2013. 135 United States Dept. of Energy, 2011. 59 consumers to accept the idea of electrification in vehicles. This is because “the popularity of hybrids introduced thousands more people who had missed the electric vehicle era to the benefits of having electricity in cars.” 136 According to Steve Harris, the Prius’ reputation coupled with GM’s extensive communications prior to the Volt’s launch helped it gain acceptance into the market: I think that because the Volt had such a long gestation period—we publicized it, talked about it, hyped it for a long time—there was pent up demand for the vehicle, a bigger group of people that were interested. 137 Thus, the Prius and extensive publicity surrounding Chevy’s newest innovation helped increase consideration for the Volt. STANDARDIZED CHARGING STATIONS — In 2011, automakers decided to work in harmony with each other and agreed to standardize the electrical outlet for their respective EVs. 138 In doing this, automakers believe they will be able to increase consumer satisfaction and attract a larger group of interested buyers who will adopt EV technology. The tough times during the recession reiterated just how important each automaker is to the auto industry. Automakers rely on each other to stay afloat and to obtain cheaper materials from suppliers to keep the cost of vehicles down. Therefore, it was important for automakers to work together on this initiative as each of them tries to break down barriers and make the transition from gas to electric as easy as possible for consumers. ENERGY AND ENVIRONMENTAL DEBATE — Since An Inconvenient Truth was released in 2006, the issues surrounding energy and the environment have turned into a heated 136 Boschert, 2007. 137 Harris, 2013. 138 Buckley, Sean. “EV manufacturers get harmonized, agree to build a universal charging system.” Engadget. 14 Oct. 2011. Web. 3 March 2012. <http://www.engadget.com/2011/10/14/ev-manufacturers-get-harmonized-agree-to- build-a-universal-char/>. 60 world debate. Whether claims of human responsibility for global warming and climate change are true or not, the passion behind the issue was enough to push companies into becoming more environmentally conscious and produce goods that were less harmful to Mother Earth. Recent years have also seen a growth in the popularity of green labeled products creating a multibillion dollar green industry. The need for change is more evident and widespread now than it ever was. INCENTIVES FOR EVs — Government subsidies have helped significantly reduce the premium price of electric vehicles. With a federal tax credit of up to $7,500, as well as state and local incentives, electric vehicles are not much more expensive than their conventional opponents (and actually cheaper when long-term fuel savings are considered). According to the U.S. Department of Energy (DOE), these “tax incentives and other measures have been proven effective in providing the additional boost needed for mainstream consumers to choose EVs.” 139 This is essential for automakers that are looking to broaden their EV customer base from the early adopters to the mid and late majorities of consumers. Additionally, as part of a competitive program through the DOE, local governments are being seeded with funds to streamline and build EV infrastructure for electric vehicles, help convert fleets to EVs, and partner with employers to offer incentives to employees who drive electric vehicles. 140 These incentives have helped across the board—from the individual to the employer to the greater community. Defining Success for the Chevy Volt From an outside perspective, it is difficult to judge just how successful or unsuccessful the Chevy Volt is. There is much more that contributes to the success of a vehicle than sales 139 United States Dept. of Energy, 2011. 140 United States Dept. of Energy, 2011. 61 figures. For the purpose of this research, success of the Chevy Volt will be measured against three standards: sales, radiation effect and consumer satisfaction. SALES — Despite its shaky start in Model Year 2011, “GM sold a record 23,461 Chevy Volts in 2012, triple the amount it did [in 2011].” 141 Even though GM’s original 2012 projection was much higher (35,000-40,000 units sold), company executives believed GM was finally on the right track. At the end of 2012, the Volt had outsold more than half of the vehicles in the U.S. market, “ahead of industry stalwarts like the Audi A6, BMW 7-Series, Porsche Cayenne and Mercedes-Benz S-Class, and it outsold most hybrids including the Toyota Prius plug-in, Honda Civic, Kia Optima, Toyota Highlander and Lexus RX 450h.” 142 Many critics match up the Toyota Prius and the Chevy Volt, asking the question: Why isn’t the Volt selling as well as the Prius? In fact, the Prius had an incredibly rocky start—a rockier start than the Volt in its first and second years but people often forget that, according to Harris. 143 He also noted that it takes the auto industry a longer period of time to claim profits on any new vehicle, not just electric: In the auto industry, with any vehicle, the first generation is a loser in terms of profitability because of the money spent to develop it and introduce it to the market. Over time, the price comes down and the market warms up to the idea of the vehicle so the company can really start to make money by the time the third or fourth generations come out. The next generation of the Volt will be a lot more 141 Unger, David J. “Chevy Volt sales triple in year of paradoxes for electric cars.” The Christian Science Monitor. 4 Jan. 2013. Web. 5 Jan. 2013. <http://www.csmonitor.com/Environment/Energy-Voices/2013/0104/Chevy-Volt- sales-triple-in-year-of-paradoxes-for-electric-cars>. 142 Gorzelany, Jim. “Chevrolet Volt Sales Redefine ‘Failure’.” Forbes. 24 Sept. 2012. Web. 12 Nov. 2012. <http://www.forbes.com/sites/jimgorzelany/2012/09/24/august-chevrolet-volt-sales-redefine-failure/>. 143 Harris, 2013. 62 profitable because they will have learned more about the vehicle and made corrections to make it less costly for them. 144 Therefore, while the Volt may be seen as a financial loser right now, it is not much different in terms of financial success than any other launch vehicle on the market today. RADIATION EFFECT — Often times an automaker will take a successful vehicle and integrate certain features into the rest of its lineup. This can be considered a vehicle’s “radiation effect.” After the launch of the Chevy Volt, the automaker overhauled its vehicle lineup to make room for better design, new ideas and advanced vehicle technologies. As a result, many of the positive aspects of the Chevy Volt are being imitated in its other hybrid electric vehicles, as well as the upcoming all-electric Chevy Spark EV and the extended range electric Cadillac ELR. These two electric vehicles will allow GM to have an electric product in three major price point categories: • Chevy Spark EV: Less than $30,000 • Chevy Volt: $30,000 to $50,000 • Cadillac ELR: $50,000+ The Chevy Spark EV will be available for purchase in 2014, with a more affordable price tag in comparison to the Chevy Volt. The Spark EV’s main competitor in the market will likely be the Nissan LEAF, and it will have sporty qualities similar to those of the current gasoline version of the Spark. The 2014 Cadillac ELR, which debuted at the 2013 North American International Auto Show, is not just a Volt with a Cadillac badge. While the ELR will utilize the same type of battery technology with an onboard gas generator and will be built on the same assembly line as 144 Harris, 2013. 63 the Volt, it will offer some of the highest quality interior advancements on the market. 145 With an estimated price range above $50,000, the ELR will create a class of its own. The expansion of GM’s current electric portfolio, which started with the Chevy Volt, will help GM maintain its long-standing vision of producing vehicles for every purse and purpose. CONSUMER SATISFACTION — As of January 2013, Volt drivers have traveled nearly 130 million miles on pure electricity (a total of more than 6.8 million gallons of gas saved) and are “more satisfied with their new car than any other compact car buyer in the U.S. today,” according to the J.D. Power & Associates 2012 Automotive Performance, Execution and Layout (APEAL) study. 146 The General Motors communications team makes it a point to host events just for Volt owners, which allows the company to get to know their biggest advocates and happiest customers on a more personal level. Barthmuss believes that these owner events help build genuine relationships between Volt drivers and the brand. While the automaker may no longer provide a 24-hour support service to its electric vehicle drivers like it did with the EV1, the company spends significant time and resources to ensure the happiness of its Volt owners. So far, this strategy seems to be working just fine. The Road Ahead All things considered, it is difficult to say with certainty that the Volt is or is not a success. For GM’s communications team, however, there is no doubt: the Volt is a huge success. From the public relations crisis that ensued after the end of the EV1 program to the government bailout, the Chevy Volt is helping to redeem the brand reputation of General Motors. 145 Wahlman, Anton. “Cadillac ELR vs. Chevrolet Volt 2.0.” The Street. 29 Jan. 2013. Web. 29 Jan. 2013. <http://www.thestreet.com/story/11825950/1/cadillac-elr-vs-chevrolet-volt-20.html>. 146 Gordon-Bloomfield, Nikki. “Chevy Volt wins drivers' hearts, gets top marks in satisfaction.” The Christian Science Monitor. 27 July 2012. Web. 10 Nov. 2012. <http://www.csmonitor.com/Business/In- Gear/2012/0727/Chevy-Volt-wins-drivers-hearts-gets-top-marks-in-satisfaction>. 