[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]





                       CLIMATE CHANGE AND ENERGY
                       SECURITY: PERSPECTIVES FROM
                        THE AUTOMOBILE INDUSTRY

=======================================================================

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON ENERGY AND AIR QUALITY

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 14, 2007

                               __________

                           Serial No. 110-19


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov

                                  ------

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                    COMMITTEE ON ENERGY AND COMMERCE

                     JOHN D. DINGELL, Michigan, Chairman

HENRY A. WAXMAN, California               JOE BARTON, Texas
EDWARD J. MARKEY, Massachusetts           Ranking Member
RICK BOUCHER, Virginia                    RALPH M. HALL, Texas
EDOLPHUS TOWNS, New York                  J. DENNIS HASTERT, Illinois
FRANK PALLONE, Jr., New Jersey            FRED UPTON, Michigan
BART GORDON, Tennessee                    CLIFF STEARNS, Florida
BOBBY L. RUSH, Illinois                   NATHAN DEAL, Georgia
ANNA G. ESHOO, California                 ED WHITFIELD, Kentucky
BART STUPAK, Michigan                     BARBARA CUBIN, Wyoming
ELIOT L. ENGEL, New York                  JOHN SHIMKUS, Illinois
ALBERT R. WYNN, Maryland                  HEATHER WILSON, New Mexico
GENE GREEN, Texas                         JOHN B. SHADEGG, Arizona
DIANA DeGETTE, Colorado                   CHARLES W. ``CHIP'' PICKERING, 
    Vice Chairman                           Mississippi
LOIS CAPPS, California                    VITO FOSSELLA, New York
MIKE DOYLE, Pennsylvania                  STEVE BUYER, Indiana
JANE HARMAN, California                   GEORGE RADANOVICH, California
TOM ALLEN, Maine                          JOSEPH R. PITTS, Pennsylvania
JAN SCHAKOWSKY, Illinois                  MARY BONO, California
HILDA L. SOLIS, California                GREG WALDEN, Oregon
CHARLES A. GONZALEZ, Texas                LEE TERRY, Nebraska
JAY INSLEE, Washington                    MIKE FERGUSON, New Jersey
TAMMY BALDWIN, Wisconsin                  MIKE ROGERS, Michigan
MIKE ROSS, Arkansas                       SUE WILKINS MYRICK, North Carolina
DARLENE HOOLEY, Oregon                    JOHN SULLIVAN, Oklahoma
ANTHONY D. WEINER, New York               TIM MURPHY, Pennsylvania
JIM MATHESON, Utah                        MICHAEL C. BURGESS, Texas
G.K. BUTTERFIELD, North Carolina          MARSHA BLACKBURN, Tennessee
CHARLIE MELANCON, Louisiana                
JOHN BARROW, Georgia                            
BARON P. HILL, Indiana                          
                                                                                                          
                                -------

                           Professional Staff

                  Dennis B. Fitzgibbons, Chief of Staff
                  Gregg A. Rothschild, Chief Counsel
                    Sharon E. Davis, Chief Clerk
                  Bud Albright, Minority Staff Director

                                  (ii)














                 Subcommittee on Energy and Air Quality

                    RICK BOUCHER, Virginia, Chairman
G.K. BUTTERFIELD, North Carolina     J. DENNIS HASTERT, Illinois,
    Vice Chairman                         Ranking Member
CHARLIE MELANCON, Louisiana          RALPH M. HALL, Texas
JOHN BARROW, Georgia                 FRED UPTON, Michigan
HENRY A. WAXMAN, California          ED WHITFIELD, Kentucky
EDWARD J. MARKEY, Massachusetts      JOHN SHIMKUS, Illinois
ALBERT R. WYNN, Maryland             JOHN B. SHADEGG, Arizona
MIKE DOYLE, Pennsylvania             CHARLES W. ``CHIP'' PICKERING, 
JANE HARMAN, California                  Mississippi
TOM ALLEN, Maine                     STEVE BUYER, Indiana
CHARLES A. GONZALEZ, Texas           MARY BONO, California
JAY INSLEE, Washington               GREG WALDEN, Oregon
TAMMY BALDWIN, Wisconsin             MIKE ROGERS, Michigan
MIKE ROSS, Arkansas                  SUE WILKINS MYRICK, North Carolina
DARLENE HOOLEY, Oregon               JOHN SULLIVAN, Oklahoma
ANTHONY D. WEINER, New York          MICHAEL C. BURGESS, Texas
JIM MATHESON, Utah                   JOE BARTON, Texas (ex officio)
JOHN D. DINGELL, Michigan (ex officio)
                                 ------                                

                           Professional Staff

                     Sue D. Sheridan, Chief Counsel
                      Bruce Harris, Policy Advisor
                 Jonathan Cordone, Deputy Chief Counsel
                    David McCarthy, Minority Counsel
                    Chris Treanor, Legislative Clerk

















                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Rick Boucher, a Representative in Congress from the 
  Commonwealth of Virginia, opening statement....................     1
Hon. J. Dennis Hastert, a Representative in Congress from the 
  State of Illinois, opening statement...........................     3
Hon. Mike Doyle, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     4
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................     5
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, prepared statement................................     7
Hon. Jane Harman, a Representative in Congress from the State of 
  California, prepared statement.................................     9
Hon. Steve Buyer, a Representative in Congress from the State of 
  Indiana, opening statement.....................................     9
Hon. Jay Inslee, a Representative in Congress from the State of 
  Washington, opening statement..................................    10
Hon. Mike Rogers, a Representative in Congress from the State of 
  Michigan, opening statement....................................    11
Hon. Tammy Baldwin, a Representative in Congress from the State 
  of Wisconsin, opening statement................................    11

                               Witnesses

Ron Gettelfinger, president, International Union, United 
  Automobile, Aerospace and Agricultural Implement Workers of 
  America, Detroit, MI...........................................    12
    Prepared statement...........................................    58
    Answers to submitted questions...............................    68
Rick Wagoner, chairman and chief executive officer, General 
  Motors Corporation, Detroit, MI................................    14
    Prepared statement...........................................   123
    Answers to submitted questions...............................   131
Jim Press, president and chief operating officer, Toyota Motor 
  North America, New York, NY....................................    16
    Prepared statement...........................................   104
    Answers to submitted questions...............................   113
Alan R. Mulally, president and chief executive officer, Ford 
  Motor Company, Dearborn, MI....................................    18
    Prepared statement...........................................    78
    Answers to submitted questions...............................    88
Thomas W. LaSorda, chief executive officer and president, 
  Chrysler Group of DaimlerChrysler, Auburn Hills, MI............    20
    Prepared statement...........................................    46
    Answers to submitted questions...............................    49


















 
  CLIMATE CHANGE AND ENERGY SECURITY: PERSPECTIVES FROM THE AUTOMOBILE

                                INDUSTRY

                              ----------                              


                       WEDNESDAY, MARCH 14, 2007

                  House of Representatives,
            Subcommittee on Energy and Air Quality,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 2:00 p.m., in 
room 2123 of the Rayburn House Office Building, Hon. Rick 
Boucher (chairman) presiding.
    Members present: Representatives Melancon, Barrow, Markey, 
Wynn, Doyle, Harman, Gonzalez, Inslee, Baldwin, Hooley, 
Matheson, Butterfield, Dingell, Hastert, Upton, Whitfield, 
Shimkus, Pickering, Buyer, Bono, Walden, Rogers, Myrick, 
Sullivan, Burgess, and Barton.
    Also present: Representatives Stupak and Engel.
    Staff present: Sue Sheridan, Laura Vaught, Jonathan 
Cordone, Bruce Harris, David McCarthy, Kurt Bilas, Lorie 
Schmidt, Chris Treanor, and Peter Kielty

    Mr. Boucher. The subcommittee will come to order. We have a 
recorded vote pending on the floor of the House, and we are 
going to recess the subcommittee at this point for the purpose 
of recording that vote, but a number of members who were 
present at this point wanted their presence recorded so that 
their priority in asking questions would be preserved. And so 
with that having been said the committee stands in recess until 
5 minutes after the conclusion of this vote.
    [Recess.]

  OPENING STATEMENT OF HON. RICK BOUCHER, A REPRESENTATIVE IN 
           CONGRESS FROM THE COMMONWEALTH OF VIRGINIA

    Mr. Boucher. The subcommittee will come to order. This 
afternoon we continue our focus on the proper United States 
response to the challenge of climate change by examining the 
views of leaders in the automotive industry. Our goal this year 
is to produce legislation that has an economy-wide application. 
Each sector of the economy will make a greenhouse gas control 
contribution. Applying this broad measure to the transportation 
sector clearly poses special challenges.
    Unlike some other industries, auto manufacturers are 
subject to a pre-existing regulatory program, CAFE, which is 
designed to promote fuel economy but which also has a limiting 
effect on greenhouse gas emissions, notably the emission of 
carbon dioxide. Much thought must be devoted to an effective 
means of integrating the existing CAFE regulatory program into 
the new regulatory structure which will specifically target 
greenhouse gases.
    While we have not made decisions at this point about the 
shape of the greenhouse gas regulatory program, some form of 
cap and trade system is obviously a major candidate for 
consideration when an approach is adopted.
    Therefore, in order to gain maximum benefit from today's 
discussion, I would welcome views from the witnesses on how cap 
and trade might apply to the automobile sector and how do we 
effectively integrate CAFE along with a cap and trade 
greenhouse gas emission program. Some have suggested that 
because transport emission sources are individually small, 
highly dispersed, and mobile, direct CO\2\ emissions monitoring 
per vehicle would be too costly to administer and that it is 
better to use proxies for each vehicle, such as the fuel that 
contains the carbon, or in the alternative, the fuel economy of 
the vehicle. Comment from our witnesses on these possible 
alternative approaches would be very helpful.
    If transportation fuel is chosen as the best foundation for 
a transportation sector cap and trade program, where in the 
fuel distribution system should the accounting take place and 
tradable credits be generated, should that be upstream at the 
refinery gate and the port of entry, or should it be further 
downstream at the point of final sale for the fuel? Another 
question that we are asking is whether alternative 
transportation fuels pose special challenges for emission 
trading system design.
    As these questions suggest, designing a greenhouse gas 
regulatory program for the transportation sector is a 
formidable task. While I don't expect our witnesses this 
afternoon to have complete and detailed answers to all of these 
questions, in posing them I want to direct your thinking to 
obtaining the answers and sharing those with use as we consider 
our approaches to structuring this program.
    We are pleased to have each of our witnesses here today, 
and momentarily we will be turning to them for their 
statements.
    I want to say just a word this afternoon about our schedule 
for drafting a greenhouse gas control measure. Earlier this 
year the Speaker assured me that this committee would have the 
time that it needs in order to produce a carefully-constructed 
bill. That early assurance was reconfirmed this week by the 
statement from the Speaker's office that climate change 
legislation will not be part of the July floor agenda.
    It is my intention to continue our hearing process through 
the early spring and then begin the bill drafting process when 
the hearing process is completed, with the goal of having the 
comprehensive climate change bill on the floor of the House 
later this year. House passage this year will provide ample 
time for a conference with the Senate during 2008, and then 
completion of the passage of climate change legislation and the 
presentation of a bill to the White House during the course of 
next year. That is our intention.
    Pursuant to a previous agreement between the majority and 
minority of the committee, the chairs and ranking members of 
both the subcommittee and full committee will be recognized 
this afternoon for 5-minute opening statements. Other members 
of the subcommittee and other members of the full committee who 
are participating in our hearing today will have the 
opportunity to offer a 1-minute opening statement. And then 
pursuant to the rules of the committee, any member who decides 
to waive an opening statement will have added to the time for 
posing questions allotted to that member the time that member 
could have used for an opening statement.
    At this time it is my pleasure to recognize the ranking 
member of this subcommittee, the distinguished gentleman from 
Illinois, Mr. Hastert, for 5 minutes.

 OPENING STATEMENT OF HON. J. DENNIS HASTERT, A REPRESENTATIVE 
             IN CONGRESS FROM THE STATE OF ILLINOIS

    Mr. Hastert. I thank the chairman, and thank you for 
holding this important hearing to discuss CAFE proposals and 
the auto industry's efforts to address climate change. Three 
weeks ago we heard from the administration on its proposal to 
address CAFE as part of the President's 2010 initiative, with a 
goal of reducing U.S. gasoline usage by 20 percent in the next 
10 years.
    I am very interested to learn about other initiatives that 
our domestic auto manufacturers are pursuing to reduce gasoline 
use and then to learn about the industry's reaction to the 
recent light truck rule. As you know, this rule and the process 
that accompanies that will be a precursor for how things may 
play out as we discuss modifying CAFE's standards for the 
passenger car fleets.
    Reducing gasoline consumption in part by strengthening CAFE 
standards addresses America's need for energy security. It must 
be part of our deliberations on energy and environmental 
policy. But CAFE is not the only means.
    We need to further increase our efforts to facilitate the 
use of alternative fuels, such as E-85 and biodiesel. For 
example, the E-85 dispensing pumps still await approval by 
Underwriters Laboratories, who have been dragging their feet 
now for almost a year. We also need to get more vehicles on the 
road that can actually use E-85. I want to hear from all the 
panelists on their efforts to increase production of flex fuel 
vehicles and their alternative-fuel vehicles and how soon in 
their best estimates we can expect real worldly results.
    I realize markets don't create themselves overnight. It 
will take time for the mainstream consumers to learn and 
appreciate the benefits of alternative fuels. And while I 
realize that industry is investing hundreds of millions of 
dollars in new advanced technologies like hybrid vehicles, fuel 
cells, and hydrogen vehicles, clearly more needs to be done. We 
all know the number of flex-fuel vehicles currently on the road 
remains relatively small, and the number of drivers who know 
their vehicles are especially equipped is even smaller. I am 
very interested to learn how the auto industry is currently 
working to address this and other lingering concerns that are 
hindering the advancement of these fuels such as decreased fuel 
economy, price sensitivity, and market availability.
    To further complicate matters, even the transition to 
alternative fuels at retail gas stations has been complicated 
by infrastructure issues such as the UL suspending 
certification for fuel dispensers for E-85 because of unfounded 
corrosion concerns. At this time when others are being asked to 
do more to reduce emissions, does the auto industry need to be 
doing more to work through all the aspects of the market, from 
manufacturer to retail to fueling?
    Regarding the CAFE and the CAFE bill that passed this 
committee last year, it like the administration bill, would 
have given the Department of Transportation authority to 
establish fuel economy standards for passenger cars on a model-
size by model-size basis. Had we enacted it, the CAFE reform 
process would already be well under way, and we would have 
begun enjoying the fuel savings much sooner. So now we have 
some catching up to do.
    And while the administration has suggested a 4 percent 
increase in fuel efficiency it is controversial. It is either 
too aggressive or not aggressive enough. I believe any 
authority that is derived from a rulemaking should take careful 
consideration of safety, cost to automakers, the technologies 
involved, and the market and consumer choice. We in Congress 
are certainly not the experts on all of these issues. The 
examinations this committee gave last year yielded a bill with 
excellent balance in my view, and I am interested in hearing 
from our panelists where they are on these issues today. I look 
forward to their testimony and yield back the balance of my 
time. Thank you, Mr. Chairman.
    Mr. Boucher. The Chair thanks the gentleman from Illinois 
and now recognizes the gentleman from Pennsylvania, Mr. Doyle, 
for 1 minute.

   OPENING STATEMENT OF HON. MIKE DOYLE, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Doyle. Thank you, Mr. Chairman. Mr. Chairman, I have 
consistently voted against arbitrarily raising CAFE standards 
because I felt that that policy could threaten thousands of 
jobs across our country. However, I must tell you I have grown 
extremely frustrated by the slow pace of the industry's 
progress in achieving better fuel economy. It is time for 
excuses to end and time for us to work together on a real 
solution for improvement.
    The question is no longer if we are going to do something 
but rather what are we going to do. And there is no silver 
bullet to fix the problem. We are left with many options as to 
how to achieve this goal. I look forward to hearing as to how 
our panel will work as active partners in the pursuit of better 
fuel economy. I want to know what they can and will do, and I 
would like to hear what they believe we can do here in 
Washington to assist them.
    Global warming is not a problem that can be fixed in 
Washington, Detroit, or any specific location. It is a problem 
that will take comprehensive solution pursued by a diverse 
group of participants from every sector of the American 
economy. By the end of this hearing I want to know if the auto 
industry will be a real partner. As such, I will pursue 
policies that reflect that level of commitment. I yield back.
    Mr. Boucher. I thank the gentleman and now call on the 
ranking member of the full committee, the gentleman from Texas, 
Mr. Barton for 5 minutes.

   OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Barton. Thank you, Mr. Chairman. I appreciate you 
holding the hearing, I appreciate our witnesses being here 
today, especially given the status in their industry. It is 
good to have you here, but I want you to get back to your 
offices so we can keep the American economy going as 
efficiently as possible.
    We are having a series of hearings, and I want to thank Mr. 
Boucher and Mr. Dingell for these hearings on global warming 
and climate change. I am a skeptic. I don't think we need to be 
rushing to legislation on this issue given the fact that our 
Earth cycles in thousands of years in terms of its climate 
warming or cooling. It seems silly to me to have to rush to 
judgment in weeks or even months on an issue of this 
importance.
    I am glad that we have our automobile industry 
representatives here today, both on the management side and the 
labor side. We are going to look at the CAFE issue and how it 
has been addressed in the past and how it may need to be 
addressed in the future. Last year this committee passed a CAFE 
reform bill. It passed committee, did not go to the floor, did 
not go to the Senate, did not become law. Had the bill that 
this committee passed become law, we would be doing for 
automobiles what we have been doing for several years for light 
trucks. We would have given the Department of Transportation 
the authority to establish a fuel economy standard on a model-
size by model-size basis. That bill did not pass, but I think 
it was helpful in raising public awareness that there are 
current problems with the current CAFE system, and the current 
CAFE system is in need of reform
    With the recent success of the light truck rule, the 
administration has further expanded these concepts in its 2010 
proposal with reducing gasoline consumption through increased 
vehicle efficiency being one of its top priorities.
    I am particularly interested in hearing today our panel's 
reactions to the administration's suggested yearly 4 percent 
increase in fuel efficiency. How feasible is that goal? What 
kind of repercussions would occur within the industry if the 
administration proposal were enacted or if there were a number 
set in statute to accomplish that target? What market-based 
lessons have been learned through the recent history of 
gasoline price spikes and declines, and what are the industry's 
suggestions for moving forward, especially if the current 
status quo is not an option?
    I am also interested in hearing from our witnesses 
regarding the administration's proposal about tradable credits 
for manufacturers to buy and sell CAFE. I would especially like 
to hear from Toyota and GM, since Toyota has said they won't 
sell them, GM has said they won't buy them. Some say that 
allowing the trading of these kinds of credits could add 
flexibility in meeting CAFE goals, but there are still strong 
concerns and several uncertainties with this concept. So I 
really hope our witnesses address that issue today.
    It seems to me that a CAFE standard must be based on 
science and also on safety. We want people who know what they 
are doing to get the right balance of mileage and safety. We 
expect them to do it without destroying American jobs, 
especially jobs like the 2,000 assembly jobs at the GM assembly 
plant in my district in Arlington, Texas. This is one of the 
most complicated programs that NHTSA administers, and frankly, 
scientists and engineers should be better equipped to do it 
than activists and politicians.
    With that, Mr. Chairman, I will yield back. Again, I want 
to thank our witnesses for being here. This is a very important 
hearing, and I hope that all members will stay and participate.
    Mr. Boucher. Thank you, Mr. Barton. The chairman of the 
full committee, the gentleman from Michigan, Mr. Dingell0 is 
recognized for 5 minutes.
    Mr. Dingell. Mr. Chairman, I waive my right to an opening 
statement at this time. I want to commend you for your 
leadership and for the responsible and aggressive way in which 
you are handling these matters. I want to thank our witnesses 
for being with us, and note the presence of our old friend, 
Dave McCurdy, the new president of the Alliance of Automobile 
Manufacturers.
    Mr. Chairman, I defer then my opening statement, I commend 
you, and I thank you for your courtesy to me.
    [The prepared statement of Chairman Dingell follows:]


    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]


    Mr. Boucher. The gentleman from Michigan waives his opening 
statement. The gentlewoman from California, Ms. Harman, is 
recognized for 1 minute.
    Ms. Harman. Thank you, Mr. Chairman. I want to apologize 
for having to leave at 3:30 to chair another hearing, but I 
come from a part of the country where the automobile is more 
than just a mode of transportation. In Los Angeles the car is a 
cultural symbol and a way of life. It is no surprise then that 
the North American headquarters including the credit and R&D 
facilities of two major automakers are based in my district.
    I had a longer statement which I will put in the record, 
but I do especially want to welcome my constituent, Jim Press, 
and to salute the efforts that Toyota is making to make our 
planet healthier and a bit safer. The witnesses today can 
either take the opportunity to shape change, or they can resist 
it. I hope they will take the opportunity to shape change, 
because change surely will come. Today is the first birthday of 
my first granddaughter, and I would love to give Lucy, her name 
is really Lucy, a safer and healthier world, and working 
together we can do that. Thank you.
    [The prepared statement of Ms. Harman follows:]

 Prepared Statement of Hon. Jane Harman, a Representative in Congress 
                      from the State of California

    I come from a part of the country where the automobile is 
more than just a mode of transportation. In Los Angeles, the 
car is a cultural symbol and a way of life. It is no surprise 
that the research and development facilities of two major 
automakers are based in my district.
    Since I was first elected to Congress in 1992, I have 
watched with pride as my constituents engineered leaps and 
bounds in automotive technology and design. Hybrid cars--to 
cite one example--represent the first step in meeting the 
energy challenges of the 21st century that we are here to 
discuss and resolve. I'm proud to say that California has 
played an indispensable role in that technology.
    But hybrids are only the first step. The breakthroughs of 
the future--including plug-in hybrids and hydrogen fuel-cell 
vehicles--will be symbols of not only energy efficiency and 
changing business models, but of good corporate citizenship. We 
will rely on automakers to help us solve the climate change and 
energy independence problems we face today.
    The question is not whether we are pushing the ball 
forward--it is clear from the testimony we will hear today that 
innovation in the automotive industry is alive and well. The 
question is whether it will come fast enough.
    The science is in, and the news from the Middle East 
depressingly repetitive. Energy independence and reductions in 
greenhouse gas emissions cannot come soon enough.
    I hope our witnesses can help us find ways to push the 
envelope on R&D. As I've said before, done right, this is a 
win-win for both our planet and our economy.
                              ----------                              

    Mr. Boucher. Thank you, Ms. Harman. The gentleman from 
Michigan, Mr. Upton, for 1 minute.
    Mr. Upton. I am going to defer and reclaim my minute in 
questions.
    Mr. Boucher. The gentleman defers. The gentleman from 
Indiana, Mr. Buyer, for 1 minute.

  OPENING STATEMENT OF HON. STEVE BUYER, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF INDIANA

    Mr. Buyer. Thank you. I would like to thank all of you for 
coming. I agree with Mr. Barton. You live pretty busy lives, 
and I am glad you are here. I am also glad that Mr. Boucher is 
chairing this subcommittee. He is thoughtful, and he is 
deliberative, and I think you are here because I am just as 
concerned.
    Washington, DC, is a dynamic city that loves to make 
decisions and judgments based on the emotion of the moment. 
Now, if you gentlemen did that in your business, you wouldn't 
last very long. And Washington, DC, has a very poor reputation, 
and so your concerns are real, and I understand that is why you 
are here. In Indiana, obviously, we have a great history with 
the automobile invented there in Kokomo, Indiana. The 15 years 
I have represented 30 counties of Indiana, and I have got 
manufacturing facilities of every one of you, and a lot of, you 
are successful because there are a lot of great workers out 
there and innovators that are making it happen. And they are 
equally as concerned.
    So we will work through this, and I appreciate your 
presence here today.
    Mr. Boucher. Thank you, Mr. Buyer. The gentleman from 
Washington State, Mr. Inslee, for 1 minute.

   OPENING STATEMENT OF HON. JAY INSLEE, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF WASHINGTON

    Mr. Inslee. Thank you. I want to welcome Alan Mulally, 
native little Boeing company out in our neck of the woods in 
Washington State. I want to note our success in aeronautics 
because we believe in game changing, changing the game in 
aeronautics, and I am optimistic now we are going to tackle 
this beast of global warming because we are going to have some 
game changers out of your industry.
    And what I am interested in is how we can help create 
incentives and conditions for those true game changers to hit 
the road, and the reason I say that is that we have to reduce 
our CO\2\ emissions by a full 80 percent to stabilize CO\2\ 
emissions to pre-industrialized levels by 2050. Eighty percent 
reductions. We cannot do that by modest baby steps, incremental 
even, improvements. We have got to think of having whole 
revolutions in automobiles in this country, and I believe it is 
our destiny to lead the world to do that, and you have got the 
geniuses to do it.
    So what I am interested in particularly is how we shape a 
regulatory environment to create an incentive that have true 
revolutions in the fuels we use so that we can move to advanced 
cellulosic ethanol and have the pumps available and the flex-
fuel vehicles for Americans to use it broadly, not sort of on a 
marginal use. How we move to a true electrical platform, how we 
get to fuel cells, how we use the technology that is there 
today as quickly as possible to get it on the road. And I just 
think we have been stuck arguing about baby steps for now for 
20 years, and we have got cars with less mileage than they did 
when Jimmy Carter was President of the United States.
    So I look forward to this revolution. I would like to think 
this is the start of that revolution today and look forward to 
working with you.
    Mr. Boucher. Thank you, Mr. Inslee. The Chair now 
recognizes the gentleman from Michigan, Mr. Rogers, for 1 
minute.

  OPENING STATEMENT OF HON. MIKE ROGERS, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Rogers. Thank you, Mr. Chairman. Thank you for being 
here. I think it is incredibly important that we find the 
balance in this, and I want to commend all of you on the work 
that you have done, and sometimes I don't think that we in 
Congress give enough kudos to the investment, the amount of 
dollar investment that you make in research and development to 
get us to that next generation of alternative fuels. Your work 
on lithium batteries, your work on the next generation of 
ethanol engine, your hybrid technology. I know many of your 
companies are doing, you are looking at putting hybrids on 
heavier vehicles so you get a higher yield, a bigger bang for 
the buck. I know many of you have many lines that are over 30 
miles per gallon.
    So I hope that in this this is your opportunity to talk to 
us about that kind of investment that you make and the success 
that you think is right around the corner, and I think it is 
really exciting where we are in cars. My generation was going 
to the moon. The next generation was the E economy, and I think 
this generation is going to be that alternative fuel vehicle 
that Americans want to buy and park in their car and brag to 
their friends about. And I can guarantee you, if it is designed 
by Congress, it ain't going to be all that attractive. If you 
design it and develop it and build it and get it on those 
parking lots around those auto dealers, I know Americans will 
buy them, and we are all going to be better off for it.
    So I am eager to hear how you can do that, how we can help 
you and not punish you to that end. And I look forward to your 
testimony today. Thank you.
    Mr. Boucher. Thank you, Mr. Rogers.
    I am now pleased to recognize the gentlewoman from Oregon, 
Ms. Hooley, for 1 minute. Ms. Hooley waives her statement. The 
gentleman from Texas, Mr. Gonzalez, for 1 minute. Mr. Gonzalez 
waives his statement
    The gentlewoman from Wisconsin, Ms. Baldwin, for 1 minute.

 OPENING STATEMENT OF HON. TAMMY BALDWIN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF WISCONSIN

    Ms. Baldwin. Thank you, Mr. Chairman, and thank you to 
today's witnesses. It is one of the largest industries in the 
United States. The automobile industry plays an important role 
in addressing climate change, and in addition to being the 
major player in ongoing discussions about CAFE standards, auto 
companies also should be involved in conversations about 
increasing the energy efficiency through their day-to-day 
manufacturing operations. Both emissions output and energy use 
will only increase as more cars are on the road.
    For far too long I think that Congress has failed to take 
action or show the leadership required to meet today's 
challenges. We have not required that manufacturers take 
advantage of or make use of the most energy-efficient and 
technologically-advanced products that are available today. We 
have set CAFE standards that fall far below levels that we are 
currently capable of achieving. Quite frankly, until recently 
we in Congress have taken the easy way out. I think now is the 
time to push that envelope, and with your cooperation and input 
show that the American auto industry can be a leader in 
efficient and effective climate solutions.
     I look forward to hearing your testimony today about how 
you plan to contribute in that bold effort. Thank you, Mr. 
Chairman.
    Mr. Boucher. Thank you very much, Ms. Baldwin. Now 
recognized is the gentleman from Texas, Mr. Burgess, for 1 
minute.
    Mr. Burgess. Mr. Chairman, I will defer and save time for 
questions.
    Mr. Boucher. Mr. Burgess waives his statement.
    The gentleman from Oregon, Mr. Walden, for 1 minute.
    Mr. Walden. Mr. Chairman, I am going to waive as well.
    Mr. Boucher. Mr. Walden waives his opening statement. The 
gentleman from Louisiana, Mr. Melancon, for 1 minute. Mr. 
Melancon waives.
    The gentleman from Kentucky, Mr. Whitfield, for 1 minute.
    Mr. Whitfield. I will waive.
    Mr. Boucher. Mr. Whitfield waives. And the gentleman from 
Maryland, Mr. Wynn. Mr. Wynn also defers.
    We now have an opportunity to hear from our witnesses, and 
I want to say a word of welcome to them this afternoon. We have 
a very distinguished panel of witnesses to share their thoughts 
with the subcommittee today. Mr. Ron Gettelfinger is the 
president of the United Auto Workers, which represents more 
than 640,000 workers and 500,000 retirees of the United States. 
Mr. Rick Wagoner is the chairman and chief executive officer of 
the General Motors Corporation, which is the largest passenger 
car and light-duty truck manufacturer in the world with 
approximately 150,000 direct employees in the United States. 
Jim Press is the president and chief operating officer of 
Toyota Motor, North America, which has operated in the United 
States since 1957. It directly employs approximately 34,000 
workers in the United States. Alan Mulally is the new president 
and chief executive officer of the Ford Motor Company, 
headquartered in the district of our full committee chairman in 
Dearborn, Michigan. Ford employs approximately 280,000 workers 
in more than 100 plants world wide. Tom LaSorda is the 
president and chief executive officer of the Chrysler Group of 
DaimlerChrysler Corporation. The company employs more than 
382,000 workers with more than 120,000 located in the United 
States. We welcome each of our witnesses. Without objection 
your prepared written statement will be made a part of the 
record, and we would welcome your oral summary of approximately 
5 minutes each. Mr. Gettelfinger, we will be pleased to begin 
with you.

