GM's Big E85 Push
There's no doubt about it. Ethanol's promise has a healthy, golden glow—and it's not just from the corn. Proponents insist that renewable E85 fuel could significantly ease addiction to foreign oil and reduce tailpipe emissions. All based—even better yet—on homegrown-in-the-heartland American corn crops. But, opponents say the consortium of producers and vehicle manufacturers pushing the fuel are simply wearing rose-tinted glasses.
The debate over the viability of E85 fuel—a blend of 85% renewable ethanol and 15% gasoline—has heated up since the beginning of the year, when President Bush gave it banner treatment in his State of the Union address. Since then, all of the Big Three have committed to doubling production by 2010 of flex-fuel vehicles, cars, and trucks that can run on either E85 or regular gas.
Beyond its potential to curb dependence on foreign oil, pro-E85 camps cite the fuel's higher octane rating, lower greenhouse emissions, and simpler infrastructure investments compared to potential fuels of the future like hydrogen. Ethanol production can also take advantage of otherwise unused American-grown crops.
But critics say the fuel is less efficient than gasoline and could not survive—either in production or at the pump—without lucrative government subsidies. Of even more immediate concern, they point to the extremely limited availability, with only around 900 stations selling the fuel nationwide—even if that number is continually growing. (For more on ethanol, (see BusinessWeek.com, "Special Report: Ethanol".)
Nevertheless, it appears consumers are receptive to considering the fuel's potential. A Harris Interactive study, the results of which were released last month, shows that two-thirds of adult vehicle owners are familiar with flex-fuel vehicles and more than half are interested in purchasing one. Of those consumers, 88% cited "reduced dependency on petroleum" as the major cause for consideration. And, more surprisingly yet, 53% said they were willing to pay more for such a vehicle.
General Motors' (GM) efforts may have something to do with changing attitudes. The company launched a national campaign promoting country-wide use of E85 this spring. The campaign, dubbed Live Green, Go Yellow—playing on both the environmental benefits and ethanol's relationship with corn—features flex-fuel GM cars from the 2006 and 2007 model years.
BusinessWeek.com's Matt Vella spoke with Beth Lowery, GM's vice president of environment and energy, about the company's big E85 push, challenges past and present, as well as the road forward. Edited excerpts follow.
What part does a campaign like Live Green, Go Yellow play in the overall plan to bring GM back into financial health?
As part of the overall turnaround, we were asking: How can we improve GM's image? How can we educate people about renewable fuels? What can we do when the price of fuel goes up? And, how can we give our customers a choice? Obviously, the timing for such a campaign could not have been better. Live Green, Go Yellow is particularly important from a marketing standpoint because it reaches the customer directly.
Your background is in law, not engineering or marketing. What kind of message do you think it sends to have someone like you heading up environment and energy, rather than someone who came up evangelizing or developing products?
What I do is ask: How do I synthesize R&D efforts, make consumers and opinion-makers care, and who are the people in Washington and the states that put the right policies in place? Live Green, Go Yellow is a very good example of where we've acted all together, with policy working with marketing working with engineering. We've got the products and, at the same time, we've got the campaign. It is an excellent example of the power of when GM comes together and acts as one company.
Is that kind of broad-based, cohesive action unique at GM? How much force or effort goes into getting everyone to get together?
I don't think it's unique so much as it demonstrates how powerful it can be. When you have everybody consistently working on the same messages, it hits federal and state [levels], consumers, energy companies get interested, local retailers get interested, we even have inventors calling us. We really have put ethanol on the map. It is a matter of collective will.
Why E85 and not another alternative fuel technology?
It's here and now. We have more than 2 million flex-fuel vehicles on the road today. One of the things we learned over the past year is that people were interested in what GM was doing from a technology standpoint, but when we talked about hydrogen and fuel cells, they thought that was too much in the distance. The program needed some catalyst for people to understand concretely. With biofuels and renewable fuels, people see they can really do their part now.
Another thing GM is very focused on is, if this is going to make any difference at all, it has to be something that the customer is willing to pay for. Customers aren't willing to make any sacrifices. And it has to be out there in volume. If we're going to improve the environment and reduce petroleum, we've absolutely got to do it in volume.
Bringing to bear the lessons of the past and the market as it exists today, where's the next milestone when you ask yourself, where is GM's campaign going? What are your metrics going forward?
I look at it as the whole picture. I do think it's important for us to do our part with respect to vehicle production. Together with Ford (F) and DaimlerChrysler (DCX), we've announced we will double production of our E85 vehicles by 2010. We'll continue our awareness campaign because as everybody's taught me in the marketing and PR world, when I'm sick of it, people will just start thinking that they may have heard something about it.
The retail stations are the other important component. We're building stations, we're trying to bring together producers and retailers and get the station momentum building. The tipping point is really when the consumer can buy E85 in their local station. Now I don't think that means you have to have one on every corner but, at least, readily accessible.
Early on, the Brazilian experiment to adapt to ethanol fuels was affected by shortages. But, as you know, by 2007, 100% of all new Brazilian cars are expected to run on 100% ethanol. What's your perspective on actual and potential ethanol shortages at home?
There's been a period for the past few months where there's been a shortage of ethanol because it is being used for E10. But, we believe that will take care of itself. There are a large number of production investments out there—up to 32 are on the drawing board. And, the last energy bill calls for 7.5 billion gallons by 2012, such that people have the assurance that if they produce that there will be a market for it. There are some estimates that it could go up to 12 billion. We really believe the split pie is going to work itself out. As oil continues to be volatile and high, these investments look pretty darn good.
Wal-Mart (WMT) has been mulling a national rollout of E85 at its retail locations, which would provide a big boon for the fuel, both in terms of press and availability. Can you tell us anything about these plans?
We're a part of the Energy Future coalition, which calls for "25 by 25"—25% renewable fuels by 2025. Likewise, Wal-Mart has had two symposiums investigating the issues around biofuels, including a possible national rollout. We're obviously very interested. I would just say, stay tuned.
The summer documentary Who Killed the Electric Car? was pretty hard on GM for scrapping the EV1 electrical car program. Did that film have any influence on you current projects?
What we learned from EV1 really was that customers don't make trade-offs. Obviously, we're very familiar with the documentary. The bottom line is there's no auto manufacturer today that's mass producing electric vehicles. No one can make the business case. That's pretty simple. The technology and the people who worked on EV1 are exactly the ones working on our fuel cells and hybrids. All that we learned was not lost.
Finally, your major foreign competitor, Toyota TM, has had much success with its Prius hybrid. In fact, many people consider it one of the best marketing campaigns in auto history. Any lessons to be learned there?
I do think when you come together as one company around a product plan consistently, it works. There's no doubt that the success of that campaign was based on the consistency of message. As far as perception and reality go, there's been a lot written about that. But, it's a very important example to look at in terms of lessons. The lesson is: Give consumers something they're interested in, but also get the marketing and messaging in line.
Click here for a slide show on ethanol cars.