64 It is towing GM down the road to recovery and, though it may take a while, the company is confident that the future is bright: The Volt is the technology halo. It is the credibility factor for new electric vehicles like the ELR or the Spark—it proves that GM knows how to make these kinds of cars and gets it. It is the [stamp of approval] that environmentalists need to start to talk to us again. It’s the alternative celebrities have now to vehicles like the Prius. It’s that American-made, technological know-how. It’s the Saturn rocket that beat the Russians to the moon. I think the Volt really is the poster child of what today’s General Motors is all about and what differentiates us from the old GM. It’s why we are the great American comeback story. It’s why the American and Canadian taxpayer investment in our company was so worthwhile. Now we have products like the Volt and other fuel efficient, quality-driven vehicles that are making money for this company again. I think it is the proof point for why we will be here for another 100 years. 147 147 Barthmuss, 2013. 65 Chapter Six: Is the Future Electric? “Future generations may well have occasion to ask themselves, ‘What were our parents thinking? Why didn't they wake up when they had a chance?’ We have to hear that question from them, now.” -Al Gore “An Inconvenient Truth” In its heyday, the Motor City was the bustling home base for many Americans working in the automobile industry. Today, it’s little more than a rundown and abandoned ghost town. Many of those who still work within the city limits of Detroit commute from the nearby suburbs of Birmingham, Dearborn, Ferndale, Royal Oaks and others, which are quaint communities one would not expect to sit so closely to the remains of a fallen empire. As a city that was built on auto industry work, Detroit began to see a gradual decline once the foreign imports hit the U.S. market in the 1950s and 1960s. Since then, the deterioration has never slowed. Now facing bankruptcy, many wonder if the “Big D” will ever be able to recover. Some believe the Detroit- made extended range electric Chevy Volt could be its saving grace. Others highly doubt it. In the 1900s, General Motors was focused on making reliable vehicles powered by electricity. Now, more than 100 years later, the automaker has come full circle. Electricity seems to be the short-term, and perhaps even long-term, answer for automakers in response to environmental concerns, high gas prices and consumer demand for more fuel efficient cars. This is not to say that other technologies do not have a space in the future of automobiles—they definitely do. For years, GM researched and tried to perfect vehicles that could be powered by other alternative fuels, like hydrogen and E-85 ethanol. Their efforts were fruitless due to the high cost of alternative fuels, along with the lack of established fueling infrastructure. While alternative fuel vehicles, like hydrogen fuel cells, are still important to General Motors and other automakers, it is safe to say that they will not be placing bets on these cars for quite a while. A 66 hydrogen fuel cell vehicle currently costs upwards of $1 million to produce. 148 Over time, internal combustion engine technology has become more advanced with higher fuel efficiencies and lowered emissions. The popularity of these “greener” ICEs has certainly offset some of the financial burden of the development of electric vehicles for automakers, and it is unlikely that the U.S. will say goodbye to the trusty internal combustion engine any time soon. The dire times of the Great Recession, however, called for more extreme measures to be taken in vehicle production—fuel efficient ICEs would not restore faith in the American auto industry alone. That is where the Chevy Volt and the other 15 plug-in vehicles listed in Figure 1 (page 5) come into play. The North American International Auto Show (NAIAS) in Detroit has historically helped shape the automobile industry and create public excitement for forward-looking vehicles. With 59 new vehicle introductions at the 2013 NAIAS, the biggest auto show in the world also experienced its highest attendance in nine years. 149 A major trend at the 2013 NAIAS was electrification. EVs ruled the show with pre-production, production and concept vehicles from nearly every automaker. Some of the more notable new electric vehicles on-site included the Cadillac ELR, Tesla Model X, BMW i8 Concept Spyder, Honda EV-Ster Concept, Volkswagen CrossBlue SUV Concept and the Honda Accord plug-in hybrid. Having all of these EVs on display creates awareness among average consumers and underscores the reality that electric vehicles are here to stay. In conversations with more than 20 attendees on the showroom floor at the 2013 North American International Auto Show, nearly half claimed that design and styling is the most 148 Ko, Vanessa. “Hydrogen fuel-cell cars look to overtake electric autos.” CNN. 26 Nov. 2012. Web. 26 Nov. 2012. <http://edition.cnn.com/2012/11/25/business/eco-hydrogen-fuel-cell-cars/index.html>. 149 “Strong Sunday brings NAIAS XXV to a close.” North American International Auto Show, 27 Jan. 2013. Web. 28 Jan. 2013. 67 important aspect for them when purchasing a conventional vehicle. In regards to electric vehicles, nearly half claimed that design and styling is also the most important aspect for them, more so than incentives, price and MPGe. Surprisingly, none of the attendees in this group were concerned with brand reputation in regards to electric vehicles, while only one person was concerned with brand reputation for conventional vehicles. The reason he claimed he was less concerned about brand reputation with electric vehicles is because the EV market is so new. Design and styling is important to him because he wants to drive a vehicle that “looks like a normal, but stylish, gas car.” 150 In order for GM to remain relevant in the marketplace, it needs to continue to push the boundaries, challenge the norms and take risks on new ideas, while maintaining a lineup of popular and stylish vehicles that meet consumer needs and wants. If GM does not, history will repeat and the company will find itself begging for monetary help again. Moon shot, game changer, Obamamobile—call it what you will. The Chevy Volt’s disruptive technology has come at a time when some argue Americans need it most. The technology and new GM attitude has spurred automakers like Ford, Mitsubishi, BMW, Mercedes and others to invest precious R&D dollars into electric vehicles. All of this aside, it is clear that there is no silver bullet to the energy and environmental issues that face the nation and the rest of the world. GM’s production of the Chevy Volt is not in itself a solution to any of the nation’s problems, but it is a step in the right direction for both the company and the greater community. Only time will tell if the future is electric. 150 Diaz, Jason. Personal communication. 31 Jan. 2013. 68 Conclusion The electric vehicle is unlike any other green consumer product. Its rich yet troubled history in the U.S. has led an overwhelming number of consumers to have negative perceptions of EVs. With steep competition, every automaker is overwhelmed with challenges that go beyond just selling cars. Consumer behavior and perceptions of EVs, along with an ever- changing buying market, have led to a need for automakers to not just sell more EVs but to gain and maintain leadership in the industry, be at the forefront of technological innovation, and become a household name like Prius, all the while lowering costs and delivering on quality and satisfaction for each car sold. The implications for communications professionals that work in the EV industry have shifted accordingly, leading to four main communications challenges: 1. Building awareness of EVs and how they work: An overwhelming theme revealed through in-person intercept surveys and discussions with attendees at the North American International Auto Show was a lack of basic knowledge of electric vehicles. While most were able to rattle off the names of a few EVs, like the Prius and the Volt, few were able to explain the fundamental differences between an electric vehicle and a conventional vehicle. Assuming attendees at the largest auto show in the world have a basic knowledge of cars, the level of knowledge and understanding in regards to EVs is far behind where it should be considering EVs have been on the market for a significant amount of time. This lack of awareness creates an added task for communications professionals who now not only have to communicate why a consumer should purchase an electric vehicle but also how an EV works and how it compares to its conventional counterparts. 69 2. Explaining the cost-benefits of driving an EV: Perhaps the most convincing argument for driving an electric vehicle is the cost savings in comparison to a gas-powered vehicle. According to the U.S. Department of Energy, the average 2013 model year vehicle gets 23 miles per gallon. 151 A driver of a 2013 Chevy Volt, driving 38 miles on electricity and 380 miles on the fuel efficient gas generator, would save $7,250 in fuel costs over five years compared to the average new vehicle. Additionally, with less moving parts and no transmission, a Chevy Volt does not require much more maintenance than an oil change once every two years, tire rotation every 5,000 miles and added washer fluid as needed. These savings alone, if appropriately communicated, would provide reason enough for most critics overlook their doubts, trade in their gas-guzzler and invest in electric vehicle technology. Environmental and other benefits of driving an electric vehicle, although persuasive, are not enough to convince the average consumer to switch from gas to electric. 