This is the prepared text of the speech and may not reflect the verbatim presentation
Thank you, Keith, and good evening to all of you. It's great to be back at the World Congress.
January 16, 2001
Anyway, these three years have been pretty momentous for me as well. I went from being a so-called "captain of industry" … to being a neophyte author … to being an absolute failure at retirement. In fact, I come from a long line of failures at retirement: To this day, my 93-year-old father routinely keeps hours at his Credit Suisse office in Zurich. Which, by the way, leads me to say to those who are saying that some of George W. Bush's cabinet picks are "too old": Just remember all the shenanigans a young man dragged us all through these past three years! (That's yet another advantage of turning, whenever possible, to members of AARP - "Ageless Americans with Remarkable Panache"!)
Anyway, I was out of the auto industry for all of about four months when I was offered the opportunity to view this industry - and several others, as you'll hear in a minute - from the perspective of a supplier. And the first thing I learned is that no matter where you are in the automotive world, this is still, as Peter Drucker once said, "the industry of industries."
Not to say, of course, that all perches in this business are exactly the same height off the ground. In my case, for instance, I've had a lot of different titles in this business-vice president, executive vice president, president, vice chairman, and now at Exide Technologies, chairman and CEO. But I learned, especially while at Ford and BMW, that the title that's even better than CEO is "owner." So, that's one of the reasons why, as a purely personal investment that has nothing to do with Exide, I'm now half-owner, along with Briggs Cunningham the Third, of the Cunningham Motor Company, the world's newest, smallest, and most "virtual" car company.
The late Briggs Cunningham the Second, as many of you know, was an American amateur sailor and race-car driver who stunned the auto racing world by almost winning the 24 Hours of Le Mans a couple times in the early '50s, in a self-financed car powered by a Chrysler hemi V-8. He then went on to build some legendary street models, including 30 copies of the Cunningham C3. Well, every kid's got to have a hobby, and since I don't golf or play tennis, here's mine:
Slide: Cunningham C7 (all 3 views)
Here's the concept we're showing off at our exhibit in the basement of Cobo this week - the luxurious, fast, high-tech, and comfortable Cunningham C7 grand-touring coupe. This car would retail for about $250,000, and as you can probably guess, it wouldn't be for everybody. It would be for wealthy people - from around the world - who want something different from what their peers are driving, as expensive as those cars may be. And it's also aimed at those who want a drivable car, as opposed to a road-going race car you have to shoehorn yourself into. Not that this car won't have plenty of performance: The plan is to equip the C7 with a six- to seven-liter 48-valve V-12 that'll generate about 500 horsepower.
And, as I mentioned, Cunningham Motor plans to be the most virtually-integrated car company in the world. We hope to work with this industry's very fine supplier base on everything from engineering to final assembly. The only things we need to, or want to, keep in-house are marketing, some finance, and that magical thing called "Overall Vehicle Integration-that sense of "wholeness" that makes for truly great cars. And, speaking of marketing, finance, and "wholeness," yes, we are now soliciting investors in this venture - because, as much as I like being half-owner of the world's smallest car company, I'd much rather be a diluted owner of a somewhat better-capitalized company! (Or, as I told a journalist at the show last week, the difference between me and John DeLorean is I'm not building an expensive factory and I don't raise capital by selling drugs or defrauding the Irish government!)
One other thing about the Cunningham C7: With all its state-of-the-art electronics, telematics, and creature comforts, I wouldn't be surprised if it requires the use of not just one, but two Exide batteries!
Slide: Exide Logo
Which brings me back to my subject matter at hand this evening. I wanted to talk to all of you tonight about two related subjects: one very grand and noble and far-reaching, the other seemingly pretty pedestrian-but not really so. Those two subjects are "convergence" and batteries.
Now, you've all heard the term convergence before. The SAE has been holding an auto-industry/technology-industry conference on convergence for several years now, and this past fall the speakers included such high-tech luminaries as Carly Fiorina of Hewlett-Packard and Scott McNealy of Sun Microsystems-who made the statement, rather famously, that he could envision telematics becoming so widespread and persuasive that one day soon cars would be viewed as (quote) "Java browsers with tires."
Well, there's no doubt about it: In-vehicle communications are here to stay, whether it's GM OnStar system, Mercedes-Benz's COMAND system, Ford's ties with Wingcast, or the various other in-car systems-including Internet systems, DVD systems, satellite-radio systems, you name it-we're seeing pop up at various manufacturers. As you no doubt saw or read, last week at the show high-tech gurus Forrester Research predicted that by 2005 more than 30 million vehicles in America will have telematics of one form or another. And another tech guru called that (quote) "an e-Vehicle wonderland" (unquote).
