>> rose: welcome to our program, tonight all about cars with bob lutz, ikon, car guys versus bean counters, the battle for the soul of american business. >> the blame erican business education, whether it is harvard preschool or wharton or berkeley or stanford, they all teach the same thing. and they all teach business administration as essentially a cost minimization model, you know, here are your various variables you play with, what you do is you analyze the data, you find out where pockets of costs are that you don't really need, you eliminate them to improve margins, and the interestingly enough and i have written business school cases and taught business school cases and i have learned from business school cases. i have done all three.

growth of the top line is never discussed, it is always assumed, it is always assumed that they give you the company sales figures for last year, thi year, and/or the last ten years, and the next ten years, and so you take the top line for granted and then you work on the costs to minimize the difference between the top line and your costs. when you do that in the automobile business, you automatically start taking away customer excellence. >> rose: and in our second segment joining bob lutz is elan musk, cofounder and ceo of tesla motors. >> we are on the verge of gliferg the sedan, the four-door sedan model s, and it is really quite a significantly, and to tell you a little bit about that, it has a range of, electric, over 300 miles, there is a performance version that will do zero to 60 in a four-point four seconds with situate faster than a porsche 9/11 carrera, it will actually

beat crash rating in every category without exception by 2012 standards this is a very difficult thing to meet, in fact, my understanding there is not a single vehicle that is fast, better crash category in 24 standards so we will be the only one. >> rose: lutz and musk next. >> funding for charlie rose was provided by the llowing. >> rose: and american express. additional funding provided by these funders.

>> and by bloomberg, a provider of mtimedia and news and informationervices worldwide. captioning sponsoredy rose communicatis from our studios in new rk city, this is charlie rose. >> rose: bob lutz is here. he is an auto industry icon. he sells leadership in bmw, ford, chrysler and general motors, hisredit with reviving gm after being in global development in 2001, he wres about the auto industry in car guys vers bean counters, the batt for the soul of american business, i am pleased to have bob lutz at thistable and back on this program. welcome. >> thank you, good to be here. >> the last time i saw you, a whole bunch has happened. >> i will say.

>> >> the classic understatement. >> rose: yes indeed. let's talk about that first. >> yes so things were going bad, you had the federal government had to come in. >> yeah. >> rose: take me how you saw all of that. >> well, it was pretty demoralizing at first, and i was actually thinking of retiring. >> but you are only 70 something. >> yeah, i know. >> but i felt good and i do love the industry, but i was afraid that -- there was some talk from the administration at the time of now that we owned them, we will make them build the kind of cars that we think they should make and i thought oh, my god here we go, an endless series of green mobiles. >> and in the event, though, that didn't happen, and as i got to know the obama automotive task force, i got the feeling that they were doing the job

well. >> they got off the information they needed, they came out of the study with a much better opinion of general motors, and i could se that, once it became ear that the federal government was in this only to support us momentarily, get us back out of chapter 11 as quickly as possible, hopeful that we would be able to chuck off government ownership as quickly as possible and had no intention of telling us how to run the business, except that they wanted us to run it for a profit because they are the shareholders, so once that became evident i relaxed with the whole thing and told myself, hey, at the end of the day this has been a very good thing, it is cleared out a lot of deadwood, it fix add lot of labor cost issues, it fixed legacy cost issues, it fixed the balance sheet, and it focused everybody's minds, including the unions, on the fact that if you don't run the busins right,

ultimately you will go chapter 11 and everybody became a believer, you know, even those who, on both the union and management side, said, aw, ah, come on, general motors will never go chapter 11 and it did. >> rose: it did. >> i think it was an experience of like death and rebirth while it was terrible for the shareholders and many bondholders and many employees, a horrible thing to go through but at the end of the day, it made gm competitive. >> rose: here is what is inresting, i see you as a nservative and as guy that doesn't want government around very much. >> that's true. >> rose:. >> except for the right kind of gulations, you know, safety regulations. >> intelligent regulations. >> rose: but when you needed help you were happy to see the government to help you mail out. >> yes and no, first of all, we do not live in a pure, private, economy, we live in a economy with a lot of government involvement at many levels,

labor legislation, social legislation, environmental legislation, et cetera, et cetera, et cetera, so it isn't exactly free market unfettered capitalism we have in the united states. and to a very large extent, a lot of the government regulation that we ha and the exchange rate the u.s. granted japan after the war that gave japan a 4,000 dollars cost advantage, the fact that corporate average fuel ecomy was enacted to where the japanese were producing all of the little cars were. >> were on the good side of the average they didn't have to change a thing. >> we had the big calls that the american public wanted. >> we had to keelhaul the whole program and change everything, that is when the american industry collected and lost it on quantity, so, there were a lot of government policies designed to hurt the automobile industry, so and then the sub ime mortgage meltdown was a