3. Moving consumers from wanting to drive an environmentally friendly vehicle to actually buying an EV: As noted in Chapter 2, most consumers’ intentions are in the right place in regards to EVs, but their intentions are not always aligned with their actions. While a consumer may want to drive an environmentally friendly vehicle, it is clear from sales numbers that, more often than not, this want does not lead to an electric vehicle purchase. It is up to the automakers, specifically the automakers’ communications teams, to remove the barriers, such as lack of awareness, negative perceptions, consumer distrust, high prices, and low availability that keep consumers 151 “Fuel Economy Compare Side-by-Side.” 2013. 70 from considering purchasing an electric vehicle. Additionally, it is up to the communications team to guide the consumer through each step in the purchasing process in a non-aggressive yet informative way. 4. Marketing EVs to new, young drivers: It is not “new” news for automakers— purchasing behavior for younger drivers is dramatically different today than it was ten years ago and even five years ago. According to Harris, younger consumers do not attach the same level of importance to cars as older generations did. In his opinion, many younger drivers “don’t see the value in having a car and would rather spend their money on other things.” 152 While drivers from older generations valued the ability to get from point A to point B and the freedom to meet up and socialize with friends, youth today find alternative ways to get around town, such as public transportation and car sharing, and they use technology to virtually meet up and socialize with friends. Thus, in the minds of the young consumer, there is little need for a personal vehicle. For this reason, an automaker is met with the challenge of creating cars that appeal to younger generations and what they value: interconnectivity. Similarly, communications professionals are tasked with marketing the vehicle as a product that teens need not just a product that teens want. The automotive industry in the U.S. has long been competitive with automakers vying for mind and market share in every vehicle category. 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Web. 13 Oct. 2012. <http://articles.latimes.com/2006/jul/15/business/fi-gmfilm15>. 80 Appendix: Industry Interviews In-person Interview: Dave Barthmuss, Group Manager of Policy and Product for General Motors’ West Coast Communications Team As head of communications for the General Motors’ largest U.S. region, Dave Barthmuss is responsible for a wide variety of public relations assignments, including engaging GM and its brands with key stakeholder groups to help communicate the company’s environmental, technology and policy initiatives. He has served in various communications roles at GM for nearly 20 years and used to lead GM’s Environment, Energy and Sustainability communications activities at the company’s global headquarters in Detroit before moving to California with his family. Though he was portrayed as a villain in the documentary “Who Killed the Electric Car?” his reputation was restored in “Revenge of the Electric Car,” as was that of General Motors. He openly admits that the “old GM” made plenty of mistakes from a communications standpoint, but he firmly believes the “new GM” will be able to win back the hearts and minds of the American people and make the company a global success. In your opinion, why did GM pull the plug on the EV1? We had every intention that the [EV1s] were going to sell in hundreds of thousands of units. I don’t think we looked at it as an experiment or some sort of regulatory program. We saw it as something that would change the world. I think the thing that killed the EV1 more than anything else was cheap gas. There was not an oil-auto conspiracy. It was the fact that the time was just not right. Gas was a little more than a dollar at that point in time. We still had the Twin Towers in New York. We didn’t have this fascination for climate change. We didn’t have wars in the Middle East. We didn’t have $4 to $5 to $6 gasoline prices. And at that time, when the EV1 came out, it was the ‘90s—it was the most prosperous time in our history. And these new vehicles came to life—sport utility vehicles, SUVs. Living rooms that drove like cars. What were some of the lessons learned with the EV1 program? The EV1 was a terrific car. It did everything we said it was going to do. The issue was that it was a two-seater, with about 100-mile range, took overnight to charge, and didn’t have any trunk space for groceries or soccer equipment or things of that nature. So you had to make 81 way too many transportation trade-offs in your daily lifestyle to make this car work for you versus having a big car that could haul 8 people, tow a boat and would not take that much money to fill up. Getting the EV1 into the hands of people in Des Moines, or St. Louis, or Atlanta, or Houston was much more difficult than convincing people in Santa Monica or San Francisco that this car would really work for them. At that point in time, it was not a vehicle for the masses. For General Motors to make a profit and its suppliers to make a profit, they needed to sell these cars in the hundreds of thousands of units. Not only to make a profit and a good business case, but really to make a difference in terms of improving the environment and addressing the environment and energy issues. Eight-hundred vehicles in a four year timeframe does not a business make. We had this brand new sales force that was just dedicated to the caring of EV1 drivers and we didn’t have that kind of program for Cavaliers or Firebirds. We had a 24-hour go-to person if EV1 drivers ever had any issues with their car. Once consumers experienced this kind of full-time attention, it was difficult for them to have it taken away. The charging infrastructure did not fully mature or develop like we thought it would. And a car like the EV1, much like the new Spark and the Leaf, really needs to have charging infrastructure because it didn’t have a back-up generator. So that was one for the huge lessons we learned with the EV1 that we transferred into the Volt. There was a war between conductive and inductive charging stations. The EV1 was inductive and many other EVs were conductive It was much like the VHS versus beta war back in the day. And the California Air Resources Board said thou shall not charge your car with 82 anything but conductive, which rendered the inductive chargers relatively useless. So that’s what happens when regulators pick winning and losing technologies. How is the U.S. landscape different today in regards to electric vehicles? The time was just not right for the EV1. People wanted their big cars because they were cheap to drive. Today, it’s vastly different. There’s a completely different landscape. Gas is hugely expensive. We had 9/11. We’ve got people dying in the Middle East every day mainly because we’re there for oil—whether we want to admit it or not. And of course, we know what’s happening with the polar ice caps. And that’s why EVs like the Volt, Spark and ELR have much more of a chance of succeeding today. We still have to sell these cars in big numbers to have a profitable business case. But instead of limiting it to one purpose-built vehicle like the EV1, we’re spreading it across multiple platforms with multiple types of electrification. We are still seeing EVs as coastal trends. To really make this work, we’ve got to get these vehicles into the heartland so that everybody is driving them. You were portrayed in Who Killed the Electric Car? as a villain. What are your thoughts of this portrayal? The movie was produced by an EV1 driver. These drivers were very passionate—they loved their cars, there’s no doubt about that. These cars became family members to them. So that was the point of view that some of these documentaries were crafted from. In the movie, I said that GM wouldn’t crush any vehicles. However, I also said we wouldn’t crush any vehicles without recycling them. Part of the recycling process is that you have to crush the body to put it through a shredder to separate all of the precious metals. They were trying to illustrate how GM was Darth Vader in cahoots with the oil companies and Alan Lloyd from the California Air Resources Board. Nothing is further from the truth. A company 83 doesn’t spend a billion and a half dollars to prove something wrong. And it doesn’t build a manufacturing plant to make a specific car to prove a regulation wrong. Do you believe the Volt is a vehicle for the average consumer? Tesla, for example, is a car for the Tom Hanks of the world. And what we try to do is make a car that anyone could buy so that we can sell these cars in hundreds of thousands of units—and I think we can do that with the Volt. I do believe that the Volt is much more of a mainstream car for the average consumer. With the Volt, you don’t have to have a second car to drive cross country. With the EV1, you needed a second car for long drives. It’s not just about saving the environment or saving gas— it’s a fun car to drive. How has marketing changed since the EV1? We have so many more ways to get engage with our audiences. Social media and digital communications didn’t exist back then. We have a much broader approach to marketing today than we did back then. Back in the early 1990s, we had this test drive program called “Impact Drive.” Prior to the actual launch of the EV1, we took its prototype—the Impact—to 11 cities across the country and gave consumers the opportunity to test drive the vehicles for a month or so to get their input. We really thought that this thing was going to take off and be the next technology—and it really is, it’s just a decade later. I think it is much easier today to market and communicate these vehicles. We’re not dependent upon television and print advertising anymore, though it is an important part. Social media really helps spread the word about our cars and creates advocates. 