Plus, we're going to be seeing more and more voice-activated, "hands-free" telephone systems embedded in the car, in part for convenience but also in part to address the growing issue of "driver distraction" related to traditional cell-phone use. To put it all another way, ever since the first caveman hauled the first wholly mammoth back to the cave and told his fellow cave-persons all about the hunt, people have felt a need to be connected, to communicate with one another. And, just as digital communications revolutionized first the office and then the home, it's a safe bet that the automobile is next in line.
But the convergence I'd like to speak about here this evening is more than just the marriage of the vehicle and of in-vehicle telematics. At the same time that the telematics revolution is going to change this industry in ways it's never been changed before, there are also, as I see it, two other big convergences taking place that are going to change this industry just as much.
The first of these gets at perhaps the most innate human need-and desire-of all: the need to move. And, more specifically, the need for personal mobility.
Of course, we here in the West have had cars, trucks, sport-utilities, and motorcycles for so long that we almost take for granted the personal freedom that comes with personal mobility. The ability to carry on trade and commerce. The ability to commute to work. The ability to uproot oneself and to look for work someplace else far away.
During the Cold War, the Communists used to show the movie The Grapes of Wrath to people in the Eastern Bloc to prove to them just how bad conditions were in America under the capitalist overlords. But they stopped showing the movie after so many people starting asking, "You mean in America even the poor people have cars?" Well, guess what? In places like China and India and Latin America, not to mention the former Eastern Bloc, they want a car just as surely as the Joad family in The Grapes of Wrath did. But, unlike the Joad family, people in the developing world are just as likely as not to already have a cell phone, to already have a TV, to maybe have some access to the Internet, and to probably know more about cars than the average American today does.
To put it another way, there are 6 billion people in the world today, but only about 700 million vehicles on the road. I call those promising demographics!
Yes, there are lots of hurdles to overcome. Roads and other infrastructure must be built. Low-cost vehicles-be they cars or even scooters-must be developed. And, most of all, market economies must be allowed to continue to take hold and to flourish, so that a rising tide can lift all boats, and so that people who want to own a vehicle can finally afford to buy one. However, I'm convinced that, sooner rather than later, we're going to finally see the long-awaited convergence of the developed and developing automotive worlds. The fact is, the world wants to drive-not just the Western world or the Northern Hemisphere, but the whole world. And whoever's first in helping unleash that pent-up demand is going to reap untold fortunes. When it comes to the auto business, the developing world truly is the "final frontier."
So, people want to move, and they want to be connected. Those are two commonalties the world over, and more and more, it's not "Never the twain shall meet," but rather "How soon shall the formerly disparate parts of the world be alike than they are different?"
But people, the world over, also want something else: They want a clean environment. And, more and more (and, at times, for better or for worse), that movement is converging into a single, global movement as well. And, not only that, but the global environmental movement is itself converging with the global mobility movement. That's because the more cars there are on the planet, the more important it is we make the right cost/benefit trade-offs on things like higher emissions versus sustainable growth. And, in turn, both environmentalism and mobility are, in their own way, converging with the global communications revolution. Which in some cases means technology helps make societies productive enough so that people can afford to drive … while in other cases it makes driving time itself more productive … while in yet other cases it means communications technology works hand in hand with other technologies to offer solutions to mobility/slash/environmental conundrums, such as, "How do you increase the global vehicle parc by, say, a couple hundred million cars without choking the world on smog and/or throwing off a whole lot more carbon dioxide than the global warmists of the world would like?" Answer: Who knows-but maybe it's an incredibly sophisticated telematics program that'll tell your super-clean i.c./electric hybrid where the nearest Intelligent Vehicle Highway System is.
Now, will all cars in the foreseeable future be hybrids, or, what a lot of people consider the even more elegant solution, hydrogen-powered fuel cells? The answer to that question is, of course not. But these so-called "green machines" will be a growing minority of the cars on the road in this country, Japan, and Europe-and, over time, in the rest of the world as well.
And here's something else-something a lot of people never really stop to think about. Every one of these vehicle types-whether it's a full hybrid or a so-called "soft" hybrid or even a fuel-cell car-every one of these vehicle types cannot function unless they have on board-you guessed it!-a battery.
