Business roundtable; 25 Of 26

The following program is made possible through a grant from nation's business. This is a business roundtable a program of current comments from leading members of America's business community. Today. EDWARD M. Cole president of the General Motors Corporation will explore the topic of the automotive industry. With series host Alfred L. C. Lee Dean of the Graduate School of Business Administration at Michigan State University. This session of the Business Roundtable is going to explore the American automotive industry the automotive industry has long been one of our economic bellwether. In fact many economists and others have said as goes the economy of the automotive industry so goes the economy of the United States. We're fortunate today to have with us to explore the subject a man that has been his entire life

in the automotive industry and today is president of the largest component of that industry the General Motors Corporation. What is the outlook for sales in the automotive industry this year. Well we're recovering as you know from what some of the economists call a mini recession. It really wasn't too bad. But for 1968 we looked for about a seven and a half percent improvement over 1967 and far as the domestic sales are concerned. Cars and trucks it'll be about nine million nine million seven hundred fifty thousand truck sales and about 800000 imports or. And you should know this about 8 million 2 or 3 domestically built cars. Does this mean that the strike that took place in the industry had some impact on these sales or do you think that the industry makes up the sales that are lost during that period.

Well it does have some impact we have had a chance to go back and study some of the work interruptions due to strikes or work stoppages. Ford has just now started to recover from a 61 day work stoppage in the last quarter of 167. And I feel that there has been some deferred purchases into 1968 and could have an effect on the 1968 calendar year sales or the sales may go up even at a faster rate than you'd anticipated I suppose. And six they could on the other hand the economy seems to be absorbing their cars at a greater rate. And it may be that the recovery is faster than our ability to produce. Well let's look down the road in terms of this industry. What do you think is going to happen in the automotive industry in terms again of volume of units or let's say roughly the next 10 years 10 years something in this general

neighborhood do you anticipate the sales are going to be approximately as they've been investors going to sell more units. What just basically is going to happen and as you look at well I don't know that I've got a big enough growth to go forward ten years this is my 38 year in the automobile business. However in order to provide facilities to continue the rate of growth of our business we naturally have to forecast. And it just happens that I've recently reviewed our 1970 forecasts and we're forecasting world wide as you know it participates in the world market that we're forecasting worldwide that the automobile business will go up about 40 percent. And this is a fantastic figure we're forecasting Thirty two million cars and trucks to be made and sold annually by that time. This is worldwide worldwide.

Worldwide demand however you might be interested to that we feel that the Canadian and other the new US market will expand faster than the U.S. market because we're probably closer to saturation here than other parts of the world. Now I can remember when I lived in Italy back in 1953. And of course he was the very large automotive manufacturer in that country and there were many motor scooter and a bicycle were the primary means of transportation for most people will now when you go do it today you can see that they've really entered the automotive age and great congestion and roll in the kind of narrow streets. So I can well understand your comment that you anticipate because you're starting from a lower base that many of these foreign countries may well expand more rapidly than we have here. I can support that a little better. We operate in several large areas in Germany. We don't want to mount a factor in Adelaide but one of our great problems now is tearing down the bifocal sheds and providing parking space for the

workers to come to work. And of course we like this approach. That's been a big Jane doesn't it. Well let's look at what you see in the automotive industry in terms of the design of the car what type of car do you see the people are going to demand here in the United States in the future. We're going to have more of what might be called the sporty look kind of Cars are cars going to get bigger Are we going to have perhaps more smaller ones or what you see in your crystal ball of this one. Wow. I wish that I could accurately forecast what the public wants and needs. There's one thing that we're quite sure about the average family car is not going to get any smaller because the young man around the campus here if you take a look at them are actually getting larger. So we think that we're going to have to provide a little more interior space that's one thing that will probably happen to our cars. I think as the society becomes more of a

flow on that there will be a need for the sporty type of car for the fun of driving in the south a benefit. And those things that go with it and you might be interested not too many years ago about four years ago. Well in the area 15 percent of our cars in this already hired. And that's the two door hard top. And today it's over 50 percent. So that's a strong indication of what the trend is and how much further it goes. This can be anybody's guess but our motto was we have a car per person per person and we expect to be doing that as we get out of the industry here are going to begin is going to produce what the people want. Wow you know that's the funny thing. Very often the people don't know what they want. And we do an awful lot of market research. And we asked somebody what he wants and he knows of what's available today and he measures his wants. Then when we come along and join some of our work and some of our thinking and the exotic area he suddenly changes his

