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How do the petroleum companies feel about some of the things that General Motors is doing to shift the auto industry away from petroleum?
Wagoner: To be honest, I haven't really had direct conversations with them. It's a fairly broad-based issue. We're not saying that we don't see our sector continuing to use petroleum. But with the cost of petroleum these days and broader sensitivity and ever increasing demand for it, alternatives have to be developed. I note with interest a number of the oil companies talk about their positions as energy providers, rather then just oil companies. I'm not in that business, that's the way to think about the future.
GM has been a major proponent of ethanol and has particularly emphasized corn in some of their advertising. There was a preliminary study that came out a couple of weeks ago that seemed to indicate the increase in cultivation of corn in the U.S. maybe indirectly leading to increased deforestation in the Amazon as Brazil ramps up soybean production in response to a decline in soybean production in the United States. Do you have any second thoughts on promoting corn as a fuel source?
Wagoner: We've been promoting E85 and in the initial stages here in the U.S. it's been grain-based as opposed to say in Brazil, where it's sugarcane-based. Over time if we're going to realize the potential of ethanol, we're going to have to have breakthroughs in the cellulosic area because there's simply not enough agricultural capability to make the kind of dent that we think could be made, unless we get to the cellulosic process.
It's going to have to move beyond the grain-based (process) here in the U.S. and that's why we have such an interest in these alternatives.
A recent Toyota report came out where they expect sort of a flattening out of demand when it comes to hybrid vehicles in the U.S. in 2008.
Wagoner: Our own experience is that we're expanding production of a number of hybrids and we are introducing more products with hybrids. We'll undoubtedly sell more hybrid-powered vehicles this year than the last year. Obviously, our base is much lower. Beyond that, I really can't comment on Toyota's position.
One of the challenges with hybrids is they do cost more. So does the consumer see the value equation or is the manufacture going to eat the higher cost. This looks different with $95 a barrel than with oil at $55 a barrel. The consumer does have more skin in the game, as painful as that is.
What's your reaction to California trying to fight the exemption to improve their standards for emissions?
Wagoner: Well, the U.S. produced an energy bill which has ambitious objectives for our industry and frankly we'd like to be able to concentrate and do those. In that sense we appreciated the EPA action and hopefully that'll stand up to the challenges that are currently coming to them.
We heard your message today that with the fuel cell vehicle, the technology is closer than maybe it's commonly appreciated?
Wagoner: We've had a lot of progress in fuel cells and in a way more than some of the skeptics thought...some people think that fuel cells are never going to happen and I wouldn't agree with that.
Is the relatively high price of crude oil causing different planning in General Motors than ordinarily is the case. Are you now feeling a certain urgency to provide these alternative vehicles?
Wagoner: My sense is there's a fundamental change here and simply stated it's the growth of the emerging markets in places like China, which are huge consumers of energy and I don't see anything which is going to diminish that over time.
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