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Secretary Chu's Remarks at Detroit Economic Club -- As Prepared for Delivery

January 11, 2012 - 9:30am

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Thank you, President Simon, for the introduction.  I also want to thank the Detroit Economic Club for hosting me.  For more than 75 years, the Detroit Economic Club has promoted thoughtful conversation on the important issues facing Michigan and our country, and I am pleased to be a part of that tradition. Finally, I want to recognize Michigan’s congressional delegation for its tireless work on behalf of the state’s families and industries.

It’s an exciting time to be in Detroit, the heart of America’s auto industry.  Yesterday, I toured the auto show and saw the amazing products that will hit the roads soon.  What began more than a century ago as a handful of local auto dealers showcasing their vehicles has grown into a global display of automotive innovation.  The Detroit Auto Show reminds us of the power of American ingenuity.  It also reminds us that we are in a fierce global competition for the auto jobs of the future.

We’re here at an important moment for the U.S. auto industry.  Only a few years ago, the industry stood on the brink of collapse.  Today, it’s a much brighter picture.  After seven straight years of decline, America’s auto manufacturers expanded their output by 35 percent in 2010.  Last year, for the first time in roughly two decades, Chrysler, Ford, and General Motors all increased their U.S. market share.  In the next few years, the Center for Automotive Research projects that auto and supply manufacturers will add more than 100,000 U.S. jobs[i]

This revival wasn’t destined to happen.  In fact, some in Washington were ready to throw in the towel and let America’s auto industry fold. 

President Obama refused to sit back and watch the industry and potentially more than one million jobs fade away[ii].  He made difficult and often unpopular choices to provide support to GM and Chrysler and to prevent catastrophe for the industry, the economy, and auto communities across the country.  In return, the President required GM and Chrysler to restructure to become more competitive.  Now, only a few years after its darkest days, the U.S. auto industry is making a comeback.

The President took action because auto manufacturing is a cornerstone of America’s industrial base and a lifeblood of our economy. A 2010 report[iii] found that U.S. auto manufacturers, suppliers, and dealers support nearly 8 million private sector jobs. This includes jobs directly connected to the industry like manufacturing, engineering, and sales, as well as other jobs that benefit when workers spend their paychecks buying food and clothes, visiting the doctor or paying their child’s college tuition. 

While we’ve weathered the storm, we can’t rest now.  As our country competes for automotive leadership, our choice is clear: innovate or be overtaken.

Discovery and invention are not the same as innovation.  One of my favorite stories is how the United States became the leader of the auto industry for the better part of the 20th century.  Gottlieb Daimler and Karl Benz invented the modern gasoline-powered internal combustion engine in Germany in the late 1800s.  The first automobiles were difficult to build and expensive to buy, putting them out of reach for most people. 

Henry Ford saw an opportunity and set out to turn the automobile from an extravagant luxury to “a car for the great multitude.”  After years of experimentation and testing, Ford introduced the moving assembly line in 1913, revolutionizing manufacturing.  The number of cars produced per worker hour increased eight-fold. Did that mean that workers lost their jobs? No.  It meant that car prices dropped and the market exploded.  More cars were sold, more factories were built, and more workers were hired – and America became the dominant auto manufacturing force in the world.

Innovation propelled the United States to the top 100 years ago, and it can do so again as we compete in the changing landscape of the 21st century. 

In the coming decades, the price of oil will likely rise, driven by the laws of supply and demand.  Consumers will increasingly demand more fuel-efficient vehicles.

At the same time, more and more car buyers will live in emerging economies like China, India, and Brazil.  In recent years, China surpassed the United States to become the world’s largest auto market.  By 2050, the number of vehicles on the road is expected to double to two billion. 

What do these developments mean for the U.S. auto industry?  We need to continuously innovate so that the highly efficient vehicles that global consumers want are powered by American technologies and made by American companies. 