STATEMENT OF RON GETTELFINGER, PRESIDENT, INTERNATIONAL UNION, 
UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS 
                    OF AMERICA, DETROIT, MI

    Mr. Gettelfinger. Thank you. Mr. Chairman, my name is Ron 
Gettelfinger. I am president of the UAW, and we appreciate the 
opportunity to testify before this subcommittee.
    The UAW believes that climate change and energy security 
are serious problems. We urge Congress to pursue initiatives 
that will deal with these issues in an integrated and balanced 
manner that protects jobs and benefits for American workers and 
retirees.
    To address the problem of global warming, the UAW supports 
the establishment of an economy-wide, mandatory, tradable-
permits program that will slow the growth of and eventually 
reduce greenhouse gas emissions in the United States. We 
believe this type of cap and trade program should be done on an 
upstream basis in order to minimize regulation and to ensure 
that all sectors of the economy participate in a proportionate 
manner.
    In considering auto sector policies to address climate 
change and energy security, the UAW believes Congress should 
keep in mind several key principles. To be effective, any 
policies must address the fuels that go into vehicles as well 
as the efficiency of the vehicles themselves. The promotion of 
alternative fuels can make an enormous contribution to reducing 
greenhouse gas emissions and our dependence on foreign oil.
    Furthermore, any auto policies requiring improvements in 
vehicle efficiencies should include measures to help level the 
playing field in the automotive industry and to provide 
struggling manufacturers with the resources needed for 
retooling efforts. Any assistance should be tied to investments 
in domestic production that will generate jobs for American 
workers and help the overall U.S. economy. It should also be 
structured in a manner that recognizes and helps to address the 
fundamental imbalance in the auto industry related to retiree 
healthcare legacy costs. Without such measures the UAW would be 
deeply concerned about the economic feasibility of any 
proposals to mandate significantly higher vehicle efficiency 
standards.
    In light of the extremely serious financial conditions of 
General Motors, Ford, and DaimlerChrysler, and the disparate 
burden they face in retiree healthcare legacy costs compared to 
their competitors, the UAW believes that the imposition of 
stringent increases in vehicle efficiency standards could lead 
to calamitous results. This could include the closing of 
additional facilities and the loss of tens of thousands of 
additional automotive jobs in this country. It could also 
include the loss of healthcare coverage for 500,000 retired 
workers and their families.
    The UAW urges Congress to explore the feasibility of 
establishing an additional carbon control policy requiring 
reductions in the carbon emissions of light-duty vehicles, as 
well as reductions in the carbon intensity of the fuels that go 
into these vehicles. This two-pronged approach could make a 
major contribution to reducing greenhouse gas emissions and 
contribute enormously to a reduction in oil consumption.
    The UAW also urges Congress to use tax or other incentives 
to encourage domestic production of advanced technology 
vehicles and their key components. As was demonstrated by a 
November 2004, study conducted by the University of Michigan, 
this type of approach would help to maintain and create tens of 
thousands of automotive jobs in this country. At the same time 
it would help to accelerate the introduction of these advanced-
technology vehicles and thereby reduce global warming emissions 
and our dependence on foreign oil.
    The UAW believes Congress should pursue several policies to 
promote the use of alternative fuels in motor vehicles. We 
would support legislation mandating that certain percentages of 
all vehicles sold in the U.S. by each automaker must be flex-
fuel capable by specified dates. We also would support 
incentives or mandates relating to the conversion of filling 
stations so they have the capability to distribute alternative 
fuels.
    The UAW believes that changes in the CAFE Program are the 
least desirable option for addressing the problems of climate 
change and energy security. Moving to an attribute-based CAFE 
system for passenger cars would enable auto manufacturers to 
offshore all of their small car production. Over 17,000 
American workers are currently employed in five U.S. assembly 
plants that produce small passenger cars. Almost 50,000 
American workers produce parts for these vehicles. To prevent 
the loss of these jobs and to prevent the auto companies from 
upsizing their vehicles, thereby resulting in worse overall 
fuel economy, the UAW urges Congress to impose an anti-
backsliding requirement on any new CAFE rules.
    In conclusion, the UAW appreciates this opportunity to 
testify before this subcommittee concerning this critically-
important issue of climate change and energy security. We look 
forward to working with this subcommittee to fashion measures 
that will enable the U.S. to make significant progress in 
reducing greenhouse gas emissions and oil consumption while 
protecting jobs and benefits for American workers and retirees. 
Thank you.
    [The prepared statement of Mr. Gettelfinger appears at the 
conclusion of the hearing.]
    Mr. Boucher. Thank you very much, Mr. Gettelfinger. Mr. 
Wagoner.

 STATEMENT RICK WAGONER, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, 
            GENERAL MOTORS CORPORATION, DETROIT, MI

    Mr. Wagoner. Good afternoon, Mr. Chairman and members of 
the committee. I am Rick Wagoner, chairman and chief executive 
officer of General Motors Corporation. Thank you for the 
opportunity to speak about advanced technology and the very 
important subjects of climate change and energy security.
    The global auto industry as a business necessity and as our 
obligation to society is developing alternative sources of 
propulsion based on diverse sources of energy to meet the 
world's growing demand for our products.
    At GM we are committing massive resources to this effort, 
and we think it is very important for us and for the American 
public that we are working on the right things, things that 
will really make a difference in reducing oil consumption and 
CO\2\ emissions.
    At GM we are fully prepared to discuss these issues, 
including carbon constraints on the U.S. economy, and we 
believe the discussion should begin with a frank evaluation of 
the Corporate Average Fuel Economy Program.
    The stated goals of the original CAFE Program were to 
reduce U.S. gasoline consumption and oil imports. However, 
because the number of vehicles on the road has nearly doubled 
since CAFE was enacted and the total number of vehicle miles 
traveled has also nearly doubled, U.S. gasoline consumption has 
increased by 60 percent and U.S. oil imports have increased by 
more than 100 percent. These increases have occurred despite 
the fact that since CAFE was enacted automakers as a whole have 
increased new vehicle fleet fuel economy for light trucks by 60 
percent and more than doubled it for passenger cars.
    I am proud to note that General Motors has improved its 
fuel economy more than any other major auto manufacturer over 
this period, and I hasten to point out that we are applying a 
broad range of technologies to continue improving fuel economy 
going forward.
    But clearly, no matter how you measure it, the CAFE Program 
has failed dramatically in meeting its stated goals. And yet 
our, for our Nation, the original goals of the CAFE legislation 
remain as important as ever. In fact, more so. It is time to 
move away from approaches that don't solve the problem and on 
to solutions that address not only the legitimate and important 
issue of reducing U.S. gasoline consumption and oil imparts, 
but also the critical challenges presented by CO\2\ emissions. 
And the good news is that we now have these solutions within 
our grasp.
    In the near term the best opportunity for reducing gasoline 
consumption, oil imports, and greenhouse gas emissions is 
through increased use of biofuels, and the biofuel with the 
greatest potential to displace petroleum-based fuels in the 
U.S. is ethanol. Consider the differences between CAFE and 
ethanol. A 4 percent per year CAFE increase would be 
extraordinarily expensive and technologically challenging to 
implement. On the other hand, GM, Ford, and DaimlerChrysler 
have already committed to make half of our annual vehicle 
production biofuel capable by 2012.
    Beyond that, a 4 percent per year increase in CAFE 
according to the administration's analysis--would save 8.5 
billion gallons of gasoline annually by 2017. That is less than 
half of the projected growth in American oil consumption. In 
other words, even with this proposed CAFE increase, as 
difficult as it is, America will still be using more and most 
likely importing more oil than ever before, as well as 
producing more CO\2\ emissions.
    On the other hand, if all the E-85 capable vehicles on the 
road today, along with those that GM, Ford, and DaimlerChrysler 
have already committed to produce over the next 10 years, if 
they were to run on E-85, we could displace 22 billion gallons 
of gasoline annually. And if all manufacturers made the same 
commitment, we could increase the savings to 37 billion gallons 
of gasoline annually. That is more than quadruple the savings 
that a 4 percent per year CAFE increase would achieve and very 
importantly, enough to actually reduce America's oil 
consumption by more than 10 percent versus today's levels as 
well as CO\2\ emissions.
    The potential of biofuels like E-85 is to significantly 
displace petroleum is within our grasp today. The vehicles are 
on the road or in the works, but they are not being fully 
utilized because of the constraints on E-85 supply and 
distribution. With continued push from Congress and the 
administration to grow biofuel production and distribution, 
including next generation cellulosic ethanol, we can make a big 
difference very quickly.
    So E-85 offers tremendous opportunities to reduce oil 
consumption and imports even within a decade. Is there even 
more we can do beyond that? Absolutely, yes. And we are already 
working on it. At GM we are making a major commitment to 
electrically-driven vehicles, including development of plug-in 
hybrids, fuel-cell vehicles like the Chevy Sequel concept, and 
range-extended electric vehicles like the Chevy Volt. Why are 
we doing this now? Because of recent advances in energy storage 
technology, specifically in lithium ion batteries and hydrogen 
fuel cells. While not yet ready for prime time, in our view 
these technologies are getting close to commercial reality. And 
this is an area where Congress can really help by significantly 
enhancing funding for domestic advanced battery research and 
development and also expanding funding for development of 
hydrogen and fuel-cell technology.
    In summary, we at GM believe now is the time for a new, 
more comprehensive and forward-looking national energy strategy 
that insures we are working on the right things, things that 
will really make a difference in reducing oil consumption and 
CO\2\ emissions. At GM we are willing and able to play a 
leadership role in helping develop and implement that strategy.
    Thanks very much, and I look forward to answering your 
questions.
    [The prepared statement of Mr. Wagoner appears at the 
conclusion of the hearing.]
    Mr. Boucher. Thank you, Mr. Wagoner. Mr. Press.

STATEMENT OF JIM PRESS, PRESIDENT AND CHIEF OPERATING OFFICER, 
            TOYOTA MOTOR NORTH AMERICA, NEW YORK, NY

    Mr. Press. Good afternoon, Mr. Chairman and members of the 
subcommittee. I am Jim Press, president of Toyota Motor North 
America. I am both humbled and honored to have this opportunity 
to discuss these issues of climate change and energy security 
with you today.
    Two of Toyota's founding principles are the elimination of 
waste and service to society. These principles permeate our 
products and our actions now and well into the future. They are 
part of our DNA, and they guide us as we address climate change 
as well as energy security issues.
    Toyota has long been mindful of and accepts the broad 
scientific consensus that climate change is occurring and will 
continue unless there are significant and coordinated global 
efforts to slow the growth of man-made greenhouse gas 
emissions. Toyota is committed to continued action to address 
climate change and promote greater energy diversity. We plan to 
increase the fuel efficiency of our products, develop new 
markets for advanced vehicle technology and alternative fuels, 
and reduce the greenhouse gas footprint from our vehicles, 
manufacturing, and distribution portions of our business.
    The motor vehicle industry has a responsibility to be part 
of the solution, but these issues cannot be addressed by the 
industry alone. U.S. action on both issues must, by definition, 
be national in scope and involve a range of industries and 
sectors of the economy, as well as the consumers.
    The centerpiece of our fuel efficiency efforts has been 
hybrid technology, a revolutionary powertrain system derived 
from our in-house research and development programs. This 
innovative system is designed to substantially increase vehicle 
fuel economy and reduce emissions significantly. Toyota hybrid 
vehicles are over 70 percent cleaner for smog-forming emissions 
than the average new vehicle and can offer up to twice the fuel 
economy. And beyond that hybrid technology is an essential and 
enabling element of future powertrains, such as plug-in hybrids 
and fuel cells.
    The year 2007, marks the 10th year of our Prius, the first 
hybrid. I am happy to say the introduction of Prius was a sound 
business decision. Last year the Prius was our third best-
selling passenger car in the U.S. after Camry and Corolla. As 
of January 2007, we have sold nearly half a million hybrids 
profitably in the United States, and we now offer six different 
hybrid models.
    Hybrid technology embodies our core belief that the most 
effective solutions are mass market solutions, and that is why 
we see hybrid technology as critical to the commercialization 
of future drivetrains. Many of the same components found in our 
current hybrids are being used in hydrogen fuel cell vehicles 
that we are currently testing here in the United States. The 
same can be said for plug-in hybrids and other technologies we 
are pursuing.
    It is not a lack of will that is keeping plug-in hybrids 
from commercialization. It is the absence of technical 
breakthroughs to address the issues of battery technology, 
weight, and cost.
    While fuel cell and plug-in hybrid research continues, so, 
too, does our application of advanced technology on 
conventional gasoline engines. We are aggressively pursuing 
clean diesel technology, as well as vehicles capable of 
operating on renewable fuels such as ethanol and biodiesel.
    In addition to vehicle technology improvements, in-use 
impacts from the existing fleet of vehicles can be reduced 
through a series of measures. For example, smarter land use 
planning, increased reliance on mass transit, and greater use 
of so-called intelligent transportation systems can reduce 
traffic, congestion, and energy consumption.
    Toyota supports the use of national performance-based 
regulatory programs, as long as the programs are fair, 
technologically feasible, cost effective, and they do not 
discourage early compliance, technological innovation, or 
safety. In this context, we support increasing both the 
passenger car and light-duty fuel economy standards and giving 
NHTSA the authority to reform the passenger car standard.
    The greenhouse gas impact from motor vehicles is inexorably 
linked to their fuel economy. Toyota's fleet in the United 
States has exceeded the applicable fuel economy standards since 
their inception in 1978. In 2005, our combined car and truck 
fleet economy was 28.9 miles per gallon, exceeding the combined 
average of the rest of the industry by 4.1 miles per gallon. 
That is nearly 17 percent. We have done this while providing a 
full range of vehicles from subcompacts to the best-selling 
passenger car, Camry, the best-selling luxury vehicle line, 
Lexus, as well as a full line of SUVs and trucks.
    Toyota has a proven record of bringing advanced technology 
to market and achieving high levels of fuel economy. Over their 
lifetime, the past 10 model years of Toyota vehicles sold in 
the U.S. will use 11 billion fewer gallons of gasoline. That is 
265 million fewer barrels of oil than if we had just met the 
standards. These same vehicles will emit over 100 million 
metric tons less of carbon dioxide.
    Our commitment to reducing the greenhouse gas footprint of 
our products does not stop there. Energy conservation and 
energy efficiency are core considerations in the life cycle of 
our vehicles. In 2002, we set an internal target to reduce 
energy consumption from our manufacturing operations by 15 
percent per unit of production by 2005, compared to a baseline 
of 2000. We have not only met but we exceeded that target ahead 
of schedule, and we now have an even more aggressive goal for 
the 2007-11, time period.
    Tackling climate change and fostering energy diversity 
require careful deliberation and balancing with other national 
priorities. It also demands innovation, unconventional 
thinking, and most of all, action. I believe the time is right 
to enlist the immense talent and the might of the auto industry 
to help solve some of the key issues of our time. As an 
industry we have an obligation to be part of the solution, not 
the problem. Toyota pledges to do its part to lend a hand and 
to work with the rest of the world to help create real 
solutions.
    I thank the subcommittee for its interest in our views and 
for this opportunity to share some of our current thinking. We 
will be happy to respond to your questions. Thank you.
    [The prepared statement of Mr. Press appears at the 
conclusion of the hearing.]
    Mr. Boucher. Thank you very much, Mr. Press. Mr. Mulally.

  STATEMENT OF ALAN R. MULALLY, PRESIDENT AND CHIEF EXECUTIVE 
  OFFICER, FORD MOTOR COMPANY WORLD HEADQUARTERS, DEARBORN, MI