mind. So I think we have as much influence on what people want in a car as are some of the people that are dealing with fashion. We've had obviously as you mentioned the influence of society as more and more of our family units have increased their incomes. We found more what we called two car families is this had an effect of the demand the kind or type of car people want do they buy the second car basically the same kind as the first bill. Well that's interesting and naturally we're interested in this phenomenon because what is has happened many people that go into the multiple car family ownership retain their older car and buy a new car. And other cases where they experience this multiple ownership for a period of time tend to go to the smaller car for the last car in the stable. And we see a very definite upgrade of the demands in the family type car in the way of convenience and safety

features like air conditioning power steering power brakes and features of this type. In a sense then as having a car for what you might call multiple purposes which you've got maybe a four door car for certain purposes in a family but you've got a two door 40 type car or some other kind of functional purpose. If your market then is pretty segment it is it's very segmented. And of course it's very hard to predict how well a certain design goal. One of our competitors was very fortunate coming to the market with a certain design and they did very well with the design. And I'm quite sure none of the marketing experts at least in our organization forecasts that the particular vehicle would do quite that well. Well let's turn our subject a little to begin another esoteric aspect of taking out your crystal ball what do you think about the car of the future. What's it going to be in terms of its power. Currently For example our cars our internal combustion engine.

You see the internal combustion engine as being basically in a car well pick five ten years from now when your crystal ball or do you think perhaps the turbine engine that we read a lot about might be the motive power or what about the electric powered automobile which has been considerable discussion. Well of course my background is engineering and one of the first jobs I had was in the motor design area and it goes back 35 years when I thought I had many brilliant ideas all new that I had brought to the business. So I made a search of the library in the files and the patent files and every idea I had was about 15 or 20 years old and this was quite discouraging to a young designer. And the other hand that we're dealing with a business that in my opinion that has more evolutionary characteristics than revolutionary and we're going through an age of replying to the improved technology that has been made available perhaps as made the piston engine That's our normal internal

combustion engine that's in the average car perhaps more competitive than it has been in the past and probably will delay the introduction of any new power plant like you're talking about the electric the turbine engine or even the steam engine. And you probably know too that we have built a number of electric cars we have some running we have built the very highly efficient zinc silver type battery powered car that had the performance characteristics of our average car. We have built a van that used fuel cells with oxygen hydrogen as a fuel. The hydroxide as the medium of exchanging power between the cells. This is the electrolyte. So we have a very broad background not only in the power sources but also in the control sources using solid state devices. The latest and se are that the silicon controlled rectifiers and things of this type to do the very best job we

can of bringing as the right kind of transportation to the public. This is our job General Motors is a transportation oriented corporation and if anything is going to come to the transportation field that we feel is outstanding and good it's going to come from General Motors in other words if you really feel that there's a real breakthrough an electric power source you're going to have it or if there is a turbine engines I don't think I heard what you said that you don't think that's going to happen very soon. Let me give you just a few points for evaluation. If we take one as a number a cost of one of our present reciprocating engines a diesel engine has a 10 to 1 factor of our present turbine engine the 51 factor of cost for the same horsepower 10 to 1 versus 50 versus 51 or 50 times as great against our current engine but now this is an aircraft I think we have intensive

programs trying to find materials and means of reducing the costs of the turban type engine. Now the turban type engine because of its characteristics is inherently better for the heavy duty requirements like our electric motor requirements the heavy trucks and stationary power plants and things of this type and we have an intensive program working in this field. Is there any possibility that the electric motor as a source of propulsion for an automobile might have some limited uses of some type while at the same time the piston internal combustion engine remains the primary source for most automobiles is it reasonable for example to have an electric powered vehicle you would use primarily within a city or a small radius that you drive in using your other piston type engine and automobile for the longer type groups. Look this is very interesting because our dynamo Motors research

laboratories have had the program and a contract with the Housing and Urban Development through the University of Pennsylvania to study this mall to determine whether there could be a mode of transportation that would be served well with limited pollution type vehicles such as the electric car. Particularly in the denser City area we have made our submission and we made this study it's certainly feasible. The question is how practical is it economically it's economically feasible. The point in is when you turn off of the busy city street on to a 70 mile an hour freeway with a vehicle that's capable of 30 or 35 miles an hour. Is this going to be accepted by the average individual lowers the limit as of now at least in terms of the development of this is about 30 35 miles an hour. The maximums because of the size of the vehicle and the safety characteristics associated with it you certainly have to limit the speed.