product, 1998 to community renewal act. >> which forced the banks to grab loans to people who couldn't poured to pay for the houses. >> so it caused a lot of the problem,. >> repayment, that is another factor, and this free market capitalism stuff, you have to let the rule of reason dictate your actions. >> the american automobile industry. >> if you let them go bankrupt,. >> the major automotive suppliers in the united states, ford motor company would have been dragged down, thousands of dealer ships around the country would have closed, i mean, the ripple economic effects would

have been too awful to contemplate, so it is very easy for somebody like mitt romney to say, this was unwarranted government intervention, then there are thoseith short memories who say, well, we have a private banking system, what is wrong with the normal debtor in possession procedure, why couldn't they have ge through a normal chapter 11, why did the government have to step in? hello, they forget, there was no money. the banks didn't have money, there was nobody that could finance e chapter 11 for ford or chrysler, the government was the only entity at the time that had any money, so am i forgot intervention? normally, no. >> rose: last recourse. >> yes. and if it is to avert a larger economic catastrophe at a time when the nation was already teetering on the brink of, you know, a worldwide financial meltdown, if i had been the president i would have done the same thing. so you defend the president people step forward and say --

>> it is one of the few things of the current administration that i put on the positive side of the ledger. >> >> rose: wagner my friend had a job too, he is a food man. >> he is a very good ma >> >> i think it was necessary, yes, because putting in the government, it was an unpopular act politically and exposed the administration to a lot of criticism that bically from the republican side, and to have supported no matter, no matter how good that management, when a calamity like that occurs and the government has to come in with that money they can't just put it in and say, hey, try to take a little better care of it this time. i mean they have got to make a change. they have to make a change and i think everybody understood that for political reasons alone, it

was necessary to pretty much clean house. >> rose: hgot actors in there running the company now. how good of a shape is general motors in? >> i think general motors is in terrific shape. the fixed costs are very low. which results in a low brake even, so that means american industry levels of 11 and a half, 12 million annual rate, which ud to be a level of market that automatically generated massive losses, in fact, we sometimes lost money at 17 million industry, now general motors is highly profitable, had about, at 12 and a half million, wage costs are much lower, we have a second tier wage in place, the healthcare burden is largely gone, so general motors is a very low break even point. >> >> rose: and it can compete -- >> well that is the important part. and, you know, i am pleased to

say i was largely in charge of that. >> >> rose: why. >> well, i described that in my book. and to some extent, i blame american business education, whether it is harvard preschool or wharton or berkeley or stanford, they all teach the same thing. and they all teach business administration as essentially a cost minimization model, you know, here are your various variables you play with, what you do is you analyze the data, you find out where pockets of costs are that you don't really need, you eliminate them to imove margins, and the interestingly enough, and i have written business school cases, i have taught business school cases and i have learned from

business school cases. i have done all three. growth of the top line is never discussed, it is always assumed, it is always assumed that they give you the company sales figures, for last year, this year, or the last ten years and the next ten years, and so you take the top line for granted and then you work on the costs to minimize the difference between the top line and your costs. when you do that in the automobile business, you automatically start taking away customer excellence, and it is like a restaurant that has a good clientele and is known for fabulous food and then it is taken over by a restaurant conglomerate who analyzed the food and say you guys are using too much butter, start substituting margarine and 90 percent of the customers. >> rose: and the vegetables could be fresher? >> or we will take the vegetables, are you buying these every day pressure? you don't have to do that. keep them two or three days,

nobody is going to notice and this nobody is going to notice, nobody is going to notice, it is death by a thousand small cuts. >> rose: the principle here is make things that peopleant. absolutely. >> rose: that they want to buy. >> absolutely. >> rose: and steve jobs never looked as you know, we know from all of the new books by walt isaac and others, steve jobs didn't say i will do a focus test on this to see if the customer wants to buy, if he created what his vision was, there would be a market for it. >> that is what george lucas did before star wars, all of the great creative people don't spend time going out and handling people's heads and if steve jobs before doing the i-phone ife went out and asked customers to describe their ideal smart phone, the description he would have gotten would have been a slightly improved norl cellphone, maybe with bigr buttons, maybe with a bigger screen, but nobody, the public was not capable of