84 I think the earlier program effort with the EV1 really paved the way for the successes of the EVs today. The EV1 was a pioneer. Without the EV1, we would not have the ability to make a Volt or make a Spark. Through the EV1, we learned about regenerative brakes, about the importance of home charging, and how to alleviate range anxiety. All of this would not be possible without the EV1. What role does the Volt play in the GM product lineup? The Volt is the technology halo. It is the credibility factor for new electric vehicles like the ELR or the Spark—it proves that GM knows how to make these kinds of cars and gets it. It is the seal that environmentalists need to start to talk to us again. It’s the alternative celebrities have now to vehicles like the Prius. It’s that American-made, technological know-how. It’s the Saturn rocket that beat the Russians to the moon. I think the Volt really is the poster child of what today’s General Motors is all about and what differentiates us from the old GM. It’s why we are the great American comeback story. It’s why the American and Canadian taxpayer investment in our company was so worthwhile. Now we have products like the Volt and other fuel efficient, quality-driven vehicles that are making money for this company again. I think it is the proof point for why we will be here for another 100 years. # # # 85 Phone Interview: Steve Harris, Partner at McGinn & Company, Former Vice President of Global Communications for General Motors Steve Harris, former Vice President of Global Communications for General Motors, has been the automotive communications go-to for more than 40 years with experience working for American Motors and Chrysler. In his years at General Motors, he helped lead the communications efforts leading up to the company’s bankruptcy, at the Senate hearing, through the government bailout and at the beginning planning stages of the extended range electric Chevrolet Volt. He is currently a partner at McGinn & Company, a communications consulting firm based in Arlington, Virginia. Even though you weren’t at GM during the EV1 era, what are your thoughts on how GM operated the program during that time? I was not there during the EV1, but I was obviously aware of what GM was doing. At the time, the EV1 was seen as a very revolutionary car and something of a technology showcase. The situation for the EV1 was difficult from the beginning—it was launched as a very limited production, lease only vehicle. The fact that it was a two-seater and so many people had that fear of being stranded—range anxiety. It was not broadly accepted. The people that wanted it and leased it were totally passionate about it and loved the vehicle, but that was not a big group of people. They always felt that had GM done more to market and promote the vehicle, that a bigger audience would have been interested. There just weren’t enough people that were willing to make the leap to a two-seater electric vehicle with limited range. At the time that Toyota was launching the Prius, GM was very dismissive of hybrid technology. They thought that they made no sense because they had two powertrains in them so they were more expensive. They really felt that pure electric or hydrogen powered would leap over hybrids. And, of course, that still has not happened. 86 Timing the market correctly and tapping into when there is really a need to help drive awareness and consideration and ultimately purchasing is critical. It is definitely an art not a science. Some people would like to believe that it’s a science, but in that case every product would be a hit and we know that doesn’t happen. I definitely think the EV1 was the odd man out at the time, it was an unusual vehicle and there was not a lot driving the acceptance of it besides the small core group of people that had a strong environmental bend who really wanted an alternative to a gasoline powered car. The auto oil conspiracy has been around for a long time. People for years thought that GM and other car companies were keeping the 100mpg carburetor on the shelf because there was an oil conspiracy. Maybe going back 30 or 40 years, it would have been a valid fear when the auto industry was truly dominated in this country by the domestic manufacturers. Certainly after the 60s that was not the case when it became a much more competitive landscape and any advantage that an auto company could find they would have taken it to try and maintain or gain market share. The EV1 was a big risk and a multibillion dollar effort by GM. Even by auto industry standards, that’s a lot of money to be throwing around if you don’t have some feeling that you’ll have some significant market gain or advantage by doing it. A big investment was made on the marketing side, on the development and engineering side, and of course they were treading uncharted waters there with most of that technology. So many people forget that a lot of technology that allows the variety of electric vehicles to be out there on the market today was really first tried out and adapted for the EV1. It gave the foundation for all of the alternative fuel vehicles and electric vehicles that are out there now. 87 What is your take on the communications/marketing strategy for GM’s electric cars (both the EV1 and the Volt)? And how do you think the past landscape and current landscape contributed to the successes and failures of each program? Some of the commercials and advertisements that I saw were definitely made to make an impact and get people’s attention and they certainly did that, but that being said, they didn’t drive people to the product. They may have enjoyed the commercials, but ultimately the strength of the product did not attract people and that’s always the bottom line. I think that because the Volt had such a long gestation period—we publicized it, talked about it, hyped it for a long time—there was pent up demand for the vehicle, a bigger group of people that were interested. The first EV1 drivers were very passionate and I don’t for a minute deny or doubt their feelings. But they were extremely biased toward that vehicle and that kind of technology. So they didn’t see any shortcomings in that car even though there were many for an average consumer. I understand that they honestly and truly believe that that was the answer and that the vehicle should have been kept on the road. I think GM could have come up with a better solution to let interested people keep them if they wanted to. The law states that you have to produce replacement parts for 20 years and that would have been a cost-prohibitive program for only a few hundred cars. I think that’s why they leased them in the first place—they didn’t know how big the market would be and they wanted to learn as they went along. And when the program didn’t generate big numbers, it just didn’t make a lot of sense. In retrospect, I think if GM could go back they would have let the drivers keep the EV1s if they could. I don’t know if there would have been any legal way to do that. 88 So many things have changed. The price of gas today is motivating people to look for more economical modes of transportation and certainly hybrids and electric vehicles provide that. I think the Prius had a lot to do with conditioning people and changing their minds about these new types of technologies and the idea of electrification in cars. Prius led the way in making it more acceptable to drive a gasoline-electric hybrid. People forget that Toyota didn’t have success immediately with the Prius—it took them the better of part of five years before they really hit their stride with the car. I think there is much greater environmental awareness today. Where people used to say they cared about the environment back in the day, I think you see younger generations actually doing something about our environmental problems today. How is success defined in the automotive industry? In the auto industry, with any vehicle, the first generation is a loser in terms of profitability because of the money spent to develop it and introduce it to the market. Over time, the price comes down and the market warms up to the idea of the vehicle so the company can really start to make money by the time the third or fourth generations come out. The next generation of the Volt will be a lot more profitable because they will have learned more about the vehicle and made corrections to make it less costly for them. While some say Bob Lutz is the brainpower behind the Chevy Volt concept, others find it hard to believe that Lutz would ever propose an electric vehicle since he openly negates global warming. What does your work on the Chevy Volt concept and with Bob Lutz lead you to believe? I was on the automotive strategy board and I remember sitting next to Bob Lutz when he brought the concept of the Volt up before the management group to get approval to move ahead. He had really decided that we had taken such a pounding from the Prius that we needed to do 89 something even though we weren’t heavily invested in hybrids, and that we really needed to demonstrate our interest in this area, our capabilities, and our willingness to make the commitment. Bob is a competitor himself. He doesn’t like to lose. And while he may have personal views about global warming, he’s also a very good businessman and realized that we were missing a market that we needed to address and that it was hurting us from a reputation and image standpoint. He thought that GM had a better idea than Toyota, which was this extended range technology. Unless battery technology