Well let's look at another question that seems to be getting considerable discussion these days and among many economists government officials and I'm sure among the automotive industry itself that's the question of the worldwide automotive markets. For example last year we had approximately 750000 foreign automobiles imported into the United States. This is roughly what is about nine to 10 percent of our total just about consumption. I think I'm in pretty good position to talk about this subject a little bit because the distress is that some of the great success that some of these cars have had in our U.S. market. In 1959 there were 600 14000 imported cars brought to this market for a total of about ten and a half percent of penetration

than the compact car came into the picture and reverse that trend. Now the trend is reversing again because many of the import cars have gotten bigger. They're more attractive they have better performance and perhaps they're more competitive to our domestically built cars and we're quite concerned. Since January 1st than you were quite accurate in your figure through September the import cars are represented 1.2 percent of our total domestic market. So we are concerned we are importing into the U.S. Our Opel car which is made in Germany. We will probably import around 52000 at when the figures are all in our self at the 2000 for 1967 and we're hopeful that we can import and sell about 75000 for 1968. Why don't you make a small car of the foreign type if Apparently there is a market for this number in the United States. Why don't you get into this market why are you making this

kind of a car right here in the United States. So here you sound like my boss. Fortunately we have done a great deal of analysis in this area. We have taken our foreign cars our own General Motors foreign cars and set them up and analyzed their cars as though they were produced in this country and at the moment were not able to meet the cause of our foreign producers that is our General Motors plants that are producing these cars in Germany and in England. And its very simple. They have a base of production from 500 to a million units of this type of a vehicle. At this moment as I indicated our Opel represents about 52000 production here in this country our sales and sales in this country through the importation of this car. We can employ modern techniques and methods at that low volume that you can employ at the high volume. So the big question

is how can you conceive a car that you can afford to tool and have a volume requirement of around three hundred fifty or 400000 units I'd said any time we could be assured of a market in this area that we could afford to get in the business. Now this is the risk you take going from 52000 to 400000 in one jump. But assuming there remains a real market in the United States. For this kind of small car than you were going to meet an importation of cars you are making a broad. You're kind of putting me on the spot. I want to say that that necessarily will be true forever because it is our hope with this expanding market requirement that we can find a way to accomplish this job because it is very distressing to me to think that they can haul a car all the way across the ocean and put it over in our market and sell it profitably for less money than we can domestically but the economics of the situation.

Those are the facts alighting are the facts alive. Well this raises of course the question in many industries where they're faced with foreign competition. The industry starts going to our federal Congress and saying well we need to tear up the tax on the importation of this good or a quota system so only so many units can be admitted. What's the position of the automotive industry on this question. Well the which is the Automobile Manufacturers Association have gone on record indicating that they're in favor of free trade with no tariff barriers. General Motors through our. Vice Chairman of the board Mr. George Russell recently has gone on record indicating that General Motors supports the free trade position all the way. We feel that there shouldn't be trade barriers in the way of artificial barriers like tariffs and quotas and things of this type. We think the free exchange of technology facilities capability and things of this type should be allowed either at this

international competition is a pretty good thing even though it pinches a little at times. Yes there are certain markets that sometimes wonder whether we're taking the right approach to it but I think in the long range the free trade approach is going to win out. Well I think we've covered the outlook for the automotive industry here in terms of the numbers the kinds of cars that the industry and you foresee in the future. Some of the problems of foreign competition. Let's turn to another. Last word it seems to me that's becoming increasingly important in the United States. The social responsibility of business. I think for example that as time goes on the concepts of ethics and social responsibility over time change somewhat. They're not always exactly constant. Seems to me as I had viewed the passing scene in our country over the years that we have more of a social consciousness today in our industry

and in many other facets of our society I think for example today in the general science most all American industry supports the view that we ought to have fair wages for the employees we ought to have good working conditions we've got to have profits for the stockholders that invested in the company and of course we don't have profit you can't have fair good wages or your working conditions all right this is the basis of the whole thing and you've got to turn out an ethical and reliable and honest product that's fairly priced and so forth. So let's skip over those social responsibilities but let's look at one that seems to me is really the crux today of some of our problems is in the ghetto where ears of our big cities. The unemployment rate among our Negro citizens in the United States is very high. They compare it to that of our citizens. How do you look at this question What is the responsibility of American business today.