    Mr. Mulally. Good afternoon. I am Alan Mulally, president 
and chief executive officer of the Ford Motor Company. It is a 
pleasure to be here and provide our perspective on these 
important issues.
    Ford Motor Company operates facilities in 45 States. About 
one in every five American autoworkers is employed by Ford. 
Beyond direct employment of over 100,000 people in the United 
States, Ford impacts nearly 2 million American jobs. Over the 
last 3 years Ford has spent nearly $23 billion on research and 
development, the vast majority of which has been here in the 
United States. Ford was the first company in our industry to 
issue a report on the challenges of climate change for our 
business going forward, and I also brought a copy of that I 
would like to add to the record for your reference.
    In addition, since 1999, we have had a specific focus on 
sustainability, the triple bottom line that addresses the 
environment, financial, and social impacts. Today I am here to 
tell you that Ford remains committed to working with you to 
secure our energy future and address climate change. But we 
need Government to be our partners, not our adversaries.
    Energy security and climate change issues are linked. An 
effective policy for both must reflect an integrated approach 
among key stakeholders, including the automobile industry, the 
fuel industry, Government, and of course, the consumers.
    Yes, we need more efficient vehicles, but we also need 
lower carbon fuels and policies that affect travel demand, 
infrastructure development, and consumer decisions. But in the 
end it is the consumers that will decide what they buy and how 
much they drive. This consumer demand, future developments in 
technologies, and ever-changing markets and political 
uncertainties require flexible solutions as well. The business 
strategy that Ford implements and the policies that we 
encourage must have the flexibility to meet a range of 
scenarios. There is, as was pointed out, no silver-bullet 
solution, and that is why Ford is investing in a broad range of 
innovative technologies.
    CAFE isn't a silver bullet either. When the CAFE law was 
passed in the 1970's, the goal was to reduce our dependence on 
foreign oil. Frankly, that did not work. Even though today's 
average light truck gets better fuel economy than a 1970's 
compact car, the unintended consequence was that as gas prices 
fell, people actually drove more.
    Ford will continue to do our part in producing flex-fuel 
vehicles and improving fuel efficiency. We support increasing 
CAFE standards to the maximum feasible levels and reforming the 
passenger car CAFE structure similar to the light-truck reform.
    We also support taking the policies out of the CAFE 
decision. Setting CAFE standards can only be properly 
accomplished after a thorough analysis of the data; the 
technology data, economic data, and safety data. We believe 
NHTSA has this capability.
    Ford also recognizes that we must particular in the 
solution to these issues, and we have invested substantial 
resource money into the research and development of innovative 
vehicle technologies. We are developing a range of advanced 
technologies that improve fuel efficiency through advanced 
gasoline engines and accommodate a range of alternative fuels 
including hybrid flex fuel vehicles, clean diesel, hydrogen 
internal combustion engines, and hydrogen fuel cells.
    We are proud that Ford produced the first American-made 
full hybrid electric vehicle on the road, the Ford Escape 
hybrid. We have been building flexible-fuel vehicles for over a 
decade and have placed more than two million of these vehicles 
on American roads, and that is only a start. Just a few weeks 
ago we introduced the Ford Escape hybrid, electric E-85 
demonstration project that combines two petroleum-saving 
technologies; hybrid electric power and E-85 flex-fuel 
capability.
    Though there are many technical and cost challenges to 
address, if just 5 percent of the fleet were powered by E-85 
hybrids today, oil imports could be reduced by 6 million 
gallons of gasoline each year. We stand ready with the 
technology, and we are willing to lead the way, but we need a 
partner with Government and the fuel providers. We must have 
renewable fuel infrastructure before we can effect change. We 
believe that there is a substantial opportunity to use 
American-grown renewable fuels to reduce carbon emissions and 
the nation's dependence on foreign oil. Today's corn ethanol 
has the ability to reduce CO\2\ emissions by approximately 25 
percent. Tomorrow's cellulosic ethanol can increase the savings 
to about 85 percent, all while reducing imported oil.
    Ford also supports incentives that encourage the 
production, distribution, and the use of these low carbon 
renewable fuels and flex-fuel vehicles capable of running on E-
85. We can have a single American solution to both of these 
problems. However, Congress will have to make some tough 
choices. In the transportation sector alone there are a number 
of possible ways to limit carbon emissions. Increasing CAFE too 
quickly and aggressively without appropriate engineering lead 
times or necessary customer incentives to drive market demand 
will have a serious negative consequence on the American 
automobile industry. And it would significantly reduce customer 
vehicle choice. We can't lose sight of the benefits of 
transitioning to low-carbon fuels. We need to have a serious 
dialog with all key stakeholders, including Congress to develop 
real solutions to these problems.
    Is the upstream cap and trade approach the answer? What 
about low carbon or biofuel standard? Or increasing the cost of 
driving, like a higher fuel tax the answer? How can we 
positively influence the customer without negatively impacting 
small business and denying families their mobility. These are 
tough questions and will require tough choices. At Ford we look 
forward to working with you on a comprehensive approach that 
will be both effective and fair without seriously impacting the 
U.S. economy.
    I look forward to taking your questions. Thank you very 
much.
    [The prepared statement of Mr. Mulally appears at the 
conclusion of the hearing.]
    Mr. Boucher. Thank you very much, Mr. Mulally. Mr. LaSorda.

  STATEMENT OF THOMAS W. LASORDA, CHIEF EXECUTIVE OFFICER AND 
 PRESIDENT, CHRYSLER GROUP OF DAIMLERCHRYSLER, AUBURN HILLS, MI

