Readers: this blog is set in the future (sometime after the year 2020). Each entry assumes there has been a 5th revolution in the US — the Revenge Revolution. More about the Revenge Revolution, a list of earlier revolutions and the author, Entry #1.
Periodically I write a “sense check” to assess whether in the next few years, a revolution in the US is still possible or whether the entire exercise is based on a statistical aberration — i.e., a roughly 50-year cycle between major upheavals in the US. Most recent sense check, Entry #332.
The past few entries have been a break from the craziness in Washington. Entry #346 started discussing a project that continues to generate considerable interest — the GM EV1, the first modern electric vehicle, which was introduced more than 25 years ago.
There are two sides to the EV1 story — product and non-product. The product side has been reasonably well documented. In my view, the non-product side of the story is far from complete, and what’s been told so far is misleading. The series of entries has been an attempt to provide addition insight. If nothing else, the series has been a diversion from the madness in Washington and has provided a good lesson or two. (If you have not read Entries #346-#349, suggest you do so before reading this entry.) Also, thanks very much to editors for these entries — my wife Pamela and Wayne Henegar, who was also on the GM EV-1 program.
This is intended to be the final entry of the series about the “inside story” of GM innovative electric vehicle, EV-1…although one never knows. The ending of the EV-1 is both sad and happy.
Sad because the EV-1 met an untimely and ugly death. Happy because many things were learned from the EV-1 program and the program has continued to this day to influence development of electric vehicles worldwide. The demand for and availability of electric vehicles has continued to grow. Even such storied brands as Porsche are introducing electric vehicles.
The EV-1 set the standard for electric vehicles, both in terms of technology innovation as well as quickly building an emotional bond with a wide swath of people. It truly bothers me to say this, but I think the auto company that so far has best captured the spirit EV-1 brought to electric vehicles has been Tesla and not General Motors.
To finish the EV-1 story, let’s start at the end and work backwards to the day the music really died. The formal death of EV-1 was in 2002. The formal death included an orderly return to GM of all EV-1’s that were on lease to customers, mostly in California.
The EV-1’s were only leased and not sold. Why only leased? Keep in mind the EV-1’s were still “experimental” by auto industry standards. Even though the EV-1’s were fully functional and met all federal safety standards, a number of items on the car had not been tested as thoroughly as most regular production models.
Leasing also allowed GM to restrict use of the cars to certain areas – initially California and later some parts of Arizona and Georgia. Leasing enabled GM to avoid what would have become a logistics nightmare. When title to a car/light-duty is transferred from the auto manufacturer to the buyer, the auto company becomes liable for providing parts and service for at least 10 years, in some states the requirement is longer.
In addition, if the owner moves from say California to Vermont, the auto company must provide service at an authorized dealership. For the EV-1 that meant possibly training dealer technicians or providing direct service to many locations throughout the country where there might be only a few EV-1’s in use.
While cancelling the EV-1 program was a strategic blunder, what GM did after the cars were returned from lease may be one of the greatest PR blunders in automotive history. After the program was canceled, remaining leases were not renewed and all EV-1’s had to be returned to GM.
So far, so good. But then what did GM do with the cars? GM crushes all but a few EV-1’s, which were donated to museums and universities but with the driveline disabled.
The giant PR mistake consisted of two components. The first mistake? With a minimal amount of effort and cost GM could have updated the cars and re-leased the EV-1’s. Doing so would have allowed GM to continue to gather customer data and maintain a positive public image about developing electric cars.
The second mistake? How the cars were disposed of. Rather than explaining to the public why the cars needed to be crushed, GM tried to keep the crushing a secret. Hard to do with that many cars and car crushers often located in open areas with no trees or other cover.
You’d think someone in GM might have remembered a previous PR fiasco, but apparently not. In the 1960’s (many people from that era had not yet retired from GM) there was a huge public outcry against GM after disclosure GM had hired a private detective to tail Ralph Nader after he published the book, “Unsafe at Any Speed,” which was critical of the safety of the Chevrolet Corvair. I guess reviewing company history and lessons learned was not part of the discussion whether to crush EV -1’s.
What happened to GM’s image after the public found out about the crushing? Almost overnight GM’s image went from good guy trying to help the environment to bad guy. Out the window went all the positive gain in GM’s image that started when the EV-1 was introduced. In fact, GM’s image slipped from positive to negative.
The public outcry over the GM crushing EV-1’s helped spawn the movie, “Who Killed the Electric Car?” Given the seemingly esoteric topic, the movie was remarkably popular. When it premiered in Charlotte, I was invited to attend. Following the movie, there was a spirited Q&A session that lasted almost an hour. The popularity of the movie helped erode GM’s image further.
But did the EV-1 really die when the cars were crushed? Or, did the EV-1 program suffer a mortal wound sometime before, and that would lead to its death? From my perspective, the real death of the EV-1 was in late 1992, years before the public demise. In blog Entry #349, I discussed how the GM financial staff viewed the EV-1 as a cost center. Entry #349 also raised a question whether there was a conspiracy among financial executives to set up, then justify replacing Chairman Robert Stempel, who had succeeded Roger Smith. Stempel was the first chairman in some time not from the financial staff.