gets a lot better with a battery that can truly give consumers significant range, extended range may be the best bet for most consumers. Certainly, the Volt is picking up momentum right now although it has had its ups and downs, but in the last six months the sales have been really good. Do you think the Volt is a success for General Motors? I think as a technology capability demonstrator, the Volt has been a success. Now, has it been a financial success? No, not yet. But no vehicle on the market is financially successful in its infancy. It takes time and a few generations for any company to start to see profit from a launch vehicle. What was it like leading the communications efforts for GM leading up to the bankruptcy and through it? I was the head of communications leading up to the bankruptcy and through the bankruptcy. In that kind of situation, you don’t really get to practice for it. We had a lot of people internally that were working on the communication efforts, as well as external experts. When it became clear that the government was going to be a major part in the bankruptcy, they had a 90 voice as well. They didn’t dictate what we did but we certainly let them know what we were doing as we were going through the various communications efforts. In these situations, where you have to dissolve brands, companies have disclosure rules. So, although we wanted to go to the individual owners directly, we had to broadcast it generally because it impacts the financial markets and the trading of the stock. I was at GM when we dropped Oldsmobile as a brand and I was at Chrysler when we dropped Plymouth as a brand— and those are really sensitive situations because there are people who have very strong ties to those brands. And there’s always the question: are you going to see the same volume of sales through your remaining brands once you drop a brand? It costs billions to eliminate a car brand, which most people, including the government, and others don’t always understand. But in a bankruptcy, the situation is a little different and a little easier because people expect the company to do draconian things and restructure the company. It’s more acceptable and understandable during bankruptcy, as opposed to a time when the company is selling a few hundred thousand of a vehicle. As communicators, you try to be as sensitive as you can to those affected by the dissolving of a brand because our ultimate goal is to reach back out to those people and find a way to keep them in the GM family. So we worked closely with the marketing and communications departments to develop language and outreach to let people know that we still cared about their business and that we felt that GM was in a better position to continue to serve them than any other brand. There was discussion surrounding dropping Buick and the federal government was in favor of it. GM was opposed to eliminating Buick because it was an extremely important and profitable brand in the U.S. and especially in China, where it is the leading brand. It was hard for the government to understand, but eventually GM ruled the day and the government agreed to let Buick stay. 91 Some people wonder why GM didn’t make changes early on when the American auto industry was infiltrated with foreign imports. Many believe that if GM would have changed its ways early on that the company wouldn’t have had to go through a government bailout. What are your thoughts? GM is huge. It’s such a large organization and the way it’s structured makes it hard for change to occur. People use the analogy, “it’s like trying to maneuver a battle ship in a river.” Tremendous changes were made in the ten years leading up to the bankruptcy, but unfortunately it just wasn’t enough and didn’t happen fast enough. For instance, Ford got in trouble before General Motors and so they went to banks and other lending institutions and borrowed $30 billion leveraging everything they owned, including their name. They received money to continue to operate and make changes. Whereas GM, by the time they realized how bad of shape they were in, those normal lending opportunities were not available so GM’s only course of action was to go to the government and then the government decided that the only course of action was to put the company into bankruptcy. So, in hindsight, you can go back 30 and 40 years back and identify the things that ultimately were not sustainable, whether it was healthcare benefits, wages or too many brands. There were lots of mistakes made over the 100 years that GM existed. We couldn’t go through normal bankruptcy because the lending institutions were in just as much financial trouble. The federal government decided to come up with a really quick bankruptcy process. The normal process would have taken a year to two years to complete, but the government pushed the company through the bankruptcy period in about 30-60 days, which was unheard of for bankruptcies of that size, and provided GM with the money to sustain the company at the other end. It was a highly unusual situation—and a lot of people were hurt in the 92 process from shareholders to dealers to suppliers. Without government help, it would have thrown 500,000 to one million people out of work. The Obama administration decided that it was not worth the risk to let GM go under without help. Traditionally, GM has been known as the American brand that radiates patriotism. Some say that sense of American pride was lost for a long period of time and is now returning. Has external communications regarding “American-made” come full circle? One of the key learnings was that in GM’s early years—through the ‘50s, ‘60s, ‘70s and even into the '80s—GM spent a lot of time telling people their role in the American economy and being very active at the community level where their dealerships and factories were. People like my parents and, to a large extent, those in my generation, understood what GM contributed to the U.S. economy. So when we got to the bankruptcy period, we looked behind us and quickly realized that there were few people left that appreciated, respected and loved GM for what it had done to help the U.S. We had done a poor job and had walked away from that American pride communications that was so evident in GM’s early years. Keeping jobs in the U.S. was a good message for the Obama administration to explain the GM bailout. People by and large think thought they could buy their cars from anywhere and that if GM goes away they could just buy their cars from another place without any thought to the taxes that were paid, the charities that GM donated to, the suppliers, the dealers. The impact of losing GM would have been huge, but people didn’t understand how big of an impact it would be and Congress didn’t understand it either. After having to bail out the banks and AIG, without public hearings, the last thing Congress wanted to hear was that GM now needed help. 93 I would say up until the last few years, there wasn’t much appetite among the American public for American-made automobiles. They just wanted the best quality for the best price and they didn’t care where it came from. Now, considering what the country has gone through, there is a greater awareness and a greater interest in supporting U.S.-made and produced goods. Until very recently though, there wasn’t a lot of value in it. I think Americans had a chance to stare over the cliff and I think they realized that when things get bad for their neighbors, things get bad for them too. My guess is that the younger generations, having gone through this recession and seeing a lot of dislocation and suffering and not knowing if they’ll have the same standard of living as their parents had, are going to be more cognizant than they would have been without this experience. What do you believe to be the best way to increase consideration for GM vehicles to future generations? I really think that people’s perspectives of their cars today have changed and will continue to change. Younger generations don’t seem to attach the same importance to their cars as my generation and my parents’ generation did. It’s not that there aren’t a lot of younger people that don’t aspire to have a car, but many of them don’t see the value in having a car and would rather spend their money on other things. The cost of car ownership is going up and people are earning less, which will drive people to find other alternatives of transportation like public transit and car sharing. The industry is going to have to figure out what is going to be the impact of that new thinking and how they can exist and prosper in an evolving world. Traditionally, automakers have made their money by 94 selling big trucks and large SUVs. Now they have to figure out how they can make cars profitable in the same way they made trucks and SUVs profitable. It’s hard to predict which technologies are going to stick and which ones are not. Unfortunately when you’re running a car company, you’re making billion dollar bets. And often times these automakers make losing bets—it’s when these companies make a series of losing bets when it becomes a problem. Do you think the future is electric? Sooner or later, I think someone will develop a really efficient and powerful battery. And if we found a much high efficiency battery today that provides a lot of range that would be a game changer. The other game changer, I think, in the long term is hydrogen fuel cell. If we can figure out a way to manufacture and distribute hydrogen fuel cell vehicles and get the infrastructure needed, then that would be the next game changer. I really believe that hydrogen fuel cell vehicles are the long term answer. And in the interim, we’ll look to automakers to develop and produce better electric vehicles. I think EV