envisaging the i-phone and that is where i think every -- every industry that has a broad customer base has to work on custer delight, and it has to have some people like steve jobs who are perhaps, unless they are ceo, they may be a little bit difficult to deal with, and because -- >> rose: they are demanding, perfectionists. >> perfectionists and a lot of times have ideas that are not based on analytical fact. >> and people will say where is your data. >> i don't have any data because nobody has done this before, and the -- i have no data because nobody has done this before is usually not a popular answer with the bean counters. >> rose: all right. the title of this book is bob lutz, car guys versus bean counters. what is a car guy? >> well, a car guy, first of

all, it can also be a female, it is a polly gender term. >> rose: absolutely. >> but it is a person -- >> rose: same thing with bean counters. >> in the car business it is a person who has the creative sense, that somehow is in tune with public sentiment, is passionate about vehicles himself or herself, can easily tell the difference between a great car and a immediate oaker car. >> rose: name me a car guy iacocca would be inthat group. >> yes. at a certain level. with him it was mainly aesthetic he really didn't care h good the car was. certainly i would say the world's finest switzerlander passes everyone, the chairman of the volkswagen group, i guess now nonexecutive chairman. >> rose: right. hhe had it? >> oh, he had i and he has it. i mean, his instincts on

creating new products are almost infallible. he is truly the pope among car guys. not that i would like to work for him, i understand he is very unpleasant. >> rose: you could handle him. >> ha spurlock, former manager at chrysler. currently the ceo ofvolkswagen i think is a terrific car guy and somewhere in the ranking of the top ten, i would modally put myself. >> rose: you should be there. maybe i said that. but you care both about the engineering and the design? >> and also -- >> and frankly abt the financial results. i mean i don't do it just for the love of the object. but my thesis is, if you do highly desirable car that not only looks great, drives great, has good fuel economy and is a pleasure to drive, you will make muchore money on that car, even though you spent more. here is an interesting fact during my time at gm, i probably

added close to $1,000 worth of costs per car, which had the bean counters tearing their hair out, but we built cars to a cost target, then the public didn't like them, and we had to spend 4,000 dollars in incentives, or even 5,000, and now with these better cars, the incentives are way down and the average transaction prices are way up, so on average, the last time i checked, gm's average transaction prices on average were up over $5,000 and the cost is up about $1,000. so what finance guy wouldn't accept that, youknow, 1,000 in and 5,000 back. it is usually a pretty good deal. >> rose: a good deal. so gm today does very well in china, yes? >> yes. >> rose: t buick a the cadillac. >> and the chevrolet is growing very rapidly in china, and the crews, the same crews that are

number one selling car in the united states. >> rose: the ze. >> is ao a best seller in china. and requires more capacity. >> rose: china biggest auto market in the world. >> yes, by far. >> rose: by far. >> and the gap is growing. >> rose: because they are developing a bigger middle class that wants cars. >> and the whole prosperity moving inland from the coast. so i don't think it is going to be more than four or five more years, the chinese auto market is going to be 30 million a year and bigger than europe and the u.s. combined. >> rose: and how many of those will be sold by chinese auto companies? >> it is a good question, i don't think anybody knows right now, i think the bulk of them will be sold by western companies, that is, volkswagen, audi, gm, in conjunction with the chinese partner. but there are some of the chinese, native chinese companies that are starting to build-up, up ahead of steam and starting to ok for technical

alliances with western producers. so i would say maybe in five or six years it will be about 50-50. and see, that is what makes china different from korea and japan. china when they developed their auto industry they welcomed partnerships with western companies. especially american ones. the japanese and the korean were absolutely mercantileistic and kept everybody out unl their industry was big and powerf, that's why i like china, well aren't you afraid of the chinese? well i am not afraid of the chinese because the chinese automobile industry develops, general motors is one of the biggest players there. >> rose: what is the status, speaking of all of this, of the development of batteries and the improvement in batteries? >> well,. >> rose: electronic vehicles -- >> electronic vehicles, of course they are here nowut we still don't have enough energy

density in lithium ion and there is a lot of research going on both in the government labs and at the universities and at the companies making batteries, looking at chemistries, like lithium sulfur and lithium air, which are great for energy storage, but currentlytill have some reliability and thermal problems, which in my judgment will get solved over the next ten years. >> rose: will be solved in the next -- >> will get solved. lithium ion was very problematic for a long time, and it took at least ten years to get lithium ion to a commercial level, but these new -- these new chemistries will have like ten times the energy density of today's lithium ion, so that a battery like the size we have got in the chevrolet volt, which is good for about 40 miles of electric driving that same size battery at some point is going to be, is going to be able to store 400 miles. at that point, range anxiety

