The head of the revitalized automaker discusses the bailout, energy efficiency and funding the Heartland Institute. Excerpt from “GM CEO, Dan Akerson,” March 7, 2012.

DAN AKERSON, Chairman and CEO, General Motors?in
In conversation with GREG DALTON, Director, Climate One

DALTON: GM’s just had a good year. Where is it now, and where are you trying to take the company in the years ahead?

AKERSON: We had the best year we’ve ever had in our 103-year history, and we posted record profits. We had to go through some difficult times, and there’s been a lot of political dialogue on that, but after a two-year hiatus, General Motors is again the largest auto manufacturer in the world. Between ’10 and ’11, we grew our revenue $15 billion. That alone would put us in the Fortune 250. Our revenue today is about $150 billion, which would be larger than the gross national product of 100 countries in the world. It’s an American company [and] it’s a global company, in the sense that we compete in 117-odd countries. We export around the globe. We’re very successful in most of the high-growth markets; we have the largest market share of any automotive manufacturer in the world. I think the lesson learned is [that] we can’t be as internally focused as we were before. As Wayne Gretzky said, he doesn’t skate to where the puck is; he skates to where it’s going to be.

Companies don’t fail in a year or two; it takes 10 years, 20 years, 30 years, for the deterioration and the rot to really impact the viability of the company. We can’t be sitting here in 2035 and saying, “What happened?” We’re in pretty good shape, but we have a lot of work to do, and we still have many issues that need to be addressed and resolved.

DALTON: The bailout has become a national political issue in this election season. You came from a private equity firm. Was there private capital available that could’ve bailed out the company, instead of taxpayers? Did the deal give the UAW a deal over bondholders?

AKERSON: I don’t want to be defensive, because, having come from private equity, we were part of many restructurings, and there are multiple avenues to a successful restructuring. I know we’ve become somewhat of a punching bag this political season. [The industry] was coming off the wheels. As Americans, we ought to be very proud. Our government stood up, regard- less of party affiliation, and just like blood is critical to the body, liquidity is critical to the economy. We provided liquidity into the markets. I’m also the senior director at American Express, which is one of the larger financial institutions. It was a different set of circumstances in the financial arena than it was in the manufacturing, specifically in the automotive, but at the end of the day, I wouldn’t have joined the company if I didn’t agree with it, because I think pragmatism has to enter into the economic dialogue. You can’t separate politics and economics on a macro-economic scale.

Two presidents of divergent political perspectives put money into this company. They weren’t running for office at the time. They had to face the hard facts, and in my opinion, they made the pragmatic decision to save this company, because it’s now been estimated a million jobs were at risk. That’s a million households. On a personal level, this is a wealthy state and a wealthy community – you all look very prosperous and wealthy to me – but when you go to Detroit, and you go to Ohio, and you go to Pennsylvania and Indiana and Illinois, where a good share of the automotive industry resides, whole communities have been negatively impacted by the downturn. It would’ve been significantly worse. President Bush said a million jobs and $150 billion in tax revenue would have been forgone by the federal and state governments had it been allowed to fail.

The industrial infrastructure of this nation would have been severely damaged. I don’t care how we got there; the question is, “Did it work?” Well, we’re not just alive; we’re prospering. Since bankruptcy, we’ve hired almost 17,000 employees in the United States alone, and we’ve invested almost $10 billion.?

DALTON: One way to separate politics from economics would be to pay back the remaining money that was lent by the U.S. Treasury. Do you have a time frame for when the Treasury will be paid back the other half??

AKERSON: Not to parse words, but you say “lent.” They lent us money; we paid all that back. They provided preferred stock with a 9 percent coupon; we’ve paid all that back, plus dividends and interest. We held the largest IPO in the history of the world, and most of that went to the federal government. They own 27 percent on a fully diluted basis, and they’re just like every other shareholder; they can sell it when they want. It is perverse, but I have some understanding of capital markets, and though we produce record profits, why isn’t the stock at record levels? Part of it is because we have a big shareholder and we don’t know when they’re going to leave. You’ve heard the structure in the financial world; it was, “Let’s take the good assets of the bank and call it good bank and bad bank.” Well, we had Liquidation Motors. We left all of the “toxic” assets behind, and we had to give several hundreds of millions of shares to the liquidation motor shareholders, and some of those, largely, were bondholders. When the stock really swooned late last year, it was because we dropped a couple hundred million shares on them and they flushed into the market. A lot of our big shareholders look at a big holder like the federal government and say, “When are they going to exit?” The answer is, candidly, I don’t know.

DALTON: You could understand the hue and cry in Congress, though. If the U.S. government sold shares that are 30 percent below the IPO price, the scream would be, “Ahh! Taxholders are getting fleeced; they sold at a loss! Bad move.”