In our bigger urban centers where the unemployment problem among the Negroes. Well I think we have a deep social responsibility as far as business and industry is concerned. And the reason I say that being silly is because as we move along and become more sophisticated we've got to carry our workers and the people with whom we operate and employ along with it. Unless you start doing that you're going to leave them further behind. The days of the debt and all that sort of thing that used to be of the magnet type labor are gone. Just this last week a few days ago I was in one of our modern foundry. The working conditions and everything about this sophisticated people to run it there isn't the ordinary menial tasks that used to be associated with that kind of an operation it takes skill and good people and we find particularly in the not white area in the Negro area that these people have a great

capability to carry on and advance. If we simply give them the opportunity they've got to start from someplace. And I think we've been perhaps a little negligent and not bringing these people into the industrial world soon enough along the lines of the sophistication that has started to come into the picture and this is a very simple thing. If you're driving to do this we're trying to do it and the other angle is that we have in our labor agreement it's right out there we have an improvement factor as a part of our contract and we're supposed to employ new technologies and things like this so that the employee can advance along with technology and along with the company. And of course we've got to integrate those people right into it along with all the rest. Let's look at them. Another aspect of social responsibility that applies specifically it seems to me at least to the automotive industry and every investor is got different kinds of what I would call specific social responsibilities. Compared with what I called general social responsibilities now in the automotive industry

we've got a problem. It seems to me of a specific aspect of social responsibility in air pollution in the safety aspects and in some types it seems to me you get in a traffic congestion primarily in our large cities. Let's look at what's the industry doing. Let's take these three in order that I just mentioned. What's the industry doing an air pollution. Well there's two types of air and air pollution we're dealing with and that is the vehicle or air pollution and the other courses are industrial air pollution from the simple combustion of hydrocarbon our That type of appeal. I'd like to separate them and take the automobile personally because that's where a lot of effort is being placed. We have now equipped all of our cars that are being sold for the 1968 model with devices air pollution control devices that will reduce the hydro carbon emissions by 63 percent over and under the car and CEO which is a carbon monoxide

problem by 60 percent. Now as more cars become equipped than the total level of the national air pollution problem will drop. But it takes about a 10 year cycle before the cars that were unequipped they last year are phased out of the picture in which a car lasts as an economic unit before it scrapped on the average about 10 years. This is a very big so there is progress and research you've done in this area is now being applied to cars but it's going to take quite a period of time for there all with all the cars in the road are sort quipped. This is right but there's another aspect of this that might be interesting to your audience and that is that even though all we do the job of equipping the cars these cars must be maintained more highly pruned if you want to live that way than they have in the past there's nothing that you probably can detect as far as operation in the car. But to get the performance on the emission control equipment they must have regular maintenance schedules.

Well let's turn to the safety issue this has become of course seems to me again I'm viewing the scene in a more important issue than it used to be at least more people seem to be the problem. What what's going on with regard to this the safety issue are cars being used to be are we safer today in an automobile we were 10 years ago. That's a very good question and and without any doubt our audience are quite familiar with the many things that have happened to their automobile their recent automobiles because now they are equipped with seat belts one for every passenger seat. They're also now in 1968 the cars with the front seat shoulder belts and they are safer cars if the occupants of the restraint system. We just recently made a film that we call you. Well I'm restrained flying objects to

something that once you see the benefit that these restraining devices offer you wonder why so many people fail to use them. Now beyond that. We have designed the front end of our cars to have more energy absorbing characteristics so if something is dropped that the impact on the occupant isn't quite as violent as it may have been in the past. We're padding the interiors the instrument panel General Motors and the like again because one of the divisions that had been working on this thing for a number of years finally indicated the advantages of this energy absorbing steering column. So when a driver is forced against the steering wheel this during wheel collapses a controlled amount and all other factors all this accident problem other than the automobile as such. Well as you know you have a driver now perhaps of the entire formula of the driver car and road

the driver is the biggest part in that equation. We find that through records that 50 percent of the accidents the fatal accidents the driver had been drinking. We also find that I'm sorry to interrupt but at a time when the Business Roundtable is up and thank you very much. Who's participating in today's Business Roundtable was Edward N. Cole president of the General Motors Corporation. Host for the program was Alfred L. Seeley dean of the Graduate School of Business Administration at Michigan State University. The topic for next week's Business Roundtable is a guaranteed annual income. Guests on the program will be Daniel Krueger professor of labor and industrial relations at Michigan State University and Charles Killingsworth University professor of labor and industrial relations at MSU.

This program was produced by the Graduate School of Business Administration and the Broadcasting Services of Michigan State University under a grant from nation's business a publication of the Chamber of Commerce of the United States. Business Roundtable is distributed through the facilities of national educational radio. This is an E.R. the national educational radio network.