sales will slowly increase in the electric vehicle industry once people start to become comfortable with the technology. # # # 95 Phone Interview: Linda Nicholes, Co-Founder of Plug-In America, EV owner and advocate A self-described “oil heiress,” Linda Nicholes co-founded Plug-In America, a non-profit organization that seeks to reduce petroleum usage through advocating for electric and other alternative fuel vehicles. Nicholes has long been involved in the EV movement, appearing in Chris Paine’s documentary, “Who Killed the Electric Car?” as the leader in the 24-hour vigils to stop the destruction of GM’s EV1 and Toyota’s RAV4 EV. Following the crushing of the EV1s, she and her husband vowed to never purchase a GM product. Now, more than ten years later, Nicholes and her husband are proud owners of a Chevy Volt, as well as two other electric vehicles—a 2001 RAV4 EV and a 2008 Tesla Roadster. And with a solar panel system installed on the roof of their house, they drive completely on sunshine. How did you first become interested in plug-in cars? When I installed solar on the roof of my house at the turn of the century in the year 2000 I was the first adapter in the city of Anaheim and I had all of this extra juice, you might say. A friend of mine drove an all-electric GM EV1 and I had this sudden epiphany that I needed to be using that extra electricity that I was producing on my roof to power my car. Toyota had an all- electric RAV4 that could be leased through a business and my husband, who’s an optometrist, agreed to lease one of those cars for me to drive. So that’s how I initially became interested. Once you drive electric, it’s almost impossible to go back to gas. It just feels so fantastic not to go to the gas station, not to be polluting—and, not only that, electric cars are wicked fast and fun to drive. We were of course upset at GM at the time for getting rid of the EV1s that people loved. But the irony is my husband is now driving a Volt, which he loves. It’s his favorite car that he’s ever owned. So we never thought we’d be driving a GM product, because frankly they ticked us off. However, this car has absolutely won us over—it is a fantastic car. I work with Plug-In America and was one of the co-founders. 96 I want to give so many accolades to GM for coming around like this. It really shows that a company doesn’t have to stay stuck in the typical automotive ideology. My whole situation, however, is kind of ironic. I’m an oil heiress. My dad had a big oil company back when he was younger in the state of Idaho—Phillips 66—plus an oil heating business. There is such irony that I’ve gotten so involved in this EV movement. Even the most die-hard, conservative will change their mind once they get behind the wheel of an EV. What is your role at Plug-In America and how did you become involved? A group of would-be EV drivers joined forces—we decided that we wanted to stop the wholesale destruction of electric vehicles because people loved these cars and they weren’t allowed to own them—they were only allowed to lease them. A lot of the reason that I got so involved was based off self-interest. I didn’t want to have to be connected to the gas pump anymore. I was in charge of scheduling a 24/7 vigil in front of Burbank GM headquarters trying to protect the last remaining 80 EV1s, which unfortunately was not successful but did make for a good movie. I was absolutely in love with it before I even got out of the parking lot. I loved the silence, I loved the pep, I loved the effortless forward momentum, I loved the lack of vibration, I loved everything about it. I especially loved taking off from stop lights—and seeing some guy in a Porsche coming up next to me and thinking he could take me. Not a chance. I fell in love with speed and I fell in love with speed without tailpipes. It is hard to explain to people what driving electric is like because it is an entirely different driving sensation and it startles them. It’s hard to communicate it to your average consumer. You’ve got to either get their butts in the passenger seat, or even better, hand them the keys. It’s life changing. 97 I think it’s really good to expose average consumers to drivers who have actually experienced driving electric. It’s better than going to a dealership because there’s not that pressure to actually buy the car. It’s most important for automakers to show consumers how great electric driving is, rather than just tell them. Habit and fear of change are huge barriers that consumers face when it comes to considering an electric vehicle or alternative fuel vehicle. I go to one particular mall and the reason is because of the charging infrastructure. I am able to go into the mall and buy the products that I want and come out to a fully charged car. I don’t think merchants are completely savvy about that just yet, but it’s such a great convenience for us electric drivers. What was the purchase experience like with your Tesla Roadster? We had to put earnest money down—$100,000—and we had to wait two and a half years for our Tesla Roadster. We received the 20 th production roadster from Tesla, which was part of the first 100 Tesla signature series, and although it’s not right for every person, I do consider myself to be an early adopter in this space. Now, of course, the price for a Tesla has come down quite a bit and the wait isn’t as long, but not everyone knows that. How do you view the current landscape in the U.S. in regards to electric vehicles? I just learned a few years ago that the American grid was 50% coal fired and it is now down to 36%. So it is going down and in California it’s about 18%. In 2011, California became first in the nation in new wind capacity and even knocked Texas off its perch as the number one producer of new wind capacity. California actually produces approximately 47,000 megawatts of wind power. And then you think of all the people 98 like me with solar systems on their roofs and the synergy of these types of renewable energy is just astounding. Right now in California, gasoline is about 5 times more expensive than electricity—even if you don’t have solar panels. California is somewhat of a fuel island—separated by time and distance—and, of course, we have the clean air mandates here so our gasoline prices are some of the highest in the nation. But people have accepted the gas prices because they’re unaware they can easily fuel their driving in another way. I’m originally from Idaho and I frequently go home to visit my parents and the only EV I’ve ever seen there is a golf cart. My family, other than my dad, thinks I’m nuts. There’s just no exposure to EVs there. Also, aside from California, there is the electric highway that goes up into Oregon and Washington—those states I think are more open to EVs too. It’s hard to believe though that those two states are next to Idaho because they’re worlds apart. I would say that the interior of the country isn’t as onboard with electric vehicle driving as other parts of the country. Whereas coastally, the mindset seems to be a bit more progressive in regards to alternative fuel vehicles. In your opinion, how has consumer perception changed in recent years in regards to alternative fuel vehicles? I will say that the public’s perception has really evolved. From that EV image that looks like a golf cart it’s really moved forward from that. I think people do see the cars as pretty fully functioning. Part of the hesitation on the public’s part again is just not being exposed. Not experiencing what it’s like to drive electric. What are some of the flaws that you see in the advertising, marketing and communication of electric vehicles? 99 I think somehow being able to translate to the public how an electric car can work for them. And addressing things like the all-pervasive range, and just communicating how much fun electric cars are. The fact that these cars are wicked fast and fun is never really communicated in advertisements. I’ve yet to see that in any electric car advertisement. Addressing the myths that are so common through advertising would be helpful, I think, for the average consumer. If the car is represented as just some granola car and some way to be green, it won’t work for the average consumer. If it seems like an obligatory car to make the world a better place, while it may be valid, it won’t sell the car. What do you believe is the future of driving? And how do you think automakers will be able to increase consideration for electric vehicles among the younger driving audiences? I’ll use an example: I do a lot of presentations at schools and my only tool used to be my RAV4 EV and while high school and college students were mildly interested in the technology of the electric car, what really got them was when I started taking my Tesla Roadster because their perception of what an electric car could be went from the golf course to the race track in one glance. I think for the younger generation the key is the cool factor. If there’s one thing I’ve learned is that younger people love just the perception of speed and coolness—intriguing them with the notion of electric cars as just the coolest thing to drive. I think there’s a tendency to confuse heat, vibration and noise with power. And that’s just not true. # # # 100 Phone Interview: Jeff U’Ren, Member of Plug-In America, former EV1 lessee and current owner of two Chevy Volts After taking Kris Trexler’s EV1 (VIN 99) for a spin in 1996, Jeff U’Ren was hooked. Since then, and even more so after his EV1 was crushed, U’Ren has played an integral role in the EV movement. He is an active member and volunteer for Plug-In America and currently owns two Chevy Volts that he willingly loans out to most everyone he meets. He is arguably one of GM’s “unofficial” Volt salesman. How did