    Mr. LaSorda. Mr. Chairman and members of the committee, 
thank you for inviting me to testify before you on the subject 
of climate change.
    DaimlerChrysler is committed to developing new advanced 
technologies which minimize the effects our products and 
processes have on global climate and the environment in 
general. We recognize that climate change and national security 
are serious concerns that require all of us; individuals, 
industry, and Government, to take actions to help reduce our 
dependence on oil and emissions of CO\2\, and we have already 
taken actions to do so.
    We have produced more than 1.5 million flexible-fuel 
vehicles, or FFV's, capable of running on E-85. That is more 
than 10 percent of our production over the last 9 years, a 
higher percentage than any other automaker. We stand ready to 
make by 2012, along with GM and Ford, 50 percent of our 
production as either flexible-fuel vehicles or vehicles capable 
of running on biodiesel. DaimlerChrysler offers seven clean 
diesel models this year, providing improved fuel economy of 30 
percent and greenhouse gas reductions of 20 percent. And we are 
actively pushing for the adoption of a national standard for B-
20 biodiesel fuel to speed its adoption in the marketplace.
    We are partners in a global alliance in hybrid development 
with General Motors, BMW, and our sister company, Mercedes Car 
Group, in developing a new hybrid system that we expect will 
leapfrog the competition. The first Chrysler Group product, the 
Dodge Durango, will make its debut in the first quarter of 
2008. DaimlerChrysler is a leader in producing 1,500 hybrid 
diesel electric buses through our Orion Transit Bus Company, 
and they are being sold in New York, San Francisco, and other 
cities across this great land.
    We also have the only demonstration fleet of plug-in 
hybrids in service through our Dodge Sprinter vans. As you may 
not know, we are the world's leader in fuel-cell vehicle 
production with more than 100 vehicles ranging from small 
passenger cars to transit buses in worldwide operation today. 
And we continue to put advanced technology into our gasoline 
engine vehicles. Last year we introduced a new world engine for 
our four-cylinder cars and trucks, along with a new fuel-
efficient continuously-variable transmission to achieve 30 plus 
miles per gallon. We are doubling the capacity of our four-
cylinder engine plant to 840,000 units per year.
    Just last month I announced a $3 billion powertrain 
investment. This investment will include development and 
production of more fuel-efficient powertrains, a brand new V-6 
engine family, new cutting-edge transmissions and axles for our 
products. All in all these investments will further secure tens 
of thousands of jobs here in the United States.
    We are also addressing our product mix. Earlier this year 
we announced the 40-plus mile per gallon Smart city car that 
will arrive in the U.S. early next year.
    I have focused on where we are going from a technology 
perspective, to reduce petroleum consumption, and since they 
are directly related, greenhouse gases. Now I would like to 
comment on calls for a 4 percent annual CAFE increase over the 
next 10 years, which translates to a 50 percent fuel economy 
increase. In fact, we already do it. It is in Europe. The U.S. 
combined fleet averages about 24 to 25 miles per gallon, and in 
Europe the fleet averages 36 miles per gallon. That is a 50 
percent difference.
    Why the huge disparity between there and here? We are the 
same companies in Europe that we are in the U.S. with access to 
similar technologies. The difference is the European approach 
to energy and greenhouse gas policies. They have made some 
tough political choices. They have highly taxed gasoline, 
making the price three plus times higher than in the U.S., and 
they have incentives on diesel fuel.
    Through policies which affect consumer demand, the mix of 
vehicles sold in Europe is radically different than here. About 
60 percent of the products are compact cars or smaller, 
compared to about 15 percent here in the United States. About 
50 percent of passenger vehicles sold in Europe are diesel 
powered. The European model, while far from perfect, is based 
on policies that leverage demand and market forces, not on 
policies that fight them.
    However, in the United States our policies have 
historically addressed the supply side; light-duty vehicle fuel 
economy standards. But consider how a 50 percent fuel economy 
improvement relates to new vehicle technology alone. Assume if 
all the new vehicles sold in the U.S. 10 years from now were 
hybrids or diesels, something that no one really believes is 
even feasible, fuel economy would improve by only 25 to 30 
percent.
    U.S. policymakers must adopt a new and unique formula that 
fits here. DaimlerChrysler supports a three-pronged 
comprehensive approach to climate change and energy security in 
the transportation sector, one that includes a combination of 
vehicle efficiency improvements by our industry, the expanded 
use of alternative fuels such as ethanol and biodiesel, and the 
harnessing of market forces to help drive consumer demand.
    But the climate change challenge is bigger than any one 
industry. So today I am here to commit personally to work with 
you on a broad-based climate change program that addresses all 
sectors of the economy, not just automobiles, is market-based 
to insure that greenhouse gas reductions do not significantly 
harm the economy, is upstream, and is national, if not global, 
in scope.
    Thank you, and I look forward to your questions.
    [The prepared statement of Mr. LaSorda appears at the 
conclusion of the hearing.]
    Mr. Boucher. Thank you very much, Mr. LaSorda, and thanks 
to each of our witnesses for your presence here this afternoon 
and sharing that information with us. I will recognize myself 
for a round of 5 minutes of questions.
    Under the current CAFE requirements and the system that 
those requirements are effectuated through, there is no ability 
on the part of the automotive manufacturers to trade CAFE 
credits. I think you are allowed to bank those credits under 
certain circumstances and use them yourself at a later time, 
but there is no opportunity to trade those within the industry.
    Some have suggested that it might add to your flexibility 
if you had that opportunity, and it might give you some early 
experience with a trading program in the event that our climate 
change proposal leads to the imposition of cap and trade.
    And so my question to you is whether or not you would 
support legislation that we could perhaps pass at an early date 
that would institute a credit trading program with regard to 
CAFE. Mr. Wagoner, do you have a comment?
    Mr. Wagoner. Thank you, Mr. Chairman. It would be my 
personal view that it, such a program would not have a 
significant impact on addressing the issues that I think we are 
trying to address, which is really to try to provide 
appropriately-costed energy to the economy but at the same time 
reduce oil imports and reduce CO\2\ emissions. I think 
realistically from a manufacturer's perspective we are going to 
do our best to meet any standard ourselves, and the prospect of 
if one is short, writing a check to your competitor so they 
will have more money to invest is one that practically isn't 
consistent with my competitive spirit. So I guess I can't say 
it would never work, but I would have to say I don't see it as 
a major part of a solution to the issues that I think we need--
--
    Mr. Boucher. So you are not recommending that to us?
    Mr. Wagoner. That is correct. Yes.
    Mr. Boucher. Mr. Press, very briefly.
    Mr. Press. Yes. I think that we would be open to 
considering that concept. But if a competitor had an expensive 
technology that generated credits, and they could sell it to a 
competitor who could buy it for less than the company spent on 
the technology, it really wouldn't do either company any good.
    Mr. Boucher. All right. So you are not recommending that 
either. Mr. Mulally.
    Mr. Mulally. I sure agree with my colleagues. I think I 
would also add that the idea though has a lot of merit of 
moving it up to almost like a sector of transportation or even 
higher where the real value would be trading between say the 
energy companies and the automobile industry. I think it would 
be a lot more effective and beneficial.
    Mr. Boucher. All right. Well, we will certainly examine 
that opportunity. Mr. LaSorda, would you care to comment?
    Mr. LaSorda. I agree with my colleagues here, and have 
nothing more to add, Mr. Chairman.
    Mr. Boucher. All right. Chairman Dingell and I are 
currently working to draft a climate change control measure. 
Let me just talk about some of the characteristics and then I 
am going to ask you for your view of this. Our goal is to have 
a mandatory program that would make a substantial contribution 
to addressing the challenge of greenhouse gas emissions. It 
would be digestible by the economy. It would spread the burden 
equally across the economy. It would assure that no sector of 
the economy will be dislocated or disadvantaged in comparison 
with any other economic sector.
    It will be a bipartisan measure. It will be an industry-
supported measure, and it would be capable of passage both in 
the House and in the Senate and hopefully signature by the 
President during the next 2 years. That is the goal that we 
have. We are soliciting the views of all interested parties. We 
are particularly soliciting both views and participation in 
crafting this measure from the industries that are greenhouse 
gas emitters, and we welcome your participation.
    So my question to you, and I think a one-word answer would 
be preferable, will you agree to participate with us? Mr. 
Gettelfinger, let us begin with you.
    Mr. Gettelfinger. Yes.
    Mr. Boucher. Mr. Wagoner.
    Mr. Wagoner. Yes.
    Mr. Boucher. Mr. Press.
    Mr. Press. Yes.
    Mr. Boucher. Mr. Mulally.
    Mr. Mulally. Yes.
    Mr. Boucher. Mr. LaSorda.
    Mr. LaSorda. Absolutely.
    Mr. Boucher. This is a fabulous panel of witnesses. Thank 
you. Thank you very much. Do you have any thoughts this 
afternoon on what I think is going to be one of the major 
challenges that we will confront, which is devising a way to 
bring the transportation sector into the broader greenhouse gas 
emission control program. We are probably going to be 
considering as a major approach to that measure some form of 
cap and trade, and so for purposes of discussion this afternoon 
let us assume cap and trade is the approach that we adopt. Do 
you have any thoughts today on how we might successfully 
integrate your pre-existing regulatory program, CAFE, with a 
cap and trade regime. I wouldn't expect detailed answers but if 
you have any preliminary thoughts on that, we would certainly 
welcome that today. Mr. Wagoner.
    Mr. Wagoner. A complex topic, as you indicate. I would say 
in general we do believe there is merit to addressing the issue 
as you have cited it. We think there are ways to go about this 
that could lead to solutions. We have some specific guidelines 
that we would like to suggest as part of that process and we 
would be pleased to work with your staff towards that end.
    Mr. Boucher. Thank you. We would welcome your information 
on that. Mr. Press.
    Mr. Press. Yes. Again, we would be open to considering any 
national program that would be fair and equitable, and that 
would make sure that those that have already made investments 
in technology are not disadvantaged. While credit trading 
between companies may be one concept, another idea is to allow 
a company to trade credits among its own fleets.
    Mr. Boucher. Thank you, Mr. Press. Mr. Mulally. No comment. 
Mr. LaSorda.
    Mr. LaSorda. Based on what you said earlier about all 
sectors in the economy being involved in the solution obviously 
we would like to participate in the discussions on this.
    Mr. Boucher. OK. Thank you very much. My time has expired. 
I am now pleased to recognize the ranking member designate for 
the moment of the--oh, I am sorry, Mr. Barton, the ranking 
member of the full committee for 5 minutes.
    Mr. Barton. Thank you, Mr. Chairman. I have nothing but 
supreme affection and respect for our full committee chairman 
and subcommittee chairman. What Mr. Boucher just outlined would 
literally be a legislative miracle of Biblical proportions if 
he is able to pull it off, so let us wish him well, and if 
there is a way, we will attempt to be helpful but we are going 
to have to answer some very tough questions. And I am going to 
start asking some of those questions right now. My first 
question to the panel since everybody has kind of nodded your 
head that you support cap and trade, I want to make sure I 
understand that.
    You support mobile sources being subject to carbon caps, is 
that true? Everybody on this panel supports there being not 
just on stationary sources but on mobile sources like tailpipe 
emissions for cars and trucks--the industry and labor union 
that represents UAW supports a mandatory cap and trade system. 
Mr. Gettelfinger.
    Mr. Gettelfinger. Yes, we support that, and we believe that 
there is a lot of merit to it, and we believe if is it upstream 
if it reduces the amount that goes into the fuel itself, and 
then on the----
    Mr. Barton. I just want to make sure you understand what 
you are saying.
    Mr. Gettelfinger. Yes, absolutely.
    Mr. Barton. You know that you are supporting a mandatory 
carbon cap on tailpipe emissions, you said yes.
    Mr. Gettelfinger. When you say tailpipe emissions----
    Mr. Barton. That is where the CO\2\ comes out.
    Mr. Gettelfinger. That is correct, and we refer to that as 
the carbon burden, and that is correct, we do support that.
    Mr. Boucher. Mr. Wagoner.
    Mr. Wagoner. Yes, Congressman, we said we would support 
that, and we would. I think to be honest we have to be clear 
the devil is always in the details so with equity and fairness, 
et cetera, et cetera, is a big caveat to that.
    Mr. Barton. Yes.
    Mr. Wagoner. Absolutely.
    Mr. Barton. Mobile source CO\2\ is about 30 to 35 percent 
of emissions man-made, and so are stationary sources. They are 
both about the same. They are around a third so I am not happy 
with that answer, but if that is your answer, that is your 
answer. Mr. Press.
    Mr. Press. Yes, I agree that we would be in support based 
on what the actual details would allow us to operate within. I 
think it is important for us to realize we have to be open to 
many new approaches, and we need to look at the whole plethora 
of opportunities. As for cap and trade, I think the further 
upstream you go the more efficient you are going to be.
    Mr. Barton. Mr. Mulally.
    Mr. Mulally. You bet. I just echo the upstream part because 
clearly we are never going to get to our mutual objective 
unless we include all the people that are associated with 
production of CO\2\, and so our agreement is to help work with 
the entire industry, the whole sector, not just what comes out 
of the tailpipe because we need to have everybody involved.
    Mr. Barton. I understand that.
    Mr. Mulally. So cap the most upstream that we can.
    Mr. Barton. Mr. LaSorda.
    Mr. LaSorda. The upstream, as I stated earlier, and the 
rest, is absolutely critical. Also, that we look at all sectors 
and what can be done upstream. And as my colleagues have 
stated, we would like to get into the details with members of 
the committee.
    Mr. Barton. My next question is a simple question. If we 
want to regulate greenhouse gases everybody seems to--right now 
the hysteria seems to be that we need to do that. I am a 
skeptic about that, but are we going to have greater impact 
regulating the greenhouse gases 0.01 percent or 95 percent? 
Which gives you the biggest bang for the buck if you decide to 
regulate greenhouse gases? The greenhouse gas that is 95 
percent of the atmosphere or the greenhouse gas that is 0.01 
percent in terms of man-made? It is not a trick question.
    Mr. Press. I fully don't understand the question and can't 
answer at this time.
    Mr. Barton. If you are trying to impact an outcome, do you 
manage 95 percent of the problem or 0.01 percent of the 
problem? Which gives you the greatest likelihood of getting the 
outcome you want?
    Mr. Wagoner. Well, obviously if you can address the problem 
the most comprehensive way you have got the greatest likelihood 
of getting a cost effective outcome. To be honest, that is one 
of the issues that I try to address in my testimony as far as 
improving both energy security and emissions, really better to 
try to address it by----
    Mr. Barton. My time has expired, but water vapor is 95 
percent of greenhouse gases and man-made CO\2\ is 0.01 percent, 
and you gentlemen have just gone on record that you want to 
manage that 0.01 percent, and I will postulate that anything in 
any activity that I have ever had any part in trying to manage, 
you do a better job of getting your outcome when you tackle 
what causes the majority of the problem instead of what even 
barely scratches the surface. And with that, Mr. Chairman, I 
yield back and good luck on your miracle.
    Mr. Boucher. Well, thank you very much, Mr. Barton. Let me 
just comment on your very generous offer to work with us 
assuming that challenging test is met, but if that test is not 
met, I can't vote for the bill either so thank you very much, 
and I appreciate that.
    Mr. Whitfield. Mr. Chairman, can Mr. Mulally make his 
comment? I think he wanted to make a comment.
    Mr. Boucher. Absolutely. Mr. Mulally, we would be happy to 
hear from you.
    Mr. Mulally. I think I certainly do understand what you 
were asking, and I think our answer would be that what we 
really want to do is to address the greenhouse gases that stay 
in the atmosphere the longest and clearly CO\2\ can stay in the 
atmosphere for 100 years. So the most important thing is to 
deal with the gases that stay there the longest. The water 
vapor in the case that you----
    Mr. Barton. Well, the water vapor is constant in the 
atmosphere. It goes up and down a little bit but it is a 
constant too.
    Mr. Mulally. So the one that you are adding that stays up 
there the longest is the one that I think we want to address.
    Mr. Boucher. The time of the gentleman has expired. I am 
now pleased to recognize the chairman of the full committee, 
Mr. Dingell, for 10 minutes.
    Mr. Dingell. Mr. Chairman, I begin by thanking you for your 
recognition but also commending you for the diligent, vigorous, 
energetic, and competent fashion in which you have been 
addressing the difficult questions before us. I have been 
pleased to listen to the comments made by Mr. Barton. I look 
forward as this matter goes through the markup process to 
working with him. His comments on CAFE and caps on CO\2\ 
emissions remind me that for all intents and purposes, these 
two things are somewhat different but mostly similar versions 
of the same thing.
    Gentlemen, our witnesses here, I have listened to all of 
your testimonies and almost all of you have exclusively 
discussed Corporate Average Fuel Economy and Government 
incentives to encourage advanced technology vehicles. I would 
observe several things. First, I support incentives for the 
domestic production of advanced technology vehicles, and I 
believe this committee would too. We need to find ways to 
develop and produce technologies for the new century here in 
the United States.
    Second, I understand our current system of regulating fuel 
economy is dependent upon what consumers choose to buy, not 
what your companies are capable of producing. It is not, I 
think, a perfect mechanism. Third, I understand that a 
statutory increase in fuel economy standards may have 
unintended consequences in the marketplace to the detriment of 
jobs, and so I think our good friend, Mr. Gettelfinger, would 
observe vehicle safety and competitiveness of American 
manufacturers. And by that I am not simply referring to Ford, 
General Motors or Chrysler alone. I want everyone to know that 
my position on this matter has been consistent and is quite 
clear.
    Fourth, I understand the administration's proposal to 
increase fuel economy standards by 4 percent annually is not 
currently feasible. I have my doubts about what an attribute 
based system would be and how it would affect passenger, cars, 
jobs and everything else in this country. I have even greater 
doubts that any manufacturer would utilize a CAFE credit 
trading system, and I also doubt that it would provide any 
significant environmental benefits. The only thing I am certain 
of, with respect to these issues, is that the administration 
has not done its homework, as we found the other day, on this 
matter.
    Fifth, the issue of global climate change must be 
addressed. It is my view that everyone should be required to 
put an appropriate contribution into the collection box. This 
includes the auto industry and all of you gentlemen who are 
there at the committee table. Fuel economy regulations have 
effectively regulated CO\2\ emissions thus far. However, I 
question whether the current system, given all of its flaws and 
your well-stated concerns today, remains the right way to go 
forward. Gentlemen, I have heard from all of you previously 
what will not work. I agree with much of what you have stated 
in that regard. What I have not heard, however, is what will 
work, how this committee will put together legislation that 
will in fact accomplish our national purpose of reducing 
imports and reducing the emissions of greenhouse gases here in 
the United States.
    Frankly, I think the American people are frustrated. 
Members of Congress on both sides of the aisle are frustrated. 
And, very frankly, my dear friends, I am very much frustrated 
myself. I would like to ask you questions about your testimony, 
and about the administration's proposals or about bills that 
have been introduced with respect to fuel economy standards. 
Unfortunately, there isn't time for me to do that, and I would 
observe that most of this old debate is pretty stale. The 
existing system of regulating fuel economy may no longer be 
sufficient to address the needs of this country, so we need 
more involvement and your leadership very much, and these are 
needed for us to succeed in the difficult work that we have to 
undertake under rather considerable time pressure.
    So, gentlemen, I ask you, are you willing to work with this 
committee to produce mandatory regulations to address the issue 
of global climate change? I would appreciate a yes or no 
response. Mr. Gettelfinger.
    Mr. Gettelfinger. Yes.
    Mr. Dingell. Mr. Wagoner.
    Mr. Wagoner. Yes.
    Mr. Dingell. Mr. Press.
    Mr. Press. Yes, sir.
    Mr. Dingell. Mr. Mulally.
    Mr. Mulally. Yes.
    Mr. Dingell. Mr. LaSorda.
    Mr. LaSorda. Yes, sir.
    Mr. Dingell. Gentlemen, I understand the inclination to 
stick with the devil that we all know, but are you willing to 
go beyond Corporate Average Fuel Economy standards and consider 
new regulatory regimes? Please respond yes or no. Mr. 
Gettelfinger.
    Mr. Gettelfinger. Yes.
    Mr. Dingell. Mr. Wagoner.
    Mr. Wagoner. Absolutely, yes.
    Mr. Dingell. Mr. Press.
    Mr. Press. Yes, we are open to considering any national----
    Mr. Dingell. Mr. Mulally.
    Mr. Mulally. Yes.
    Mr. Dingell. Mr. LaSorda.
    Mr. LaSorda. Yes, sir.
    Mr. Dingell. Gentlemen, my own dad used to say something 
that I thought was pretty useful. He used to say you can't just 
sit at your end of the boat and tell the fellow at the other 
end of the boat that his end is sinking. Now the question here 
is, gentlemen, are you willing to work together amongst 
yourselves and with us to get beyond this old-fashioned 
thinking of CAFE and make real environmental progress? Mr. 
Gettelfinger.
    Mr. Gettelfinger. Yes.
    Mr. Dingell. Mr. Wagoner.
    Mr. Wagoner. Yes.
    Mr. Dingell. Mr. Press.
    Mr. Press. Definitely, yes.
    Mr. Dingell. Mr. Mulally.
    Mr. Mulally. Yes.
    Mr. Dingell. Mr. LaSorda.
    Mr. LaSorda. Absolutely.
    Mr. Dingell. Gentlemen, now are you willing to work with 
other sectors in the economy to assure that we produce an 
effective regulatory regime that fairly distinguishes and 
fairly distributes responsibilities and obligations to all 
concerned? Mr. Gettelfinger.
    Mr. Gettelfinger. Yes.
    Mr. Dingell. Mr. Wagoner.
    Mr. Wagoner. Yes.
    Mr. Dingell. Mr. Press.
    Mr. Press. Yes.
    Mr. Dingell. Mr. Mulally.
    Mr. Mulally. Yes.
    Mr. Dingell. Mr. LaSorda.
    Mr. LaSorda. Yes.
    Mr. Dingell. Are you then willing gentlemen, to consider a 
system that regulates the emissions of carbon dioxide from your 
vehicles alone or in tandem with carbon content of the fuels? 
Mr. Gettelfinger.
    Mr. Gettelfinger. Yes.
    Mr. Dingell. Mr. Wagoner.
    Mr. Wagoner. Yes.
    Mr. Dingell. Mr. Press.
    Mr. Press. Yes.
    Mr. Dingell. Mr. Mulally.
    Mr. Mulally. Yes.
    Mr. Dingell. Mr. LaSorda.
    Mr. LaSorda. Yes.
    Mr. Dingell. Gentlemen, I want to commend you for your 
testimony. We have a difficult task here before this committee 
and that is to write a good, responsible, and balanced piece of 
legislation that will serve the broad public interest and 
address the concerns that the Nation has and that other 
countries have with regard to the questions of greenhouse gas 
emissions and the risk that this contains with regard to the 
world for climate change and with regard to global warming. I 
think that we can assemble here in this committee members of 
Congress who will be willing to work beyond the stalemate now 
before us to achieve real results in the environmental work 
that the American people want done today.
    I hope that you will engage in that dialog and be a part of 
the solution. Having worked with you before, I know that you 
are and I want you to know that I appreciate that. I do observe 
that inaction will not work and telling us what doesn't work is 
useful but no longer sufficient. With that, gentlemen, so ends 
my catechism, and I thank you for your presence and your 
assistance to the committee.
    Mr. Boucher. Thank you very much, Mr. Dingell. The 
gentleman from Michigan, Mr. Upton, is recognized for 5 
minutes.
    Mr. Upton. Thank you, Mr. Chairman, and I want to associate 
myself with a goal of what you indicated. My only question to 
you is will it also slice bread?
    Mr. Boucher. We are working on that, and we are going to 
have a hearing on that subject.
    Mr. Upton. I am sure that rises to the top. I want to say 
that every American, we all want better fuel economy, and I say 
that as a consumer and I say that as a family that is in the 
market for a new vehicle as well. It is very important, and I 
think for most consumers that is often a bottom line question 
that they ask. As we struggle with this issue, I would be 
interested to know one of two things, two things from each of 
the companies represented here. One is how much is your company 
this year spending on research and development on fuel economy? 
I am not interested in other things that you are looking at but 
just specifically on fuel economy and what that number would be 
say over--the collective number of what that is say over the 
last 5 or 10 years as well. Mr. Wagoner, a ballpark number.
    Mr. Wagoner. Just to give you an idea, we recently approved 
projects to convert our four- and five-speed transmissions to 
six-speed transmissions to give you an idea. That is a $3 
billion investment for us to do something to get you something 
between 6 and 8 percent fuel economy.
    Mr. Upton. Is that all being done this year?
    Mr. Wagoner. It is being spread out over a period of years, 
a period of 4 or 5 years, I guess. If you look at the 
development of a fuel cell vehicle, that is going to cost well 
in excess of a billion dollars to get the first product really 
on the road. These are massive dollar commitments so I think 
the response to your question if you consider it 
comprehensively from the changes to conventional engines and 
transmissions to pure R&D and fuel cell or ethanol type fuels 
the investments are in billions of dollars on an annual basis 
for our company, and I suspect our competitors, as well.
    Mr. Upton. Mr. Press?
    Mr. Press. Yes, I think, from our perspective, almost all 
the dollars that we are spending in R&D, even the new products 
we are introducing as an industry, have better mileage and our 
focus is to have a better car with better mileage and still 
provide good customer satisfaction.
    We are currently spending about $11 billion a year, or $23 
million a day on R&D through the broad range of projects. In 
addition, we are working with fuel companies and other partners 
to find solutions that will give us global application. 
Virtually our whole R&D effort on new products is focused on 
how we can improve fuel economy as well as other aspects of the 
product.
    Mr. Upton. Mr. Mulally.
    Mr. Mulally. Yes. Over the last 5 years we spent 
approximately $23 billion on product development, and the real 
focus there of course are the capability of the vehicles and 
the fuel efficiency and the safety to make innovations in each 
of those areas.
    Mr. Upton. Mr. LaSorda.
    Mr. LaSorda. Well, every year on total product development 
spending, I will start there just to give you a scale of size, 
the Chrysler group alone spend $6 billion on total product 
programs, and then if you add Mercedes and our commercial 
vehicle division, we are over $9 to $10 billion. On the fuel 
economy side, when you look at new diesels, the new world 
engine that we put into the--in Michigan we built a new plant. 
There will be new plants being built over the next 4 or 5 
years. We will be spending in excess of $4 to $5 billion just 
in these areas.
    Mr. Upton. So you all are spending sizable sums every year. 
I know when the administration announced as part of the State 
of the Union address that they wanted to increase mileage by 4 
percent every year beginning in 2010 for light trucks and 2012 
for vehicles they asked for a 4 percent increase. If you were 
able to make that target, how much more do you think you would 
have to spend? I know Toyota makes that now but at some point 
because in the out years it is 4 percent additional. The report 
that I had heard was that you thought the response from most of 
the industry was that it would be very challenging to make. 
What additional dollars would that cost the industry? And I 
want to ask one more question after this so if you can go 
quickly, go ahead. Mr. Wagoner.
    Mr. Wagoner. The administration's estimate for us was in 
the $40 billion range. It is my assessment that that is low. 
The number would be significantly higher than that.
    Mr. Upton. Mr. Press.
    Mr. Press. I think it is very difficult without knowing 
more to get to a definitive answer but the reality is there may 
not be enough money. We have to really take a look at what the 
challenge is.
    Mr. Mulally. I agree with the previous comments.
    Mr. LaSorda. Similar to the group.
    Mr. Upton. The three of you met with the President last 
fall and you talked, as I recall, you talked about battery 
research and development, and I think you had presented a 
proposal to the President asking for a ramp up of Federal funds 
of over $100 million per year through 2012. The President's 
budget for 2008 was released a couple weeks ago. It didn't ask 
for $100 million. It asked for $11 million. And I would be 
interested to know what your reaction to that is. And it is in 
this context, all of you are spending tremendous amounts of 
money looking for research, as I look to what we want to get to 
in terms of the final answer, I want the Government to be able 
to in fact help you as we insist that you hit these targets. If 
we do that, I want to make sure that we help you along that way 
and at least on the surface of things as I look at this $11 
million isn't anywhere close to where we ought to be as you 
look at that final goal, but I would like you to say that, not 
necessarily me. And I am saying that because I am 12 seconds in 
arrears. Mr. Wagoner.
    Mr. Wagoner. I fully agree with your assessment, and it is 
a shame because these are high leverage opportunities, so we 
will get a huge impact if we can get breakthroughs in fuel 
cells and batteries, which we believe we can, so we are 
disappointed at that number. It is way less than it should be.
    Mr. Upton. Mr. Mulally.
    Mr. Mulally. Agree.
    Mr. LaSorda. Absolutely.
    Mr. Upton. Thank you very much. I look forward to working 
with you.
    Mr. Boucher. Thank you, Mr. Upton. Mr. Markey from 
Massachusetts is recognized for 5 minutes.
    Mr. Markey. Thank you, Mr. Chairman, very much. Mr. 
Mulally, you said that CAFE was not a success. You couldn't be 
more wrong, Mr. Mulally. In 1970 we were importing about 20 
percent of our oil. It has skyrocketed to 1977 to 46.5 percent 
of our oil was imported. The Congress has passed a law, a law 
that mandated that there was a doubling of the fuel economy 
standards in the United States of America. Over the next 
several years there was a decline to only 27 percent of our oil 
being imported by 1985, 1986. CAFE was a huge success, Mr. 
Mulally, and I think Ford deserves a lot of the credit for 
making that work. I think you are making a mistake in taking 
credit away from you and Chrysler and General Motors for the 
job you did technologically.
    But since 1986, Mr. Mulally, with no new improvements in 
fuel economy we are now 60 percent dependent upon imported oil. 
It has gone up, in other words, 33 percent in the last 20 
years. That is a national security crisis. We have 135,000 
young men and women over in the Middle East right now. There 
are 20,000 more on the way as part of a surge. We cannot allow 
that to continue to skyrocket as the auto industry continues 
successful to block improvements in fuel economy standards. On 
that second issue, the second issue is vehicle miles traveled 
that Mr. Wagoner raised. On that issue, vehicle miles traveled 
has increased consistently for the last 35 years. The only time 
it went down in terms of our total oil consumption was during 
the time that the fuel economy standards were hitting our 
economy. That is when we broke the cycle because obviously 
there are more people and more vehicles but with increased fuel 
economy standard we actually imported less oil.
    So this question of national security goes to the heart of 
this debate and since we import 70 percent of our oil, 60 
percent of our oil right now, we have got a crisis on our 
hands. Are you saying that, Mr. Mulally, what Ford did back 
then was not a success and that what we are asking for you to 
do this time is impossible?
    Mr. Mulally. I think that what we have done together to 
improve fuel economy absolutely has been a success, absolutely.
    Mr. Markey. You call CAFE a failure.
    Mr. Mulally. My only thought about your second question is 
that we are absolutely, all of us, committed to continuous 
improvement of fuel efficiency. It is what the customers want, 
it is the right thing for the environment, and it is absolutely 
the right thing for national security and our reliance on oil. 
So we are absolutely in agreement on the objective. I think----
    Mr. Markey. Mr. LaSorda, do you think the CAFE was a 
failure?
    Mr. LaSorda. Well, when you take a look at the charts that 
you showed, fuel prices skyrocketed in the 1970's and early 
1980's. People consumed less energy and switched to other 
segments and that is what happened as well as CAFE.
    Mr. Markey. That is your answer. Do you think, Mr. Wagoner, 
that CAFE was a failure?
    Mr. Wagoner. Yes, sir. Against its stated goals of, and I 
am quoting, ``reducing U.S. gasoline consumption and oil 
imports'' it wasn't effective. I think for the reason Mr. 
LaSorda mentioned, basically consumers make their choices very 
heavily influenced by fuel price, so that is why in my 
comments, Congressman, I specifically endorsed that the initial 
ideas, the reasons behind the desired outcomes of the original 
CAFE program are in fact excellent ones and suggest, I think, 
very real approaches to move significantly in the right 
direction to achieve those objectives.
    Mr. Markey. I just can't believe the testimony I am 
hearing. The charts demonstrate conclusively that the testimony 
you are giving is completely wrong, and I don't know why you 
are going to maintain that a drop from 46 percent imports to 27 
percent imports at the same time that we have doubled our fuel 
economy from 13 to 27 miles per gallon is not something that is 
in direct correlation. I find your inability to at least take 
credit for what you did so technologically to be troubling to 
me. You did the job. America was benefited from that. What we 
are asking for you now is to tell us what you can do 
technologically going forward when it is hard to do that if you 
continue to maintain that there was no success story for our 
country from a national security perspective back in the 
1980's. I thank you, Mr. Chairman.
    Mr. Boucher. Thank you very much, Mr. Markey. The gentleman 
from Illinois, Mr. Shimkus, is recognized for 6 minutes.
    Mr. Shimkus. Thank you, Mr. Chairman. So much to ask, so 
little time, but it is great to have you all here. In respect 
to Mr. Markey's chart, I think there is one thing there was the 
change in speed limits too that there was a major effect. And 
coming from Illinois, I always hate the debate on Europe, let 
me tell you, because I lived in Europe for 3 years. You can 
drive across Europe in about 7 hours. You can't get through the 
State of Illinois in 7 hours. So these comparisons with Europe 
or Japan, if you want to talk about how long it takes to drive 
across Japan, we are a big country that likes to go places and 
we are going to drive those places.
    And when this gets down to a local consumer level that is 
going to be a big issue. First of all, a couple questions. Mr. 
Gettelfinger, how many people do you represent?
    Mr. Gettelfinger. I think active workers would be somewhere 
in the neighborhood of 500,000.
    Mr. Shimkus. Mr. Wagoner, how many do you employ?
    Mr. Wagoner. Globally 285,000, in the U.S. about 125,000.
    Mr. Shimkus. Yes, let us stay with the U.S. Mr. Press.
    Mr. Press. In the United States we have 34,000.
    Mr. Shimkus. Thirty-four thousand. Mr. Mulally.
    Mr. Mulally. Approximately 100,000.
    Mr. Shimkus. Thank you. Mr. LaSorda.
    Mr. LaSorda. About 65,000.
    Mr. Shimkus. How many of those have what you would consider 
good paying jobs?
    Mr. Gettelfinger. I would say they are good paying jobs.
    Mr. Shimkus. You bargained for them, right? Go on down the 
line, please.
    Mr. Wagoner. I would say 100 percent are good paying jobs.
    Mr. Press. Every one.
    Mr. Mulally. Every one.
    Mr. LaSorda. Every one, yes.
    Mr. Shimkus. Health care benefits.
    Mr. Gettelfinger. Very good.
    Mr. Wagoner. Good.
    Mr. Press. I think probably among the richest in the 
country.
    Mr. Mulally. Great.
    Mr. LaSorda. Excellent.
    Mr. Shimkus. Thank you. Thank you for providing our 
constituents good paying jobs with health care benefits. We are 
not here to be up on you. I am here to say thank you, and we 
want to keep you a vibrant part of our economy. I have great 
respect, and he knows this as the chairman of this committee, 
and we want to make sure when he says he wants to bargain in 
good faith and make sure that you are still a vibrant part of 
our economy, I take him at his word. I am still a skeptic, but 
I trust Mr. Boucher and hopefully we will do the least harm 
through this process. I like Ranking Member Upton's also 
questions on research and development because I was going to go 
in that direction also.
    How many of your R&D dollars, Mr. Gettelfinger, you don't 
have to answer this, do not pay off, what percentage?
    Mr. Wagoner. From GM's side we certainly don't bat about 
1,000 on that. I think it depends a little bit how you cut it.
    Mr. Shimkus. The bottom line is when you R&D there is 
sometimes that it doesn't pay off and you have got millions of 
dollars out there for no return.
    Mr. Wagoner. Right, but what we try to do is the up front 
R&D isn't the expensive part. It is bringing stuff into 
production so we really try to look at a lot of options up 
front so a lot of the real basic research frankly doesn't work 
out. It is not huge dollars. The issue is picking the right 
ones to get in production.
    Mr. Shimkus. And if I can get everybody. Mr. Press.
    Mr. Press. I would agree. The reality is we probably learn 
from those failures too, and so it does move forward and the 
dollars do help.