Yes, it's true: Were it not for batteries like the ones made by Exide Technologies, much of the breakthrough environmental work in the auto industry would grind to a screeching halt. In hybrid vehicles, batteries act much like the fuel tank in your conventional car. No matter where the electricity for the hybrid's electric motor is produced-be it from a gas engine or a diesel engine or from regenerative braking or whatever-that electrical energy needs to be stored someplace until it's needed for use. And that someplace is the hybrid's battery. And the exact same is true for fuel-cell vehicles as well, which, of course, are themselves hybrid vehicles-since fuel-cell cars have an electric motor, too, only it's paired with an electricity-producing fuel-cell stack rather than an i/c engine. And, as with hybrids, the battery is an absolutely integral part of a fuel-cell vehicle's system as well. That's because while fuel-cell stacks produce a steady stream of electricity, cars need that power in short, periodic bursts, such as for acceleration, hill-climbing, and other times when there are peak-torque demands on the electric motor.
But that's not the only point of convergence where the supposedly "humble" battery is playing a key, if albeit quiet, role. The fact is, batteries are playing a critical role in all the areas I've mentioned tonight-from providing starting power to cars, trucks, boats, farm implements, and you-name-it around the world … to helping people get and stay connected both in the car and, importantly, between the car and wherever else you might be.
Let me just give you a little bit better idea of what I mean with a just a few visuals.
Slide: Absolyte Battery & Telecom Control Panel Photo
First, the sides of Exide that not too many people here in Detroit know about-starting with what we call our network-power business. What you see here, in the inset on the right, is one of our "Absolyte"-brand battery stacks along with the highly sophisticated telecommunications system it's designed to provide critical back-up electrical power should there be a regular-power shortage.
These network batteries also keep telephones working and railroads running smoothly and safely when the power is out, and they help electric utilities shift power from grid to grid and, therefore, to better manage their power at any time. (And if you think managing power grids doesn't sound all that sexy or critical to our nation's livelihood, just ask the people in California right now!)
These types of batteries are also an integral part of the high-tech world. They power voice networks, wireless systems, cable TV, and high-speed data transmission such as the Internet. In other words, batteries not only help you pull the Internet into your car, they'll also help get it up on the satellite to begin with! And Exide, following our acquisition of GNB Technologies last year, is now the world's largest provider of these types of batteries.
Slide: Forklift w/battery
Next, talking about how people have an almost-innate need "to move," another type of battery we make takes its name from that very word: our motive-power batteries. These zero-pollution power sources include everything from forklift batteries (like the one shown here) … to, increasingly, all-electric busses that are starting to show up in many municipalities … to batteries that power electric locomotives inside mines.
Slide: Submarine w/crew
And, speaking of places where people's very lives might depend on your product, we also have a sizable military business. In fact, Exide supplies submarine batteries utilizing Copper Stretched Metal, or "CSM," technology to the navies of more than a dozen countries around the world.
All in all, non-automotive products now account for about a third of our revenues at Exide Technologies, and that side of our business is by far our fastest-growing. In fact, I'm happy to share with you that our high-profit network business is growing at an annualized rate of 30 percent!
But, of course, we're still a major supplier of automotive and other transportation batteries. And it is, of course, that side of our business that will have the most to do with the three convergences I've talked about here tonight. And, luckily, we have a lot of exciting things happening in that end of the business as well.
Slide: Orbital Battery cutaway
Not too long after I joined Exide two years ago, we introduced this battery-an advanced, spiral-wound lead-acid battery we call the Orbital Select. At Exide, we like to call it "the Viper of automotive batteries." As you can see, it looks like a six-pack of black beer cans, but unlike beer cans, its gas-recombinant gel technology is virtually leak-proof and puncture-proof. In fact, this is the first mass-marketed battery safe enough to be sent through the U.S. mail, or installed inside the passenger compartment of a vehicle. In addition to being mounted in any location, it can be also mounted in any position, even upside-down. And it can take abuse like you wouldn't believe.
Slide- Live-Fire Tested Orbital
Here's an example of what I'm talking about. Following some recent "live fire" testing by the U. S. Defense Department-including being hit with a 5.56-milimeter round at eight meters-we were delighted to be informed that at least some of the tested Orbitals were still able to start gasoline engines. Which, if you're the Army, means these batteries might be just the thing for a light-armored vehicle … or, if you're in Detroit, means you might be okay in a drive-by! (Or at least you won't be sprayed with liquid acid!)
Slide: Battery in back of seat/under seat
Through our partnership on interiors with the Lear Corporation, we've explored all sorts of applications for Orbital. Two of them, as shown here, include splitting up the battery's "six-pack" and mounting it three-to-a-module either behind the driver or front-passenger seat or under it. We could also, if we wanted to, form the battery into an "S" or "C" or practically any other shape that fits best with the car's design and available real estate.