When the great hockey player, Wayne Gretzky, was asked how he positions himself on the ice, he replied: “I skate to where the puck is going to be, not where it’s been.” America should do the same.

To strengthen our position, the Obama Administration has proposed landmark standards that will increase U.S. fuel economy to nearly 55 miles per gallon for cars and light-duty trucks by Model Year 2025.

These standards, combined with other steps the Administration has taken to increase fuel efficiency, will have real results for American families.  By 2025, they will:

  • Save families an average of more than $8,000 in fuel costs per vehicle;

 

  • Reduce oil consumption by 2.2 million barrels a day – enough to offset nearly a quarter of what we currently import; and

 

  • Keep more than 6 billion metric tons of greenhouse gas emissions from polluting the air we breathe.

Just as importantly, these standards will help U.S. manufacturers compete in overseas markets like Europe and Japan, which already have tough standards.  Finally, they will drive American innovation as industry develops advanced combustion technologies, lighter and stronger materials, improved electric vehicle components, and a host of other products. This can lead to stronger companies, whole new industries, and more jobs in Michigan.

The Energy Department works with America’s manufacturers, universities, national labs, and researchers to promote U.S. automotive leadership.  Throughout our history, from agriculture to aviation, from biotechnologies to computer technologies, the federal government has partnered with the private sector to unleash innovation and keep the United States at the technological forefront of important industries.

We are on the cusp of big breakthroughs in vehicle technologies.  The question is, “Which countries will make them?”  Asia and Europe are moving aggressively to seize technological leadership.  So must we.

That is why the Energy Department is supporting research and development across a broad portfolio of vehicle technologies, from efficiency and electrification technologies to alternative fuels. 

I could talk for hours on how the Department of Energy is investing in research and development that will help our automobile industry become increasingly competitive. Today, I want to briefly highlight some of our efforts.  A lot of our program goals are ambitious, and I can’t promise that everything will succeed, but I remain convinced that America’s innovators are the best in the world.

 

  • Research we’ve supported by the University of Wisconsin and Sandia National Labs has shown that low-temperature combustion could considerably improve engine efficiency and increase the fuel economy of light-duty vehicles by more than 50 percent.

 

  • For conventional internal combustion engine vehicles, a 10 percent reduction in vehicle weight can result in a six to eight percent improvement in fuel economy.  That is why we are supporting research and development of high-tensile strength steels, aluminum and magnesium alloys, and carbon fiber composites. Our goal is to reduce body and chassis weight by 50 percent.

 

  • Through our ARPA-E program, we’ve invested in a cutting-edge GM project aimed at recovering waste heat in automobiles.  If successful, it could increase fuel efficiency by up to 10 percent.

 

  • Research supported by the Department has led to significant progress in fuel cells.  This includes helping to greatly reduce manufacturing costs for automotive fuel cells.

 

  • And advanced battery technologies continue to take big steps forward.  R&D work in nickel metal hydride batteries supported by the Energy Department two decades ago paved the way for first-generation hybrid electric vehicles, while work done by Argonne National Lab has improved lithium-ion batteries for vehicles entering the market today. 

 

Decades ago, we let leadership in battery manufacturing shift to Asia.  Today, we’re catching up, but our goal is to become the market leader. Research supported by the Energy Department is pushing the limits of energy density and cost for lithium-ion batteries, while also exploring even more advanced battery concepts such as lithium-air, lithium-sulfur, and a whole class of metal-air batteries. We are still in the early days of this work, but we are seeing some promising results.

Overall, the Department of Energy is partnering with industry to reduce the manufacturing cost of advanced batteries.  While a typical battery for a plug-in hybrid electric vehicle with a 40-mile electric range cost $12,000 in 2008, we’re on track to demonstrate technology by 2015 that would reduce the cost to $3,600.  And last year, we set a goal of demonstrating technology by 2020 that would further reduce the cost to $1,500 – an accomplishment that could help spur the mass-market adoption of electric vehicles.