    Mr. Shimkus. Mr. Mulally.
    Mr. Mulally. I think a key element of your question is the 
fact that we really do--we really cannot bet on what the single 
one technology is going to be that is going to help us achieve 
our mutual objectives, and so we have continued to invest in 
multiple technologies because we know it is going to be a 
basket of solutions which is another important piece, I think.
    Mr. Shimkus. Thank you. Mr. LaSorda.
    Mr. LaSorda. Congressman, when you take a look at what has 
evolved in this industry, we have moved more to joint research 
and development projects than doing them on our own as well 
just to try to minimize risk and bring in more technical 
science from the different companies. I stated earlier, our 
hybrid technology is a joint venture with BMW, General Motors, 
and Mercedes, and we have a fuel cell venture with Ford Motor 
Company. You are going to see more and more of that because of 
that very question you asked.
    Mr. Shimkus. Thank you. I have had a chance to do--I am on 
the hydrogen vehicles, the van that was out, and I can't 
remember whose it was but it was $100 million. I tell kids 
about this. I drove a hydrogen van. It had good pickup. We went 
on the interstate and it is only at $100 million right now, the 
cost to buy that van. So obviously we want to get there and it 
costs a lot of money, and you ought to be congratulated for 
that for the money that you are putting in right now. I am a 
big flex fuel guy, you all know that. I had an Explorer, 
Taurus, and now I have a Jeep Grand Cherokee, 22 filling 
stations. What are you doing about the compression ratio so 
that we get miles per gallon competitive with gasoline? Anyone?
    Mr. Mulally. There is about a 20 percent drop off.
    Mr. Wagoner. Yes, the energy density of ethanol is less so 
the fact is there is always going to be some shortfall but we 
have been working on the gasoline for 100 years and the ethanol 
for a much shorter period of time. We will be able to improve 
it.
    Mr. Shimkus. And I am going to stop with you because it is 
kind of the same answer, but as long as we have ethanol 85 at 
20 cents, 30 cents less a gallon it is a wash and it works out 
well for me. Mr. Press, flexible fuel, when are you guys going 
to get on board?
    Mr. Press. We have announced our first flex fuel vehicle 
will be in 2009, and we are considering beyond that other 
products in the future including hybrid flex fuel.
    Mr. Shimkus. We went to welcome it to the community. You 
can see now that everyone has embraced it. It has been a long 
haul. We appreciate the leadership that the automobile 
industry, especially Ford on the 85 corridor, which has been 
great for Illinois and Missouri and it has helped push at the 
retail level, and we have seen great success. My time has 
expired. Thank you, Mr. Chairman.
    Mr. Boucher. Thank you very much, Mr. Shimkus. The 
gentleman from Pennsylvania, Mr. Doyle, is recognized for 5 
minutes.
    Mr. Doyle. Mr. Chairman, thank you, and you have set some 
lofty goals for our committee. I want you to know that you have 
my commitment that we are going to work together to achieve 
those goals so I think we can do that. I want to share a lot of 
what Mr. Dingell said. I think the way we are going to achieve 
this is maybe thinking differently than how we thought about it 
in the past, to start to think outside the box and it just 
seems to me that the answer here is technology and initially 
with hybrid and flex fuel vehicles eventually with fuel cells. 
I want to commend Toyota. I have to tell you, I only buy 
American cars but you are to be congratulated because you are 
buying cars that Americans want to drive, and you are able to 
meet standards that just aren't being met by some of your 
competitors here in America, and you got six hybrid cars.
    Now having said that, I have a Ford Escape hybrid, and I 
bought one of the first ones off the line. I was glad to 
finally see an American car company make one I could buy, and 
you should be making more of them and Americans want to drive 
these cars. And I want to tell you, I haven't done anything to 
that Fort Escape hybrid but put gas in it and very little gas 
in it, and it runs perfect and I have never had a problem with 
it. And I just don't understand why you don't have a lot more 
of these kinds of cars on the road. Americans do like to drive 
them. And it is frustrating for those of us that want to see 
American car manufacturers compete in this market that Toyota 
and other companies like them seem to get what you guys haven't 
got in the past and they are way ahead of you on some of this.
    Having said that I think it is technology that is going to 
do it, in fact, I think some people are concerned if we were to 
raise CAFE standards annually by 4 percent that a lot of people 
feel you may start pulling away from your research from the 
next generation type of vehicles to focus more on how you can 
improve the combustion engine to meet this 4 percent. I am 
wondering how accurate you believe that kind of an argument is. 
And what I really want to get to because we are talking about 
solutions, not want doesn't work but what can work. What would 
be the single most significant incentive that the Government 
could provide through the tax code or any other thing to help 
push this envelope of technology forward? What are the 
obstacles in the law that you think need to be amended to 
encourage more advances in the technology? And I am talking 
about helping you to roll out and deploy these technologies 
sooner rather than later.
    We know hydrogen fuel cells are way down the road, but the 
sooner we get there the better, and what can we do to encourage 
more of these bridge technologies until we get the hydrogen, 
what can we do to help you do that? And I will just let you 
each take a turn, just go down the line.
    Mr. Wagoner. Thank you. First of all, Congressman, I would 
like to point out we at GM will have four hybrid vehicles 
introduced this year. We introduced a couple last year, and we 
will have 12 on the road in 2008 so we will be glad to be in 
that game, and we share enthusiasm for the importance of 
technology. If we could ask the Congress for three things I 
think in the area of ethanol we need radically ramped up 
distribution of ethanol, and it has been sticky. It has been 
hard to break through, kind of 1,000 fueling stations out of 
170,000 offering it, so any ideas or help on how to get all 
these people who now bought the E-85 flex fuel capable vehicles 
given the opportunity to use ethanol would be a huge help.
    The second area, as was discussed by Congressman Upton, 
advanced battery research. We see a battery that will work and 
do a lot of the stuff that you are talking about down the road. 
There is some work that still needs to be done and other 
countries are moving much faster. And then, third, I would say 
generally continuing incentives for consumers as the Congress 
has passed in the area of hybrids to help defray the fact that 
they do cost more at this stage are three things that I would 
suggest.
    Mr. Press. Thank you for that question. First of all, the 
tax incentive really helps. You have to create the environment 
for new technology. About 80 percent of the customers that buy 
a hybrid buy it because of the fuel economy. The biggest reason 
they choose not to buy a hybrid, about 45 percent, is the cost. 
And the reality is if we get economies of scale we get lower 
cost for our suppliers and we can increase the volume and 
really bring the cost down substantially. And a lot of these 
technologies are like the old batteries in our cell phones you 
used to carry around on your shoulder. Now these new 
technologies in hybrids are like a small cell phone. They are 
getting miniaturized. The same thing for transitioning or 
manufacturing costs to assist in domestic production of these 
products. Any way to reduce the cost difference and improve 
carbon-based fuel advantages and ethanol would be a very big 
advantage.
    Another key is education. We need to bring the consumers 
into this to understand the scope of the problem and get them 
to be part of the solution.
    Mr. Mullaly. I would add especially on the hybrids the 
available of batteries, which is our limiting factor right now. 
And, for example, we don't have a domestic, a United States 
source for the batteries in the hybrids.
    Mr. Doyle. Where do you get them?
    Mr. Mullaly. Right now we get them from Japan. And you 
heard the collaboration that we all have going on on batteries, 
not only today's batteries but also lithium ion batteries, 
which clearly can be part of the future so getting an available 
U.S. source will help us but we are actually committed to the 
hybrid and the technology. Going back, I would like to just----
    Mr. Boucher. Mr. Mulally, unfortunately the gentleman's 
time has expired.
    Mr. Doyle. That is exactly what I was going to say.
    Mr. Boucher. Thank you very much, Mr. Doyle. The gentleman 
from Michigan, Mr. Rogers, is recognized for 5 minutes.
    Mr. Rogers. Thank you, Mr. Chairman. I had some great 
advice from a member of this committee who is a long and 
distinguished member here, Mr. Dingell, who told me when I 
first got here when you are suppering with the devil make sure 
you have a very long spoon, which is great advice, Mr. Dingell. 
I appreciate it. I was a little surprised to hear you all 
acquiesce so quickly to as it was termed a regulatory regime. I 
own a small business and that scares me to death, just the 
words in and of itself. And I sometimes wonder if we are not 
coming at this thing a little bit backwards. Did anyone tell 
you to get into the lithium battery business for research and 
development? Did the Government tell you to do that? Did the 
Government tell you to develop a flex fuel vehicle? Is there 
any rule that you know of that that--anybody? No.
    Did the Government tell you to work on hydrogen fuel 
vehicles? Was there some Government mandate that told Chrysler 
or Ford or Toyota that you are aware of? You did that on your 
own, did you not? Why did you do that?
    Mr. Wagoner. From our side, I think that consumer concerns 
about environmental issues, the availability of energy, the 
constant ups and downs in oil prices suggested to us that 
eventually we were going to need to come up with a better 
answer than the traditional one, so frankly having gone through 
a lot of them that we knew were going to be higher cost and 
require customer trade offs like our EV1 in California in the 
mid-1990's, we said, hey, what is something that can really 
work, and so we put a lot of efforts behind the couple areas 
you mentioned.
    Mr. Rogers. Wasn't the EV1 really in reaction to a mandate 
in the State of California for 10 percent electric cars at that 
time so you tried to fill that market void, didn't you?
    Mr. Wagoner. Well, to be perfectly honest, I wasn't here at 
the time so I can't give you the blow by blow but I can tell 
you unfortunately that obviously from a business perspective 
the battery technology wasn't ready so it didn't work. We 
learned something from it but it didn't work.
    Mr. Rogers. I guess my point here is that we all have 
agreed, including all the companies here before us today, we 
want to do something about CO\2\ emissions. That is a good 
outcome. We want to do something about buying oil from 
overseas. That is a good outcome if we can lessen our 
dependency on foreign oil. You have taken steps because the 
market is driving you that way already. You are investing 
literally billions of dollars over the course of time into 
these products. Back in World War II, we asked the car 
companies to help us out to build tanks and artillery tubes, 
and you all stepped up to the plate.
    There is a place in my district where they went from 
building trucks to artillery shells in 8 weeks to meet the 
demand for World War II. That is pretty impressive. So my 
argument is maybe instead of telling you and creating this big 
government regulatory regime to try and mandate and tell you 
exactly how to do it, won't you have to have people who are 
trying to figure out what that regulatory scheme is and how 
that fits into your development schedule and what that means 
for projects that you will and will not work on, is that right? 
I mean that is just the way it works now, does it not? Is that 
correct? I don't want to put words in your mouth. Is that 
right?
    Mr. Wagoner. Yes.
    Mr. Rogers. So what if we came up with a way to provide you 
a different kind of incentive and say, listen, here is the 
problem in America. We don't want to buy foreign oil anymore if 
we can avoid it, and we want to cut our CO\2\ emissions. That 
would be great. And we also want a car that somebody would put 
in their driveway and want to buy, right? That would be really 
good too, wouldn't it? So what if we let all the intellectual 
capital that you all have come to those conclusions?
    I am a big ethanol guy. I drive an ethanol vehicle. It is 
great. I love it. It is like giving a good salute to Iranian 
Ayatollah every time I step on the gas. I enjoy it a lot. Is 
there a better way, can we provide capital in some way either 
through the free market process that would allow you to spend 
money on research and development and help us get out of this 
problem and help you develop a car that Americans want to buy? 
Mr. Wagoner?
    Mr. Wagoner. Yes, I think so. I think the things we talked 
about today to the extent that we can consent to production 
distribution of ethanol the Government could play a big role in 
helping to reduce the oil imports. Helping with battery 
research would be a big help. I just want to comment, 
Congressman Rogers, you talked about us sort of being willing 
to be regulated. I think you know and everyone on the committee 
knows, we have been heavily regulated under CAFE for 30 years 
unlike a lot of other parts of the energy consuming economy in 
the U.S., and our goal would be to have a--if we are going to 
be regulated let us regulate in the direction that actually 
solves the issues that are on the table which, as you 
highlight, oil imports, emissions, things of that sort.
    Mr. Rogers. Just quickly, if we came up with a Federal loan 
guarantee that was very specific to research and development on 
alternative fuels, and you decide what that is, you decide what 
the market is, would you be interested in something like that 
that allowed you to make those decisions and maybe reduced the 
cost of your loan?
    Mr. Wagoner. Sure, because our own situation is such that 
our credit rating is low and while we have a lot of capital in 
the business we need a lot of capital investment so anything 
that could support in that direction would be appreciated.
    Mr. Rogers. Mr. Mulally.
    Mr. Mulally. Yes. That would be great.
    Mr. LaSorda. Yes.
    Mr. Boucher. Thank you very much, Mr. Rogers. The 
gentlewoman from Wisconsin, Ms. Baldwin, is recognized for 5 
minutes.
    Ms. Baldwin. Thank you, Mr. Chairman. I mentioned in my 
opening that the automobile sector is not only in the best 
position to improve the fuel economy of its vehicles but also 
to reduce the greenhouse gas emissions in the day-to-day 
manufacturing operations, and manufacturing automobiles is 
clearly an energy intensive enterprise. So as one of the 
largest industries in the United States, you are in a position 
to lead by example, and I wonder if you could each briefly 
address the steps you are taking to increase energy efficiency 
in your plants across the United States. I am hoping I will get 
a chance for a second question so if you can briefly respond to 
that, that would be great.
    Mr. Wagoner. Yes. You are familiar, we have a plant in your 
district, I think.
    Ms. Baldwin. Just next door.
    Mr. Wagoner. We put, let me say, a broad-based target 
across all of our manufacturing facilities in North America. We 
exceeded the target. We reduced 23 percent between 2000 and 
2005. We set another target of 17 percent between 2006 and 2010 
so we can have a 40 percent reduction over that time period, 
and that we are employing every single imaginable thing you can 
do from getting people to turn off lights to buying more energy 
efficient equipment. You name it. It is micro stuff that adds 
up to big numbers.
    Ms. Baldwin. Mr. Press.
    Mr. Press. Since 2000 we have had a 30 percent reduction 
per vehicle produced. We have very aggressive plans going 
forward on a preventive basis, and this goes all the way to 
zero landfill. We just finished a new plant in San Antonio, 
Texas where the energy cost per unit is about a third less than 
anything we have ever built before in the new plant. New plants 
allow us to do that and we will continue these efforts.
    Ms. Baldwin. Mr. Mulally.
    Mr. Mulally. We also have improved I think a little over 15 
percent in the last few years, and we have a target to improve 
each year continuously. And we also joined the Chicago Climate 
Exchange where we can trade the carbon also. It is very 
important to our business, and it is good business.
    Ms. Baldwin. And this is also through multi-faceted 
strategies or anything in particular to get that 15 percent?
    Mr. Mulally. Just looking at every part of the operation on 
generating and using power.
    Ms. Baldwin. Mr. LaSorda.
    Mr. LaSorda. Yes. Since 2002, our plants reduced about 20 
percent. We used outside, experts as well in the energy 
business who are running our power plants with us and it is a 
mindset to get every employee--and, by the way, costs of energy 
have gone up so much it is a natural fixed cost reduction. We 
have to focus on taking it down. So it is combined, both.
    Ms. Baldwin. Thank you. Mr. Wagoner, you noted the plant 
that is just adjacent to my district in Jamesville. While the 
plant is located just across the district border, I know that 
many of the 2,600 employees who work in that plant are 
constituents of mine and we are very proud of the work that 
they do, which includes producing about half of GM's 400,000 E-
85 flex fuel vehicles in 2006. I want to touch on just a little 
more detail on what Mr. Doyle raised in his questioning about 
the challenges faced by owners of flex fuel vehicles in terms 
of the fueling stations that have been slow to get behind the 
growth of the availability of these vehicles, and what steps 
are GM and the other automotive manufacturers doing to 
encourage the development of the infrastructure for delivery of 
E-85 to the consumer. Are you working with the oil companies? 
Are you working with the industry and what steps should you be 
taking, what steps should we be taking to move this forward?
    Mr. Wagoner. Excellent question because it has perplexed us 
to a certain extent. We have worked with several of the oil 
companies. I think to be honest our biggest success has been 
working with some of the so-called big box retailers, Meijers, 
for example, and working with them on specific programs to 
convert some of their fueling pumps over to ethanol. It is a 
slow process. We are talking with some of the other major 
retailers to do the same. And I think it is critical that we 
get over this because eventually people are going to either not 
use the E-85 capability or lose interest in this great 
opportunity that we have if we are not able to push that more 
aggressively.
    I know there are incentives to offer current gas station 
operators, tax credit to convert. I don't know if the level of 
that is adequate to actually induce people to do so.
    Mr. Mulally. I might just add to Rick's comment that it is 
really tough for us to help move that infrastructure along as 
you know because we are not in that business, but we will 
continue to go out of our way to make sure that everybody knows 
the value of the alternative fuels and the benefit to all of 
us. And as far as the business proposition that they are 
dealing with, I think some encouragement and some help and some 
incentives to put in that infrastructure is absolutely going to 
be needed.
    Ms. Baldwin. One last comment. I understand anecdotally 
that many people who are purchasers of flex fuel vehicles may 
not be aware of that attribute so in terms of your education, 
consumer education of the consumer to make them demand this 
service of their local fuel stations is certainly a helpful 
component.
    Mr. Boucher. Thank you very much, Ms. Baldwin. The 
gentleman from Oklahoma, Mr. Sullivan, for 6 minutes.
    Mr. Sullivan. Thank you, Mr. Chairman. I would like to 
thank all the panelists for being here today. I know that you 
face a lot of challenging times right now in the auto industry, 
and I think you are doing a good job. I think you will get 
through it all because you guys are bright men, you got good 
teams. I think that the innovation and the technology is very 
exciting. Mr. Wagoner, I bought a Suburban, one of those flex 
fuels, I haven't been able to put ethanol in it though in 
Oklahoma. I can't find a place to put ethanol in it. I would 
have to drive to Kansas, I think, to do it, but I might do that 
some day.
    But one of the neatest things, one of the technological 
features of it I think that is pretty cool is it operates on a 
V4 to V8, and that is a neat technology too that saves a lot of 
fuel. I love that. I think too I would like to refer to my 
colleague from Michigan, what he said, is that you are doing 
these things already. You are getting into this. No one is 
making you do it. It is really kind of you have a constituency 
of a market like we have a constituency of voters. We like to 
do what they want because we want to get reelected. You want to 
do what you want to do so you can sell more cars.
    I think if people wanted purple cars you would probably 
make those if you saw in your data that they wanted them. And 
so I think it is really market driven. You guys are doing a 
good job in that, and the technology is really neat and I 
commend you for it. But I would like to refer to another issue 
that no one has really talked about, and it is about safety. 
And when you achieve the technology to get to certain arbitrary 
standards that some people over here might want to do, you 
would have to maybe downsize in weight and other maybe 
aerodynamics and things that might jeopardize safety. And I 
just want to ask could automobile or highway safety be 
jeopardized if the Congress decides to set these arbitrary cap 
A levels and the companies have to consider downsizing or down 
weighting vehicles in order to produce a fleet of vehicles that 
will comply?
    Mr. Wagoner. History would suggest that, yes, that is a 
risk. We obviously do everything we can to mitigate that risk. 
We have added a lot of safety equipment on vehicles but I think 
the historical data speaks for itself that it does bring that 
risk along with it.
    Mr. Press. I may have a little different viewpoint from the 
standpoint that technology may allow you to achieve safety and 
emissions improvements, like a hybrid system applied to a 
vehicle but it is an extra cost and it does take extra 
engineering. It depends and it has to be carefully considered 
when any rule is made the impact it would have on safety and 
then how we execute it. It has to be open and available so we 
can maintain safety and reduce the fuel consumption.
    Mr. Mulally. Clearly, it is absolutely a key component and 
one reason we have been very supportive of NHTSA doing that 
evaluation and helping us get the maximum feasible levels is 
that they take into account the technology, he economics of 
doing it, and the safety. I think that has served us very well, 
especially the last program was a light truck program. It took 
into account all those considerations because there are real 
issues. They are doing a good job at it.
    Mr. LaSorda. When we design a car, we start with obviously 
something the consumer wants, and then we want to make it safe 
because they need to be safe. Of course, the fuel economy, the 
aero, these are all factors that we take into consideration 
almost 4 years in advance before it hits the road. Some people 
think we can make a car in a couple of months. These take a lot 
of time and a lot of effort including new technology on 
materials that could be used for safety and fuel economy for 
weight reduction.
    Mr. Sullivan. Don't you think that engineers and others are 
more suited to make these decisions than career politicians, 
and probably better than us as well. OK. Also, another thing I 
would like to focus on is these batteries. I think that is a 
very neat innovation. I am interested in hearing more about 
that. It means battery advancements that may be--advancements 
that may be needed to allow your companies to consider 
producing plug in hybrid vehicles, what more do we need to 
learn to have usable battery packs, and how soon do you think 
we might be able to get there where you see them all over the 
place, and the batteries are smaller and weigh less and cost 
effective.
    Mr. Wagoner. The challenge is--I mean the chemistry is 
focused in on this so-called lithium ion model for batteries. 
It has been very successful in smaller applications. There is 
actually a company in California that is going to be offering 
in the next couple of years the opportunity to buy a vehicle 
that is powered by these small batteries. The problem is there 
is like 6,900 of them to power the car, so that is as you can 
imagine pretty expensive. So what we need to do is find a way 
to be able to get a more efficient application of this battery 
technology. How fast can that be done, I can't give you an 
answer for sure but I think if we get on it and put all our 
muscle behind it, it is more like a 5-year time frame than a 
25-year time frame. It is something that we made a huge amount 
of progress in this battery technology in 5 years, and we are 
using the technology and your cell phone or whatever, so there 
is a lot of hope that we can scale that up and get the cost 
down.
    Mr. Press. Obviously, the battery is a limiting factor 
right now. If you took a Prius and made it a plug-in vehicle, 
the trunk would literally be full of batteries due to the 
technology, but that doesn't mean that in the future that we 
won't be able to achieve a great deal of reduction in cost and 
weight and efficiency and safety of batteries. These are issues 
we are all working on very diligently at this time. In terms of 
the time, it really depends on how this whole process plays out 
and the kind of support there is and the focus and the amount 
of energy required from an electrical vehicle perspective. If 
that is stimulated then it becomes faster.
    Mr. Boucher. Thank you, Mr. Sullivan. The gentleman's time 
has expired.
    Mr. Sullivan. Thank you very much.
    Mr. Boucher. The Chair now recognizes the gentleman from 
Texas, Mr. Burgess, for 6 minutes.
    Mr. Burgess. Thank you, Mr. Chairman. I want to thank the 
panel. This has been a very informative afternoon. I really 
enjoyed all of the testimony. You have heard from every person 
up here who drives a hybrid and who drives a flex fuel vehicle. 
I drive a hybrid. I believe in the technology. But, Mr. Press, 
I have to ask you, someone I think mentioned that we can't 
predict the time line or the duration of the technology or how 
quickly the technology can come to market. You have had the 
hybrid in process for 10 years, did you tell us, and 10 years 
ago did people think they had to hit a home run with that?
    Mr. Press. Ten years ago when we introduced the Prius, gas 
was $1 a gallon, and it was a long range project. We really 
wanted to start learning and getting some experience from it. 
What has happened is we have advanced much quicker than we 
thought. We have been able to bring a second generation and 
soon a third generation version which has lower weight, lower 
cost, and a lot more performance, and it has progressed quite 
well.
    Mr. Burgess. But at some point in the future we know that 
the price of oil is cyclical and we may again see oil come down 
dramatically from where it is today. Do you see that as 
impacting your business model with the future changes to the 
hybrid?
    Mr. Press. From the standpoint of the market if you 
considered creating demand and sow into the market, no. We need 
to start marketing the products. We have to make hybrids 
attractive. We have to make them cost effective and make sure 
that there is an education of what the advantages are, and we 
and we can help create a mainstream hybrid market and that is--
--
    Mr. Burgess. Can I just interrupt for a minute because we 
got this vote, how long did it take you to develop that 
technology when you made the commitment that we were going to 
do this? How long did that go from bench to the assembly line?
    Mr. Press. The development of the program itself was about 
a 7-year project where we got into production. The concept of a 
hybrid though goes all the way back to the 1900's and this 
technology we have been working on for a very long time.
    Mr. Burgess. That 7-year interval, was any of that research 
and development funded by the Government?
    Mr. Press. No, sir.
    Mr. Burgess. So that was all just done under your own 
initiative?
    Mr. Press. Yes.
    Mr. Burgess. And I appreciate you doing it. Mr. Mulally, I 
actually too was waiting for a Ford Escape hybrid but you only 
sold them on the east and west coast, and being in middle 
America I had to rely on Mr. Press for a hybrid, but it serves 
a purpose. It gives me a good deal of moral superiority when I 
drive, and I like that.
    Now, unfortunately Mr. Markey is gone with his charts. When 
I take a look back to the 1970's and a mental image of the CAFE 
standards, and what I envision is the Yugo, and I really don't 
want to see us go back there. I guess, Mr. Gettelfinger, at the 
time I left, I am most concerned about the constituency that 
you represent. These other fine gentlemen are all going to be 
OK one way or the other regardless of whether it is corn or 
whether it is hybrid or electricity or lightning bolts. They 
are going to be OK.
    But the constituency that you represent is probably more at 
risk when you hear, and everyone is gone from the other side, 
but we heard terms like a 80 percent reduction in carbon 
emissions by 2050. Does that startle you when you hear talk 
like that?
    Mr. Gettelfinger. Well, not necessarily because if you look 
back over time and then move forward to today there has been a 
lot of change in the industry. What is of concern though is a 
loss of jobs in this country.
    Mr. Burgess. Absolutely. And you have already heard that 
the batteries are only made in Japan.
    Mr. Gettelfinger. That is correct. And that is the one 
difference I have here with Mr. Wagoner a while ago on the 
consumer credit because what we are really doing is we are 
subsidizing then the product that is made overseas. And as 
everybody here has testified, if you take one of these products 
that has got the power train brought in from Japan you drop the 
content of that vehicle from perhaps 80 percent down to 55. And 
so, yes, that is a concern, and we tried to address that in our 
testimony because we are losing a lot of jobs in this country 
and we are not replacing them either.
    Mr. Burgess. Correct, and if I may, when you couple that 
with the fact that the wages are good, the health benefits are 
significant, and the retirement benefits are significant, and a 
lot of that can be overcome by outsourcing overseas that is of 
concern to me because you individually represent a constituency 
that is as large as all of the other gentlemen at the table 
combined if I did my math right as we were going through the 
employment numbers. And I just wonder if we have talked about 
people thinking outside the box. I just wonder if you should be 
thinking of using the power or equity that you have in 
collective bargaining to work with your partners to your left 
at the table there to insure that they do.
    Don't rely on us. You see how we are going to fight about 
CAFE standards. Don't rely on us to do that job for you. I 
would say it is incumbent upon the union to use their power or 
collective bargaining to go to General Motors, to go to Ford, 
and see what can be achieved together to make these products 
deliverable and achievable within our natural life time because 
there is a very popular television show that begins in about an 
hour that talks about the war on the middle class, and I would 
submit to you that the CAFE standards and that the carbon 
tailpipe emission standards may well represent the new war on 
the middle class, and unfortunately it will be your 
constituency that suffers the greatest.
    Mr. Gettelfinger. It would depend on how it is designed and 
put into place. But again everybody at this table, NUMMI, the 
GM-Toyota joint venture and with all these folks here at the 
table that are represented here, we work with the companies. In 
fact, we go through presentations like with Mr. Wagoner, we 
just had a presentation on what they are doing as far as 
advance technology vehicles, Mr. Mulally, as well as Mr. 
LaSorda, so we do try to stay on top of that. Because in the 
final analysis everybody to my left is in good shape 
financially. If the jobs go away the impact on the community or 
whatever they are going to be all right. But we deal with the 
day-to-day worlds of the people that have lost their jobs and 
they have got nowhere to go. And so we do have a very big 
interest in that, and that is why we have pointed out the 
University of Michigan study that said as far as advanced 
technology vehicles, we should give incentives to everybody 
here to produce those products in this country, but also to 
help move the needle forward quicker as far as technology goes 
by incentivizing.
    Mr. Burgess. And I couldn't agree with you more. I know the 
committee will work with you. I would just say you can't tell 
when a carbon monoxide molecule comes out of the tailpipe 
whether it originated from fossil fuel or part of the carbon 
cycle for corn but every one of those carbon dioxide molecules 
has a union label on it. Thank you, Mr. Chairman, I will yield 
back.
    Mr. Boucher. Thank you. The gentleman's time has expired. I 
am pleased to recognize now the ranking member of our 
subcommittee, the gentleman from Illinois, Mr. Hastert.
    Mr. Hastert. I thank the chairman. The energy policy act 
that we passed at the last Congress among other things 
encourages the development and use of E-85 fuel. Exploiting 
America's domestic agriculture resource to achieve energy 
security and provide jobs for Americans, I think is of utmost 
national importance. Mr. Wagoner, what is General Motors doing 
to promote the use of E-85 flex fuel vehicles?
    Mr. Wagoner. First and foremost, Congressman, we are 
obviously radically expanding the number of vehicles and the 
types of vehicles we offer this option on, first and foremost. 
Second of all, we are spending a lot of money educating 
consumers about it. We have run a big marketing campaign, Live 
Green, Go Yellow. We have actually put different color gas caps 
on our E-85 vehicles so people are reminded every time they go 
to a fuel station that they have the capability to use flex 
fuel. And finally I was mentioning earlier that we worked with 
some of the big retailers to encourage, help them offer ethanol 
distribution, which I think is at this particular moment having 
adequate stations for consumers to use on a convenient basis is 
probably the biggest bottleneck we see in the system although 
there could be others.
    Mr. Hastert. As you know, there is somebody that got their 
fingers around the hose and the stopping ability--you know, if 
you build automobiles that is fine. People buy them and expect 
to be able to use E-85 but if you have to drive 40 or 50 miles 
to get the fuel that is a difficult situation to be able to 
crack. Underwriter Laboratories, UL, has been working to 
certify E-85 fuel dispensers since last summer. This is just to 
certify. In the meantime, big box retailers as you say are 
delaying the roll out of additional E-85 pumps around the 
country pending UL certification.
    This represents thousands of refueling stations across the 
country. How does this impact the sale of flex fuel vehicles, 
and is your company working with UL to try to expedite this 
process?
    Mr. Wagoner. I am aware of one very specific large case 
where that is exactly the issue that you cite that we could 
significantly increase the number of fueling stations but they 
don't want to proceed this retailer unless there is 
clarification of this issue. It is a liability issue. So we are 
frankly continuing to produce and continuing to talk about the 
benefits of flex fuel but behind the scenes obviously our own 
people in R&D have offered to and to the best of my knowledge 
are continuing to work with UL to understand what the issues 
are that are leading them to withhold that approval, and we 
continue to be available to try to work through those. We 
obviously have a lot of experience in this in places like 
Brazil so we know it can work.
    Mr. Hastert. The U.S. Air Force uses it. The military uses 
it. Brazil has used it. I don't know what the hang up is, and 
we have used E-85 in engines for a long time. As a matter of 
fact, Mr. Mulally, I have been told that UL doesn't even have 
enough information about the effects of E-85 on fuel tanks and 
pumps. I think the original Model T was capable of running on 
ethanol, is that correct?
    Mr. Mulally. Absolutely, because Henry Ford also cared 
about farming too and so he was the first one--actually the 
first Model T ran on ethanol. They had a long time to take a 
look at it.
    Mr. Hastert. Mr. Mulally, I assume that before your company 
began producing flex fuel vehicles you did significant testing 
on the effects of E-85 on fuel tanks and other components 
within the car, I assume, is that correct?
    Mr. Mulally. Absolutely.
    Mr. Hastert. Have you shared this data with UL?
    Mr. Mulally. Maybe I better get back to you on that 
specifically. I am sure we have because we have been like all 
of us a real proponent of moving towards flex vehicles.
    Mr. Hastert. Well, I am reminded that we have a vote that 
we have to get to. I really appreciate this panel. I am sorry 
that I got pulled off on another meeting for part of your 
testimony. You are a major producer of what Americans are proud 
of and use every day. The automobile is part of our way of 
life. We need to know how to adapt it and what we have to do to 
meet requirements and make, quite frankly, our environment 
healthier. But there are ways to do it. We appreciate your 
testimony and look forward to working with you. Thank you very 
much.
    Mr. Boucher. Thank you very much, Mr. Hastert. The 
gentleman from Mississippi has arrived, and, Mr. Pickering, we 
have 2 minutes left to cast our votes on the floor. However, I 
note that 348 Members have not voted yet so I have a feeling 
that this one is going to remain open for a little while, but I 
would ask the gentleman to be as expeditious as he can with his 
5 minutes of questions.
    Mr. Pickering. Mr. Chairman, I will be very brief, and I 
will use my time basically just to make a few comments and so 
then we can adjourn and end this good day. But I thank all the 
leaders of the American automotive industry and manufacturers. 
And I want to personally welcome Mr. Press with Toyota. He is 
now our Tupelo honey. The birthplace of Elvis Presley will now 
be the birthplace of many cars, we hope, flex fuel cars, new 
hybrid cars, fuel cell cars. And the American spirit and the 
American car go together. It does represent and symbolize 
freedom.
    I do not think mandates, CAFE mandates, are the best way to 
go. I think research and opportunities develop technological 
solutions and incentives for people to find a way to solve our 
problems on security, on fuel independence, and on 
environmental issues is the best way. I appreciate what you all 
are doing and look forward to working with you as we go forward 
in this process.
    Mr. Boucher. Thank you very much, Mr. Pickering. I want to 
express appreciation on behalf of the committee to all of our 
witnesses. You have spent a long afternoon with us today. I 
know each of you is very busy, and we do appreciate your time 
and the very valuable information that you have shared with us. 
I also want to say thank you for your commitment to work with 
us as we undertake the major challenge of drafting a greenhouse 
gas emission bill. We will be consulting closely with you and 
those with whom you work, and we very much appreciate your 
cooperation. That being said, the hearing stands adjourned.
    [Whereupon, at 4:50 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                     Statement of Thomas W. LaSorda