you first become interested in plug-in cars? I was working at a place in Hollywood and one of the guys there showed up with an EV1 one day. I don’t think I knew much about electric cars before that—this was in ‘96. Kris Trexler had a red EV1, which is in the Petersen Museum now. So I drove his EV1 and he was very enthusiastic about it and he was a General Motors collector. He kind of had the inside track, knew some people at General Motors so he was able to jump on the car early. So he saw that I was really interested in it and he let me borrow his for the weekend so I could show it to my wife and my son. We drove it around and decided we had to have one mainly because it was a very cool car and it was really fun to drive and had a lot of power. It was a little sports car, kind of like a rocket. And you know the fact that you didn’t have to buy gasoline for it was a huge selling point. I got my EV1 on June 14 of 1997. I knew that you had to plug it in and you had to charge it up and it only got so many miles per charge, but I knew I would be able to plug it in at work if I needed to and I was just looking at it as a commuter car. I had the car for 3 years and it was a lot of fun. I never got stranded, I never had any big problems with it. I was attracted to the EV1 because it was a great, futuristic car. I thought of it as being the future of cars. After having it for a few months I thought to myself, “Wow!” I’m not buying any gas and I didn’t have to buy a gas for three years while I drove it. 101 Did the EV1 change your view of driving? How so? Absolutely. I had muscle cars when I was growing up—I had a ’65 GTO that was built for racing and it had a 485-horsepower engine in it. I had a Pontiac Formula 400 Firebird. And when I was a young adult, I drove a BMW. I liked stylish cars, and cars that were fun to drive. So when I got the EV1 it had a new kind of style to it and it was really fun to drive, but it was different than my GTO in that my GTO didn’t get more than 8 miles per gallon. And the other cars I drove never got more than 14 or 15 miles per gallon. I lived through the gas embargo of 1973 and I was working at NBC in Burbank when we went to the odd-even day gas rationing and it became hard to get to work because you had to sit in line to buy gas. That drove home the point that we were all slaves to gasoline. We needed gasoline to go to work. We needed gasoline to do everything. We needed this one fuel for this one mode of transportation for our entire lives to do everything. It changed my view of automobiles and made me think: “Well, what do I really use my car for?” And I used mine mainly just to drive to work and during that time I was driving from San Juan Capistrano to the valley and back. I was pounding the same pavement every day and all I really needed was something that was not monotonous and that was fun to drive. And why not do it as cheaply as possible? When you find yourself driving an electric car, gasoline cars look extremely foolish because you have this complicated engine that needs constant attention and tuning. They have so many parts that can break and it consumes and burns fuel that eventually puts all that junk into the air. Electric cars have simple electric motors with one moving part, they’re clean, and they’re quiet. Everything about the electric car after you experience it for a week, a month, and 102 especially after three years, you start to look at gasoline-powered cars as extremely foolish to own. What are some of the flaws you’ve seen in the advertising, marketing and communication of the EV1? What is GM doing right, if anything, in regards to its advertising, marketing and communication of the Volt? Kris Trexler did such a good job of being an advocate for the car that once I went to the dealership I was pretty much sold on it. It wasn’t until after I leased the car, when I saw the advertisements for it. The advertisements were very much behind the curve back then for the same reasons plug-in car advertising is behind the curve now because they don’t reflect the biggest advantages of plug-in cars: that you can just plug it in to a normal household outlet and fuel your car through your home’s cheap electricity and that it’s fun to drive. The original EV1 commercials represented the EV1 as a household appliance like a TV, a washer or a toaster. When I saw the commercial I thought to myself, “Wow, these people don’t know the car at all, do they?” I understand that advertisers have to advertise products. But sometimes the product is so great that an advertiser could oversell it and turn people off. How did your life change after your EV1 lease agreement end? I didn’t really want to go back to driving a gas-powered vehicle after my EV1 lease ended. I made a feeble attempt at buying a RAV4 EV, which was the next most popular electric vehicle, but unfortunately I got really busy with my business so I went back to a BMW 3 series. I was disgusted by the whole situation—I was disgusted because the car was so popular. I let so many people try out my EV1 and all of them loved it. At first, they saw it as a novelty car, but then they saw it as a practical car after test driving mine. There was so much interest in the car— 103 I certainly wanted to buy and keep the car. I was really pissed off at General Motors. I kind of felt like this type of thing would happen in the back of my mind because the oil companies are so powerful and gasoline cars were so popular and big corporations would want to stay with the status quo. But at the same time, the car was so popular for so many people and I thought they should have continued with the EV1 program. I thought it was so short-sided and an ignorant thing to do on GM’s part. Following the crushing of the EV1s, what was your opinion of General Motors? I rented Chris Paine’s documentary “Who Killed the Electric Car?” and watched it and I just cried. In the movie, Chelsea Sexton, who was the person who leased me my EV1 and was my EV1 specialist, goes to the Petersen Museum to visit Kris Trexler’s EV1, which was the car that I had first tested and the exact same car that motivated me to become an EV1 driver. I think it was the ignorance that came from the top down that ruined GM and made them go bankrupt. I think at that point—when the EV1s were crushed—that I could have predicted it that GM was blocking itself from the future. I was mad and I just thought I had been played by GM as one of their consumers—it’s what pushed me to really get involved in electric cars and advocate for them through Plug-In America in the summer of 2006. Years later, GM contacted you for an exclusive preview of the new Chevy Volt. Were you reluctant to try out the Volt because of your previous experience with GM? When GM announced the Volt at the Detroit Auto Show and I went to see the concept when it came to the LA Auto Show. When I read the story of how it became a serious consideration for production with Bob Lutz championing it and the reasoning behind making an extended-range electric car, as a previous EV1 driver it just made sense to me. Back then, I always thought: “Why don’t they have a generator so that if you ever run out of charge you 104 won’t be stuck?” because nobody wants to buy a car that could potentially leave you stuck. I started following the development of the Volt since they introduced it at the auto show. By the time GM invited me to drive it, I knew about the car. I even went and bought $3,000 worth of GM stock. And when I finally drove the Volt, I was just blown away. It was so far beyond the EV1 and it was so competitive with gas cars that I just knew it was going to be a homerun. I immediately wanted one—and I wanted one of the first ones. Why did you decide to stay loyal to General Motors? It was hard for people to believe, but from my perspective, GM really listened to the feedback they received from the EV1 program. The consumer satisfaction from the EV1 was really high. And as far as the Volt is concerned, I think when customers see huge efforts, no matter how effective it is, it means something. What do you think is the most effective way to increase consideration for the average consumer to purchase the Volt? I think the greatest marketing strategy is that every Volt that gets leased or purchased makes a potential Volt salesperson. Because the product is so fantastic, every person that leases or buys the Volt becomes an automatic salesperson. And I see it happen all the time with the Volt. I think the tipping point will be when other OEMs start producing vehicles just like the Volt so that consumers will have more options and price ranges to choose from. Because there are some people who don’t ever want to own a Chevy—and hopefully soon, there will be Volt- like cars from every automaker. That’s what we’re waiting for. Your son has been by your side during your time with the EV1 and now with the Chevy Volt and has been able to see firsthand the benefits of electric driving. What do you 105 believe is the future of driving? And how do you think automakers will be able to increase consideration for electric vehicles among the younger driving audiences, like your son? An under $30,000 2-door coupe plug-in electric car that’s really stylish that has the same range as the Volt coupled with good marketing would be right on par with the 20- and 30- somethings. My son is just as enamored with the gadgets and the interconnectivity of his car is just as important to him as being able to save money on gas by just plugging the car in. He’d rather spend his money on a nice dinner with his girlfriend than on gas. Whether the car is powered by gas or electricity or some other fuel, it still has to compete with the other cars in the market—electric cars have to have the same conveniences, and more. # # #