Slide: Champion Trailblazer Battery
Meanwhile, in addition to being the industry leader in spiral-wound technology, Exide (by virtue of our acquisition of GNB Technologies) now also has a very strong presence in cast-positive silver-alloy technology, also known as "Ag9" technology, such as in the Champion Trailblazer battery shown here. This technology offers excellent heat resistance and long battery life. And with it, Exide is now the only company in the world to offer all three major transportation-battery technologies: spiral-wound, Ag9, and traditional expanded-metal.
Slide: Dual Graphite Battery
But, here's the battery that just might be a convergence in and of itself. The technology is called "dual-graphite," a technology that uses woven graphite strands for plates in a non-acid electrolyte.
Dual-graphite technology was initially conceived during the Cold War by the U.S. Navy, and it's now being developed by Exide after a lot of good work by Chrysler. As I see it, it has the promise to be the break-through, "holy-grail" battery-technology that would make the true EV possible. To have a true EV, as I see it, you need 200-300 miles of range per charge, about one-hour or less recharge time, low weight, low cost, and at least 1,000 cycles-i.e., 250,000-350,000 miles of total vehicle life.
Well, the good news is that small lab samples are exceeding even our most optimistic projections. The bad news is, scaling up advanced-battery technology such as this to EV-sized units is a tough, expensive, and time-consuming proposition. But, we hope to have something to announce-and demonstrate-on this front yet this year. As my CFO Kevin Morano never fails to remind me, we already have an Exide demonstrator electric car built; now it's time to give it a battery!
Slide: 42-volt graphic
And finally, of course, there's the battery technology you have all heard about: the new 42-volt systems.
The core of the 42-volt system, the so-called "ISAD" (Integrated Starter and Alternator Drive), will permit systems such as power steering, ABS, suspension control, and so forth to be run electrically, rather than off the engine. In effect, the ISAD functions like what I like to call a "mild"-hybrid during systems starting and stopping, automatically shifting from electrical power to engine power at, say, a stop light-thus avoiding the heavy fuel use and emissions on initial acceleration. And I, for one, think that these mild-hybrids just might be a great answer to the question, "Where does an i/c-based industry go first before it makes the big, uncharted leap into large volumes of true hybrids, fuel cells, or EVs?"
Slide: "Batteries For A World in Motion"
So that, ladies and gentlemen, is how the "humble" battery helps keeps this ever-converging world of ours going 'round.
But, I feel I would be remiss if I left you this evening without ending, as I did here three years ago, with a few pithy summations of points just covered. For those of you who were here three years ago, you may recall that I gave a speech decrying the touchie-feelie management so much in vogue back then called "Lutz's Immutable Laws," and that among my laws were "Teamwork is Not Always a Good Thing" and "It's Okay to be Anal Sometimes" and "Real Creativity Has Nothing at all to do with 'Casual Day'." You may also recall that that speech and those laws went on to become the centerpiece of my book, Guts, which, miraculously enough, became a Business Week best-seller.
Well, I can't guarantee the same thing will happen with tonight's laws, but here goes anyway. Here are: Lutz's Laws of the Coming Convergence.
And, since I'm on the topic, let me wrap up with a bonus "Lutz's law" here this evening: Ugly cars, no matter what the market, don't sell.
Let me tell you why I bring this up here. As a sort of "elder statesman" in this business, I feel almost an obligation to the industry say that I'm concerned over a lot of the concept cars we're seeing lately, including at this year's show. Many of them are all-out weird. It's as if the designers are no longer designing for the public, but rather for each other, trying to be evermore off-the-wall than the competition.
It reminds me of the height of the abstract-art boom in the '60s and '70s, when you viewed one blue circle and one line on a canvas, and then had to read a two-page description of what all the artist meant. There are concepts over across the street that look like a whole family of angry kitchen appliances: demented toasters, furious bread machines, and vengeful trash compactors (or even compactees). Then there are the assemblages of mere steel tubes, leather, and plastic-they look like exercise machines. And worse yet, a lot of these concepts all seem to be drowning in a sea of sameness: high belt-lines, tiny windows, flat fronts, rhomboidal headlights, and slab sides.
Auto companies that fall in love with this stuff do so, I submit, at their peril: Jack-o-lantern styling may get photographed at show time, but if it sells, it'd be a miracle. By the same token, I'd suggest that designers should never forget that cars, like birds or fish, are bodies that move through a fluid. And the fact is, you don't see many birds or fish with flat, snowplow front ends, faceted eyes, and jagged protuberances.
Anyway, I hope sanity returns before any of this stuff is tried in production, or else we might really see a downturn. And, of course, I have a vested interest in this industry's welfare because, as we all know, what's good for the auto business is good for the battery business!
Thank you very much.