Issues: Oil & Energy

Thank you very much. It's a pleasure and an honor to be here this afternoon. I want to start by telling you a little about myself.

I am the son of an immigrant. My father came to the United States after World War II, to get a better education and to be part of the American Dream. And part of that dream was to own a car, an American car to be exact. My father was a loyal "Ford" man. He wouldn't have dreamed of buying anything else. Not only were Fords great cars, but my father wanted to support American workers. And I think that many of us in this room still share those values, supporting American workers building the best cars in the world.

I feel very fortunate to have my job in this remarkable time of change for Detroit automakers. I remember when I was a kid, waiting for Car and Driver and Motor Trend magazines to show up in the mailbox, and poring over the latest new cars. I want to see that excitement, that emotional connection, remain centered here on the Motor City. But today's America is not the same as the one I grew up in, and the excitement emanating from Detroit seems have turned into a growing anxiety.

You probably know the story better than I do. The signs, quite frankly, are very troubling:

• The Big Three's market share hit an all-time low last year, and it's still dropping.
  
  
• Toyota is neck-and-neck with Ford as the No. 2 automaker in the world, and has its sights set on surpassing GM for the title of No. 1.
  
  
• Sales of what used to be Detroit's most profitable vehicles are slumping badly. As the inventories grow, plants are being idled and thousands of American workers sidelined.
  
  
• The industry is locked in a profit-sapping incentive war -- one in which the Big Three have to offer almost four times the discount of their Japanese competitors -- as much as $6,000 per vehicle -- in order to move their inventory.
  
  
• Meanwhile, customers are lining up to pay premium prices for advanced technology, fuel-efficient hybrids, mostly from Japan.
  

As one analyst said recently, a "perfect storm" is brewing. The bottom line is that Detroit is fighting for its survival. High retirement and medical costs are an important part of the problem. But consider these critical facts:

• The era of cheap oil is over. Detroit has been riding a wave of cheap oil for over a decade now, but $20-to $25-per-barrel oil is a thing of the past. With global production capacity continuing to struggle to keep up with rising demand, we'll be lucky to see oil ever drop below $35 or $40 per barrel. Terrorists are well aware that with one strike, they could take a million barrels or more of Saudi crude off the market overnight. That's just one possible event that could easily send oil prices soaring to the $80 per barrel in today's dollars that we saw at the height of the second oil crisis. Three or four dollar-a-gallon gasoline? It's possible, even likely over the next five years.
  
  
• And let's not forget about global warming. Most of the world's industrialized countries have now committed to cutting global warming pollution. Those nations will only be importing clean vehicles. And these are your most valuable foreign markets. In North America, automakers are fighting a rearguard action against a groundswell of state demand to regulate carbon pollution from tailpipes. And the automakers have virtually no hope of stopping efforts in Canada to set new CO2 pollution standards.
  

These forces means that automakers are coming under increasing pressure to build clean and efficient vehicles. Even the Chinese have adopted increasingly stringent fuel economy standards. And the Chinese market may surpass the U.S. market in size in about 10 years and is critical to the fortunes of automakers.

To meet these challenges there is a simple prescription: compete. Build the best damn vehicles in the world; build vehicles that inspire and excite, vehicles that are better than anything else out there. And build with the clean, efficient powertrains the market needs now. These vehicles are hybrids.

There's no doubt the market for hybrids is set to take off. Over the next three years, the number of hybrid models will increase to almost 20, and by 2012, there could possibly be more than 50 models. These are real volumes, and real value. If you don't build them, someone else will, and they will take your market share. Even under a business-as-usual scenario, the global market for hybrids is by one estimate 4.5 million units by 2013 -- perhaps $65 billion in the U.S. alone in just eight years' time. And those forecasts don't even take into account the prospects of yet another oil shock, or the inevitable consequences on vehicle standards when this country gets serious about joining the rest of the world in fighting global warming.

Given these grave risks, any prudent automaker, at the minimum, needs to adopt hybrids as a hedge against the next oil shock in the near future and to remain competitive in the next decade. The wrong choice now could put you of business. How much are you willing to gamble?

You may be thinking, "How do we turn this big ship around? Detroit can't turn on a dime." But it can, and it has. Remember what happened during World War II? In a few short months, Detroit turned from producing Studebakers and Buicks to Sherman tanks and B-24 bombers. It was the engine for the "arsenal of democracy," and we couldn't have won the war without it.

Today, we are facing a new challenge: the struggle to break the chain between our national security and our energy security. It's a challenge that can't be won by tanks and bombers. We need to reduce our dependency on foreign oil. We need to invest in America's factories, rather then sending our dollars overseas to oil-rich areas of the world that are unstable and increasingly hostile to our country. We need to put American ingenuity back to work building clean, fuel-efficient cars. And just like in World War II, we need all of America to come together, to pitch in, to help solve these problems.

I know we haven't always seen eye to eye, and we'll continue to have our differences. But we do have common ground to build on. NRDC believes that a healthy environment goes hand in hand with a healthy economy. We believe this country can continue to have strong economic growth and a high standard of living, while cutting our oil dependency and cutting global warming pollution. And we believe, quite strongly, that we must invest in America.

Last month, the non-partisan National Commission on Energy Policy recommended exactly that. This group, which included industry and environmentalists, Republicans and Democrats, called for $3 billion in tax credits to manufacturers that build efficient vehicles and to consumers who buy them.

Let me end with a few thoughts about the future. Imagine a future where instead of being hounded by environmentalists, you're rewarded for helping cut petroleum dependency and solving global warming. In eight years, when my son Henry is 16, I want him to have the opportunity to buy a hybrid. And I want him to have his choice of high-quality, high-performance hybrids built in America.

We're eager to help make this future a reality. We're ready to fight to get you the resources you need to become competitive in this critical market.

This is not pie-in-the-sky. We can do this. Let's send those lawyers and lobbyists home (from both sides of the fence), and put American ingenuity to work.

Thank you very much for your attention.