Asset Metadata

Creator Gonzalez, Kristen Lynne (author)

Core Title From the EV1 to the Chevy Volt: a re-electrification of the American automobile industry

Contributor Electronically uploaded by the author (provenance)

School Annenberg School for Communication

Degree Master of Arts

Degree Program Strategic Public Relations

Publication Date 08/01/2013

Defense Date 08/01/2013

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag Chevrolet,Chevy,electric vehicle,EV,EV1,General Motors,GM,OAI-PMH Harvest,Volt

Format application/pdf (imt)

Language English

Advisor Swerling, Jerry (committee chair), Lynch, Brenda (committee member), Tenderich, Burghardt (committee member)

Creator Email kg@kristengonzalez.com,kgonzo99@gmail.com

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c3-311705

Unique identifier UC11295049

Identifier etd-GonzalezKr-1932.pdf (filename),usctheses-c3-311705 (legacy record id)

Legacy Identifier etd-GonzalezKr-1932.pdf

Dmrecord 311705

Document Type Thesis

Format application/pdf (imt)

Rights Gonzalez, Kristen Lynne

Type texts

Source University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

Access Conditions The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the a...

Repository Name University of Southern California Digital Library

Repository Location USC Digital Library, University of Southern California, University Park Campus MC 2810, 3434 South Grand Avenue, 2nd Floor, Los Angeles, California 90089-2810, USA

Abstract (if available)

Abstract This paper examines the successes and failures of General Motors in the electric vehicle (EV) industry from the EV1, released in 1996, to its predecessor, the Chevrolet Volt, which was introduced to the U.S. market in 2010. More importantly, this paper sets the scene for the future and explores the anticipated role EVs will play in helping breathe new life into the American automobile industry. By examining consumer behavior in the green marketplace, the changing American landscape and the ever-evolving needs of new drivers, marketers and public relations professionals working on behalf of GM will be able to better understand how to communicate effectively with key audiences, and ultimately raise awareness of and increase consideration for electric vehicles. The principal hypothesis motivating primary and secondary research concerns a pressing need for alternative means of transportation in the United States of America with soaring gas prices coupled with the reluctance for many Americans to buy into the EV industry. With an increasing number of vehicle models and manufacturers to choose from, it is imperative for GM to keep its commitment to advanced vehicle technology and maintain a high level of consumer satisfaction for its products and services in order to continue to increase its market share in every vehicle division, in every country in which it operates.