The advanced battery competition is a race the United States can and should win. I am pleased to announce that we are launching a new research center this year to dramatically improve battery and energy storage technologies for vehicle and grid applications.  I want to thank Michigan’s congressional delegation, especially Senator Stabenow, for its leadership in supporting the project.

This Energy Innovation Hub, modeled after America’s great industrial labs in their heyday, will bring together scientists, engineers, and industry to develop fresh concepts and new approaches to making batteries that last longer, go farther, and cost less. This research center won’t focus on incremental improvements, but on technologies that would enable us to leap forward and could allow proto-type testing in this decade.  Imagine a low-cost battery that allows you to drive a few hundred miles, recharge while you stop for lunch, and then drive on for another few hundred miles.  Achieving this goal could be transformative.

While research and development is absolutely essential, we must link it to manufacturing.  To compete in the global economy, it’s not enough for the United States to invent technologies; we have to make them in America and sell our products worldwide. To borrow a Super Bowl line, we want “Imported from Detroit” to be advertised around the world.

That is why the Energy Department’s auto manufacturing loan program has committed more than $8 billion in loans to support companies that will make next-generation, fuel-efficient vehicles and components in the United States that can compete in the international market. 

The projects supported by the Advanced Technology Vehicles Manufacturing program are employing tens of thousands of workers, reducing our dependence on foreign oil, and promoting U.S. leadership across an array of innovative technologies.

For example, Ford received a nearly $6 billion loan to retool and modernize factories across Illinois, Kentucky, Michigan, Missouri, and Ohio to produce higher-quality, more fuel-efficient vehicles.  A loan to Nissan North America is helping the company to produce advanced batteries and the all-electric LEAF in Tennessee.  And we’re supporting Fisker and Tesla, two newer manufacturers who are building innovative electric vehicles in what will be a hotly competitive market. 

Bolstering this effort, grants from the American Recovery and Reinvestment Act are supporting 30 new U.S. plants to manufacture advanced battery and electric vehicle components. In Michigan, we are supporting several battery facilities and education training programs.  Companies like Johnson Controls and A123 Systems have said that these grants were critical to their decision to locate their facilities in the United States instead of overseas.

In 2009, when President Obama took office, the U.S. had only two factories manufacturing advanced vehicle batteries.  By 2015, the United States will be able to produce enough batteries and components to support one million plug-in hybrid and electric vehicles, thanks to Recovery Act investments and the ATVM loan program. 

While some critics were willing to let the U.S. auto industry disintegrate, the Obama Administration has helped it to innovate, improve, and grow. 

A New York Times headline from 100 years ago read, “American Cars Make Headway.”  The article went on to discuss how U.S. cars could be found in countries across the globe.  As we look to the future, innovation will be key to putting even more American technologies and vehicles on the world’s roads. 

America can and must make the most competitive cars in the world.  Our workers have the skills.  Our engineers have the ingenuity.  And we see here that the U.S. auto industry has the ability to innovate with better internal combustion engines, lighter weight materials, innovative systems engineering, and jazzy features that are the automobile version of “avionics.” For lack of a better name, let’s call it “auto-onics.” 

To compete in a world market that will double to two billion automobiles in the next 40 years, the United States has to make fabulous automobiles; cars that are fuel-efficient and fun.

Thank you.

 

 



[ii]“ The Impact on the U.S. Economy of the Successful Automaker Bankruptcies,” Center for Automotive Research, November 2010, http://www.cargroup.org/pdfs/bankruptcy.pdf; “The Resurgence of the American Automotive Industry,” White House June 2011 report, http://www.whitehouse.gov/sites/default/files/uploads/auto_report_06_01_...

 

[iii] Center for Automotive Research, “Contribution of the Automotive Industry to the Economies of All Fifty States and the United States,” April 2010  http://www.cargroup.org/pdfs/association_paper.pdf

 

 

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