PAUL MASCARENAS’ OPENING REMARKS AT SAE WORLD CONGRESS

PAUL MASCARENAS’ OPENING REMARKS AT SAE WORLD CONGRESS

Following are the opening remarks of Ford Vice President Paul Mascarenas, general chairman of the 2010 SAE (Society of Automotive Engineers) World Congress, delivered at Cobo Center.

Good morning everyone and welcome to the 2010 SAE World Congress, a congress planned under the spotlight of the immense challenges facing our industry, a congress some thought might never happen, a congress that I believe should mark a turning point for us as we move forward.

Our industry has weathered an unprecedented financial storm, but we’re now emerging from one of the worst economic downturns on record with renewed optimism – and a healthy sense of realism!

We’ve all been called to dig deeper than ever before, and will surely carry the memories of the past year for the rest of our careers. But, while there is much for us to learn from those experiences, the next three days are primarily a time for us to look forward, and imagine a brighter future for us all.

Although we hear a great deal about the environmental challenges facing our industry, we hear less about the economic growth and opportunities that our industry generates.

Yet, it’s a widely accepted fact that the auto industry reshaped the world and drove the growth of the global economy in the 20th century. Moving forward in the 21st century, I believe that the automotive industry will continue to be as important as it was in the early part of the last century.

However, there are challenges, and we all know what they are. We must also recognize that no single individual or organization has all the answers or all the solutions. Working together as an industry through key partnerships and alliances is one of the paths to success.

This morning, I’d like to review some of the trends and challenges that help define the questions we need to answer.

Most of us realize the impact of our industry on the environment. While this may be our most important challenge, let’s also consider some other key trends and developments. These include:

  • The relentless advance of technology, particularly in the area of consumer electronics
  • Changing demographics – with an aging population in many countries
  • Huge growth in the emerging markets – and in many cases, the disparity between these and the mature markets
  • And finally, the continued emergence of the world’s “Megacities,” which although important centers of economic growth and opportunity, also amplify the other challenges we already face

Let’s take a look a closer look at each of these.

One of the most important challenges we face is to reduce the environmental impact of automobiles. One solution is the development of vehicles that use alternative energy sources. The battery electric vehicle that Ford is developing with Magna is an example of what is possible in this area. It is also an example of the collaborative efforts required to develop innovative solutions.

Delivering practical electric vehicles requires cooperation between vehicle manufacturers and organizations with very specific expertise and capabilities. It also requires collaboration with utility companies and others who must provide the infrastructure these types of vehicles require.

In the long term, alternative energy sources will become increasingly important…but in the foreseeable future, most passenger cars and light trucks will continue to use petroleum-based fuels. This is proven, affordable technology supported by an immense infrastructure. Our challenge is to make it vastly more efficient.

Related to that is the responsible management of emissions, including CO2 from both vehicles and manufacturing processes. We also have to develop vehicles using materials that have minimum impact on the planet. This includes how they are produced, how they are transported and how they are processed, as well as considerations for end-of-life recycling and/or disposal.

The next area that I’d like to discuss is the advance of technology, largely enabled through the phenomenal growth of computer processing power. Consistent with Moore’s Law, we are sure to see continuing growth in the processing capabilities of electronic hardware, with ongoing improvements in the manufacturing costs.

The continued expansion of driver information systems supports safer, more efficient operation and a more satisfying driving experience. Both drivers and passengers want to remain connected to their personal digital world even while traveling in a vehicle. Through the application of smart technology, like Ford’s SYNC voice recognition system, our goal is to support this expanded real-time connectivity while maintaining the driver’s ability to focus on vehicle operations.

The continued increase in computing power and the potential for vehicle-to-vehicle and vehicle-to-infrastructure communications presents the possibility to supplement driver control and further enhance highway safety. We must work together to properly manage this change, creating systems that are accepted by drivers and society in general.

Now let’s consider the challenge posed by the changing demographics of drivers and the growing importance of emerging markets.

With the exception of the United States, populations are shrinking in mature, affluent markets. In most developed societies, people are living longer, which means an aging population and differing needs for older drivers and passengers.

Meanwhile, the combination of population growth and economic expansion in emerging markets is driving a rapid increase in demand for passenger cars and light trucks. Our challenge is to create a portfolio of vehicles that meets the needs of both groups of customers.

In fact, dealing with the differences between mature and emerging markets presents us some of the most difficult questions.

How do we make the economic and mobility advantages of cars and light trucks available to buyers in every market?

How do we address the growing gap between rich and poor with innovative, affordable solutions and also provide leading-edge products for those who can afford them?

Certainly tough questions, but now let’s reflect on how these challenges are amplified in the world’s Megacities.

Throughout human history, urban areas have attracted individuals seeking greater economic opportunity. As a city’s population grew, so did economic prosperity, which then attracted more individuals seeking greater opportunities. And so the cycle continued such that over time a new term emerged: “Megacities,” which are defined as urban areas with a population of 10 million or more.