Financial staff executives knew whoever followed Roger Smith as chairman would be faced with a host of difficult problems created while Smith was chairman in the 1980’s. The effect of most of these problems was a cash drain and reduced ability by the operating divisions to generate additional cash. In addition, it was clear by the late 1980’s that the US economy was weakening and likely would slide into a recession. The recession would cause auto sales to slow and cash reserves to erode further.
Regardless of who was appointed chairman, no question GM needed to cut expenditures. But where to cut? The financial staff continued its drumbeat that all costs associated with the EV-1 were of no value elsewhere in the company, despite evidence to the contrary.
How was the EV-1 program affected as GM looked for cash? Here’s the scene in fall 1992. Location: General Motors Building, Detroit, conference room near the boardroom. Time, 3:00 p.m.
Attendees at the EV-1 status review meeting: on the corporate side are the chairman, president and two senior financial-staff executives. Representing EV-1 are four executives, including me.
Meeting content includes an update of engineering developments, review of marketing programs, and review of program cost. During the meeting, the chairman takes notes and asks a number of questions. The president takes no notes and does not ask a single question.
At precisely 5:00 p.m., the president stands, turns to the chairman and states, “Bob (Stempel), you can’t afford the program.” The president then excuses himself and leaves the meeting. The meeting concludes shortly thereafter.
After the internal review but before the next meeting of the Board, usually the first Monday of the month, Bob Stempel resigned as chairman and retired from GM. Soon thereafter the Board announced that Jack Smith would be promoted from president to the CEO’s role. The chairman’s role was assigned to an outside Board member.
The Board also approved a significant cutback in staff throughout the company as well as a cutback funding for certain product programs, including the GM EV-1. All the cutbacks, including funding for the EV-1, seems consistent with the idea that Stempel had been set up as the fall guy before someone from the financial staff could ride in on a white horse and save the company.
Oh, I almost forgot. What date did the Board formally approve cutting back on the EV-1 program? An action that in my opinion effectively killed the momentum of the only program which was improving GM’s image; a program which had the potential to attract to GM younger buyers who were more prone at the time to buy Imports, especially Japanese models. What date was the Board meeting that mortally wounded this program? None other than December 7th.
OK, so the Board was tone deaf to the irony of the date of their decision. Not having been privy to the discussion in the Board room, one has to wonder how objective the presentation was about the EV-1 program. Given the negative attitude toward EV-1 of the incoming CEO and his former colleagues on the financial staff, which usually coordinated presentations to the Board (a job I held for a while), I have serious doubts many of the positive aspects of the EV-1 program were presented.
But all connected with EV-1 program has not been lost. A number of positive aspects of the program seem relevant today. For me, probably the biggest takeaway has been how a small group of people with such a limited budget could build such a huge following and have such a lasting impact. By traditional automotive standards, the size of the individual staffs, amount of the engineering budget, amount of the marketing budget and other support was tiny.
By almost any measure, we were also an eclectic group – some staff members had lots of auto experience; some had almost none. Yet, collectively we became a highly effective team that had a major positive impact on GM’s image and set the standard for a new generation of electric vehicles.
GM senior management’s failure to realize the positive benefits of the program, especially how EV-1 improved GM’s image among younger generations, was an indication then and now that GM senior management was too focused on costs and not focused on generating revenue. The concept of a company trying to cut costs and “save its way into prosperity” never works. Such an approach often is a path to bankruptcy.
The focus of senior management on cost savings and not revenue generation also alienated a number of younger, more innovative-thinking executives inside the company. Many of these innovators left GM. Their departure left GM with far fewer executives willing to take risks and try new ideas, just at the very time GM needed this kind of thinking.
The combination of focusing on cost and avoiding any kind of risk taking proved devastating. GM’s loss of market share that started in the 1980’s because of actions by then chairman Roger Smith continued throughout the 1990’s. By the time GM finally declared bankruptcy in 2008, GM’s share of cars/light-duty trucks sold in the US had fallen from about 45.0% in 1980 to less than 25.0% and was headed toward 20.0%. In say 2006, had GM maintained the share it held in 1980, GM would have sold an additional 3,500,000 cars and trucks in the US.
Could EV-1 have saved GM from bankruptcy? As a car program, no. Annual EV-1 volume was too small to offset declines in other carlines. However, the spirit, enthusiasm and innovation that was generated by the EV-1 program, both inside and outside GM, could have been the catalyst to change thinking inside the company and stop the slide in market share. Only years after the EV-1 program was cancelled, did Rick Wagoner (another financial guy), who succeeded Jack Smith as chairman, admit cancelling EV-1 was a major mistake.
Another major irony of the program? EV-1 could have been Roger Smith’s best idea to help change GM and his legacy. Unfortunately for Smith, and GM, this great idea was preceded by actions that did irreparable harm to the company.
So, now you have another side of the GM EV-1 story. While writing these entries I was reminded of the opening words to Don McLean’s most famous ballad, “American Pie.”
“A long, long time ago
I can still remember how that music
Used to make me smile
And I knew if I had my chance
That I could make those people dance
And maybe they’d be happy for a while
But February made me shiver
With every paper I’d deliver
Bad news on the doorstep
I couldn’t take one more step
I can’t remember if I cried when I
Read about his widowed bride
But something touched me deep inside
The day the music died.”
Hope you found the series of interest. Comments welcome, as always.