AKERSON: I asked – I won’t tell you who I asked the question – “Is the federal government a private equity firm, or were they acting on behalf of we, the people?” Was our economy – was our citizenship – properly served? What if we didn’t collect those $150 billion in taxes? If we had failed, we’d have had a $23-24 billion pension shortfall, which we’ve now worked down to around $12 or $13 billion. That would’ve gone to the PBGC [Pension Benefit Guaranty Corporation], and the government would’ve had to take up that $20 billion liability.

DALTON: You told CNN last year that gasoline at about $4.50 would affect people going into showrooms. How are high gasoline prices affecting car sales and the kinds of cars that Americans are buying?

AKERSON: In my tenure, we’ve seen a shift of almost 12 percent of our production to small- to medium-sized sedans, away from large trucks. That’s a function of energy cost and us producing better cars on the low end of the market; I don’t mean low-end price, but smaller, more fuel-efficient cars. I remember President Obama, when I was in private equity, I think in an unguarded statement of exasperation with the whole industry, said, “Why can’t they build a car like the Corolla?” Well, we did. The best-selling compact car in America today is the Chevy Cruze. It’s not just the Corolla; it’s all of them, and it makes about 40 miles per gallon.

DALTON: Last year, you said that a dollar-a-gallon gasoline tax would be preferable to the efficiency standards that were being talked about at that time and subsequently became law in California and the United States. Do you still think that increasing the 18-cent-a-gallon gasoline tax is a good idea?

AKERSON: I think there are a number of approaches to how you want to impact consumption. There are economic laws just like there are physical laws, and one of them is, you don’t tax production; you tax consumption if you want to change behavior. There are a number of ways to get to that.

DALTON: I’d like to read you one of the questions we got from Facebook today: “Please ask Mr. Akerson why GM funds the Heartland Institute, a group that has tried to push misinformation about climate change into our public schools. Is this funding consistent with their company’s message and marketing of the Chevy Volt?”

AKERSON: I am glad you asked me that. I wasn’t aware of this until the last day or so. A couple things in terms of good governance: I cannot sit on the Foundation’s board or steer anything, because –?

DALTON: You’re saying it was the General Motors Foundation that gave the money to this institute??

AKERSON: Yeah; not the company. Let me say another fact. The first time I was interviewed by the press, I was stunned with the following reaction. Some guy says, “Do you believe in global warming?” and I said, “Well, yeah, I do.” Several GM executives said, “You don’t say that in public!”

I always say [that] actions matter more than words. Just last week, the EPA named us their Energy Star [Partner of the Year] because of consistent reduction of emissions controls. We are 60 percent more efficient in the use of fuel than we were just five years ago. Landfill usage coming off of our plants is essentially zero. You can put it in a coffee can. We have some plants that are completely run off of landfill methane – they’re zero emission – and we have plants that are the size of small farms. We put $40 million behind the Chevy program with the Cruze and said we would reduce 8 million metric tons of CO2 in this country in one year, and we’ve done it; we’ve bought and paid for a forest to be the size of the state of Connecticut. This is $15,000 that was committed to before I came in. I also think the Heartland Institute, I’m told, does other things. I find this [question] interesting. I won’t go any further, but I’m going to take another look at it when I get back to Detroit. I’ll leave it at that.?

DALTON: You’re a global company. Europe has a price on carbon, very low. Australia recently put in a carbon tax. China’s moving in that direction. When do you think there’ll be a price on carbon, and how will that affect your plan for General Motors selling cars around the world?

AKERSON: When I was at [the] Naval Academy, we were told, “Yes, sir; no, sir; I’ll find out, sir.” I don’t know.

DALTON: No one does. Lots of people have metrics and scenarios.?

AKERSON: We have to allow for all possibilities. We were an active, willing participant in CAFE standards this year. We’re going to do our level best to be a responsible corporate citizen, and if the wisdom of our political leadership is to put in a carbon tax, we’re going to react to it as best we can in the interest of our shareholders.

DALTON: The Chevy Volt is the centerpiece of a lot of GM strategy right now. It’s brought something of a halo effect to the company, yet recently the company announced it was suspending production; you sold less than you wanted to last year. Are you a little bit disappointed with the Volt, or is this natural for something that’s a new technology in the marketplace?

AKERSON: You never have perfect knowledge of what the market’s going to do and how well it’ll receive your product. There’s so much intensity around the Volt, because though it was designed probably when President Obama was in the Senate, it’s now his car.

DALTON: GM Ventures invested in car- sharing, I believe with Relay Ride. Talk about the future of car-sharing and mobility as a service, not something that people buy.

AKERSON: We’re looking at autonomous cars. We’re trying to look at everything now. We can’t afford to run around with blinders, saying, “We’re going to build just trucks.” We’re going to build every segment of the market. Well, if it evolves to a Zip Car type or a peer-to-peer type application that relay cars represent, we want to be part of it. We have a unique technology in OnStar where we can enable that. They want to take this to all 50 states. We don’t want to be late to the game, so we decided to be proactive rather than reactive. It’s always, “If you’re right, you’re a genius; and if you’re wrong, well, we knew you were stupid.”