At the beginning of the 20th century, there were no cities that fit this definition. However, the introduction and rapid expansion of the utilization of automobiles and light trucks was a catalyst to fuel the economic growth of cities at a pace never seen before.

In 1930, New York became the world’s first Megacity, with a population of 10 million.

Today, there are 11 areas with populations of 15 million or more and just five years from now, the world is projected to have 24 Megacities.

Despite the promise of mass transit, telecommuting and other alternatives, the automobile has been and will continue to be a key driver of economic opportunity in the Megacities of the 21st century.

However, while automobiles offer unique potential to drive economic development, they also present unique challenges.

Consider the Megacities projected to be the two largest in 2015, Jakarta, Indonesia, and Tokyo-Yokohama, Japan. In Indonesia, the average age is 27 years old and GDP per capita is about $4,000. It’s a culture with a rich mix of languages and ethnic backgrounds.

In contrast, Japan has one of the most homogeneous cultures in the world, with an average age of 44 and GDP per capita of about $32,000. In both Jakarta and Tokyo-Yokohama, air pollution is a critical concern.

Yet, simply adding already available emission controls – let alone introducing technologies like electrification – would make the average automobile unaffordable for most potential buyers in Jakarta. Growth rates, age of infrastructure and geographic constraints also vary widely from one Megacity to another.

Consider New York, which is geographically constrained with a long-established infrastructure and a population growing at only about one-half percent per year. The slow growth makes it difficult to radically alter the infrastructure to support new vehicle technology or alternative transportation solutions.

On the other hand, Shenzhen, China, is a young Megacity with a growth rate of 3.7 percent per year and a rapidly expanding infrastructure. This offers the potential to support new and alternative vehicle technologies – or to develop solutions that combine personal transportation with mass public transit.

Our attempts to predict the development path of markets like China pose another question:
Will emerging markets in the 21st century simply follow the same path that mature markets followed in the 20th century? Perhaps at an accelerated pace?

Or, will emerging markets leap-frog in their development? Will they skip stages and pass the mature markets?

As an example, in the telecommunication industry mature markets had land lines for generations before adopting cell phones. Many emerging markets never created the infrastructure for land lines and simply jumped immediately to cell phones. Likewise, many families who have never owned a computer have gone directly to a Web-enabled hand-held device.

We can already see a difference in the development path for our industry. In the beginning of the 20th century, automobiles were replacing horses as a means of personal transportation. In most emerging markets today, automobiles are a safer, more capable replacement for motorcycles and scooters.

This morning, I’ve reviewed some of the key trends and challenges we need to address. These include:

  • Managing the impact of our industry on the environment
  • Keeping pace with rapid growth of new technology
  • Dealing with growing diversity among drivers
  • Meeting the differing needs in mature and emerging markets

Finally, there is the continued growth of Megacities, which tends to amplify the effects of other trends and also presents a whole set of new challenges.

We can’t precisely predict the future anymore than we can control policy decisions or market forces. As SAE members, we have a tremendous opportunity to lead the development of solutions for our industry, and society as a whole.

We have a responsibility to identify the most likely courses of development and help the industry rally around the most desirable future state, taking a leadership position and developing a consensus on our direction. This, in turn, will lead to more efficient execution – as all parties drive in a similar direction and develop compatible solutions.

We must also recognize that while it’s important to establish a leadership position and set the direction, we cannot be close minded to other perspectives and ideas.

Any solutions we offer must meet certain requirements. They must compete with current and proposed modes of transport by being:

  • Safe to drive and ride in
  • Clean and environmentally friendly – both to operate and to manufacture
  • Efficient – both as a means of transportation and in their use of resources
  • Reliable and consistent with customer expectations

Our focus over the next three days is to help develop solutions to these challenges – and others – so let’s:

  • Listen carefully to the panel discussions. Critically analyze the panelists’ perspectives and concerns.
  • Discuss your ideas with others when you “Chat with the Experts.”
  • Challenge others in your discussions – and challenge yourself. Find ways to think differently and consider alternatives.
  • Review the technologies available in the Innovators Only Exhibition and maybe even go drive some cars!

Finally, imagine what the world could be like. Imagine if you could take the best lessons from this week and use them to help solve our challenges. That’s why we’re here.

This World Congress is the beginning of a journey. Like every journey, it begins with a single step. We won’t leave here in three days with all the answers, but we can leave here knowing that we have taken the first step.

We can be confident that we are capable of transforming our industry and leaving a positive legacy for future generations. We know what the challenges are. We know they aren’t going away.

Our members are intelligent, motivated and creative people who hold the keys to the solutions.
Let’s join together on this quest. Let’s leave a legacy for our industry and the world. Let’s each leave here with a sense of pride in our contribution to this great effort!

Thank you.

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April 13, 2010

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