    Mr. Chairman and Members of the Committee, thank you for 
inviting me to testify before you on the subject of climate 
change. DaimlerChrysler is committed to developing new, 
advanced technologies, which minimize the effects our products 
and processes have on global climate and the environment in 
general. We recognize that climate change and national security 
are serious concerns that require all of us--individuals, 
industry and government--to take actions to help reduce our 
dependence on oil and emissions of CO\2\. And, we have already 
taken actions to do so.
    DaimlerChrysler has long been committed to reducing 
petroleum consumption and emissions of greenhouse gases of its 
motor vehicles.

      We have produced more than 1.5 million flexible 
fuel vehicles (FFVs)--vehicles capable of running on E-85--in 
spite of the limited availability of E85 fuel to consumers. 
That is more than 10 percent of our production over the past 
nine years, a higher percentage than any other manufacturer. We 
stand ready to make, by 2012, 50 percent of our production as 
either FFVs or vehicles capable of running on biodiesel.
      DaimlerChrysler offers seven clean-diesel models 
this year--providing improved fuel economy of 30 percent and 
greenhouse gas reductions of 20 percent. As we announced at the 
Washington Auto Show in January, our new heavy-duty Dodge Ram 
diesel meets the stringent, 50-state, 2010 emission standards 
TODAY. And, we are actively pushing for the adoption of a 
national standard for B20 biodiesel fuel to speed its adoption 
in the marketplace.
      We are partners in a global alliance in hybrid 
development with GM and BMW in developing a new hybrid system 
that we expect will leapfrog the competition. The first 
Chrysler Group product--the Dodge Durango--will be on sale in 
2008.
      DaimlerChrysler is a leader in producing hybrid 
diesel-electric buses through our Orion transit bus brand. We 
also have the only demonstration fleet of plug-in hybrids in 
service--our Dodge Sprinter vans.
      As you may not know, we are the world's leader in 
fuel cell vehicle production, with more than 100 vehicles--
ranging from small passenger cars to city transit buses--in 
worldwide operation today. Thirty-two of these are in the U.S. 
We are putting significant resources into developing these new 
types of propulsion with the objective of significantly 
reducing greenhouse gases.
      And we continue to put advanced technology into 
our gasoline engine vehicles. Last year we introduced a new 
World Engine for our 4-cylinder cars and trucks, along with a 
new fuel-efficient continuously variable transmission.
      Just last month we announced a $3 billion 
powertrain investment. This investment will include the 
development and production of:
      A significantly more fuel efficient V-6 engine 
family; and
      New cutting-edge transmissions that improve fuel 
economy by an additional 5-10 percent alone.
      Plus, we will double the production capacity of 
our 30 plus mpg 4-cylinder engine plant in Michigan to 840,000 
units per year.
      All in all, these investments will further secure 
tens of thousands of U.S. jobs associated with the engineering 
and manufacturing of the vehicles that will benefit from these 
new technologies.
      We're also addressing our product mix. Earlier 
this year, we announced a 40-plus mpg ``Smart'' city car that 
will arrive in the U.S. early next year.

    I've focused on what we are doing, from a technology 
perspective, to reduce petroleum consumption--and, since they 
are directly related, greenhouse gases. But I need to mention 
one more item in this vein. For those who advocate 4 percent 
annual CAFE increases over the next 10 years--which translates 
to a 50 percent fuel economy increase--we know how to do that, 
too.
    In fact, we already do it--in Europe. The U.S. combined 
fleet averages 24-25 mpg, and in Europe the fleet averages 36 
mpg. That's a 50 percent difference.
    Why is there a huge disparity between our fleets there and 
here? After all, we are the same companies in Europe that we 
are in the U.S., with access to similar technologies. The 
difference is the European approach to energy and greenhouse 
gas policies. They've made some tough political choices. 
They've highly taxed gasoline, making the price three times 
higher than in the U.S., and they have incentives on diesel 
fuel. As a result of these policies, fuel economy is always 
high on a customer's list, and not just when there's a spike in 
fuel prices.
    Through policies which affect consumer demand, the mix of 
vehicles sold in Europe is radically different than here--about 
60 percent compacts or smaller, compared to about 15 percent 
here; and about 50 percent of passenger vehicles are diesel 
powered.
    There's no magic at work here. A gas-engine mid-size car in 
Europe gets the same mileage as a gas-engine mid-size car in 
the U.S. It's just that customers demand a very different mix 
of vehicles in Europe.
    The European model, while far from perfect, is based on 
policies that leverage demand and market forces, not on 
policies that fight them.
    However, in the U.S., our policies have historically 
addressed the supply side--light-duty vehicle fuel-economy 
standards. But, consider how a 50-percent fuel-economy 
improvement relates to new vehicle technology alone. If all the 
new vehicles sold in the U.S. 10 years from now were hybrids or 
diesels--something that no one really believes is feasible--
fuel economy would improve by only 25-30 percent.
    U.S. policymakers must adopt a new and unique formula that 
fits here. DaimlerChrysler supports a three-pronged, 
comprehensive approach to climate change and energy security; 
one that includes a combination of:

      vehicle efficiency improvements;
      the expanded use of alternative fuels--such as 
ethanol and biodiesel; and,
     the harnessing of market forces to help drive 
consumer demand.

    We all need to be very clear on one point--new vehicle 
efficiency improvements alone will never result in the overall 
decline in petroleum consumption and greenhouse gas emissions 
we need. The demand for fuel will continue to grow, as more 
drivers enter the market and vehicles are driven longer 
distances.
    There are more than 230 million light-duty vehicles 
currently in use today in the U.S. which travel nearly 3 
trillion miles. That is nearly 13,000 miles traveled by each 
vehicle, each year--an increase of about 30 percent since 1985. 
Thus, greenhouse gases and the demand for petroleum will not be 
offset by only addressing efficiency improvements among the 16-
17 million new vehicles that enter the U.S. market each year. 
In order to decrease total greenhouse gas emissions and 
petroleum consumption, we need to accelerate the adoption of 
alternative fuels such as E85 and bio-diesel, which will affect 
a greater proportion of the population of light duty vehicles.
    And by the way, while travel is growing in the U.S., it 
will grow exponentially as China and India increase the global 
automotive market dramatically. The combined Indian and Chinese 
existing car fleet will almost triple during the next 10 years 
to about 90 million vehicles, while the U.S. fleet is forecast 
to grow 25 percent.
    To address this increase in demand, we need a comprehensive 
approach that addresses energy use and greenhouse gas emissions 
from all sectors of the U.S. economy, and encourages the most 
efficient reductions in energy use. Our approach should not 
just address the supply of energy-efficient products, but also 
spur demand for them, while establishing reasonable time-tables 
for compliance and realistic levels of reductions.
    Although it should go without saying, I'll say it anyway: 
This effort needs to be national in scope. We need to avoid an 
unacceptable and inefficient patchwork of inconsistent Federal, 
State, and local approaches. In fact, to truly be effective in 
curbing greenhouse gases, we need a global solution.
    On the vehicle efficiency side, we at DaimlerChrysler 
recognize the need for action. And we're taking it. Every day, 
our engineers are working to reduce greenhouse gases and 
petroleum consumption. We absolutely will be part of the 
solution and we will accelerate our efforts. We also support 
reforming the CAFE program to base it on vehicle attributes and 
pledge to continue to work with NHTSA to establish maximum 
feasible levels of fuel economy--levels that are based on sound 
science and that recognize the limits of technology, cost, and 
consumer demand.
    But again, if we intend to make meaningful progress in 
reducing petroleum consumption in this country, in addition to 
vehicle technology improvements, we look to the Federal 
Government to establish policies that address consumer demand 
and bend the bias of transportation fuels toward lower carbon 
alternatives.
    Thank you and I look forward to answering your questions.

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