goes away and the electric car is just as convenient as a gasoline powered car except once a week you have to remember to musplug it in. >> rose: you know this question is coming. suppose you got this idea 15 years ago and said we have an emission problem here in the united states. we have a climate issue in the united states. and around the world. >> >> rose: i know where you come from, you don't believe it is man-made. >> no, absolutely not. >> rose: and you have the science on your side which makes you -- >> yes, increasingly because there is more and more scientists that are stink off the bus and if you look at the ipc -- >> rose: would you come to the table and debate this? >> i sure will. >> rose: we will do that. i don't want to get waylaid by that. >> wouldn't we have been better if we had electric vehicles? >> no. because there would have been no market for them and the technology wasn't -- >> rose: there was no market, we just accomplished that there was no market for an "own and ipod. >> but people wanted an i-phone. >> rose: they didn't know they

wanted an i-phone, think want and, they wanted an i-phone because -- >> an electric car, gm did one. they did theery first one. the ev 1. >> rose: yes. and what happened to that, by the way? >> you know what, they cost like 250 some odd thousand each to produce. we couldn't sell them. >> rose: not an economic mol. >> nobody wanted them so we had leave, lease them out for $300 a month and it was a huge money making proposition and what you had is a very narrow, almost at that matt tall fan base, and mostly, fanatical fan base, mostly in hollywood and california, that gave rise to who killed the electric car conspiracy theory. >> rose: we are going to take a look at that moment in a moment, let's look at the cars around the world today. so when you look at toyota .. are they back? i mean, what is the realistic view of what happened to them, how big of a hole they are in and what it

takes them to begin once more, if they can, the number one car company in the world? >> well, they will -- they may in terms of size become the number one car company in the world again, although it is tough for them, because her not that well received in china. interestingly, even general motors in the bad old days was running circles around toyota in china. i think if you ask people in toyota, and i have, what you hear is, we got carried away by our own success, and we started believing all of the press clippings about we are better than anybody else, we are the world's bes we ahe world's smartest, you know, et cetera. >> ros right. >> it was kin of pride goes before the fall. so because of their relatively modest participation in china and gm and volkswagen's huge presence in china, as that market froze rapidly, volkswagen

and general motors are just going to walk away from toyota, because they are not present, not really present in the world's -- >> rose: what about the image idea. >> the image, of toyota is just another car company. they used to be up on a pedestal, worshipped by the u.s. >> rose: right. >> they are just so smart. >> rose: prius was like that, why couldn't you have done a prius. >> well, yeah. we could have, but we didn't want to. but at any rate, this thing of yota is better tn anybody else is gone forever. and now people are taking a much more objective look at the cars, and they areaying, well, wait a minute, they are not at the top of the reliability rankings, they don't steer and handle any -- you know, dynamic properties have never been a hallmark of toyota. the styling i't sexy or particularly appealing, so i think now that ts bloom of

infallibility is gone, it is tough shredding for them and they are going to have -- it is going to be an interesting task to take on the revitalization of toyota, but it would have to begin with superb design .. rose: could they steal you? >> no. no. i wouldn't do that. they wouldn't want me, think way. i mean, they may -- the asians may respect -- leaders but that is a bridge too far. >> rose: you still fly helicopter? >> yeah. >> rose: you still ride your motorcycle. >> yes. fly the jet. >> rose: fly the jet too, so you are out there so you are in good shape. >> i think so. >> rose: you always have been. let me sea with the car company. what do you think of adam and what he has done at sportsdesk? >> he in has done a terrific job. he would be considered a bean counter in your world or -- >> no. i will count anybody who is focused on the excellence of the oduct and the excellence of stomer service, i would put

him in the car guy category, even if he dsn't know anything about cars, but at least he is there in pursuit of excellence, rather than in pursuit of shaving costs. i think alan has done a terrific job and he got a little bit annoyed at me because i frequently say the reason for it didn't go chapter 11 is in the o 8 meltdown they went in with a bigger cash pile than anybody else. >> rose: they did that because they were smart and used superb financial planning, they went out and borrowed money. >> of course. >> rose: that is what alan says, it is true. >> yes, it is true. so he got tire of me saying that they were lucky. >> rose: he should have. they were smart. except some might argue it may have been better -- >> well, the point is, prior to '08, they were in such desperate financial straight they had to basically mortgage the whole company, but where alan's contribution came in is, as he pointed out to me, when they had a big enough pile to get by and to finance the future product

program, he told the treasury people, i don't like the way the economy is looking, i am really worried about how these things end. we need an emergency fund. so he signed them out again to borrow even more money and it was that even more money that enabled them to avoid chapter 11. so i giveim credit for that. >> rose: what do you think of fiat and chrysler? >> that is going to be a surisingly good marriage >> rose: really? >> yeah. >> but they get a bit downgraded because they did it. >> yeah, i mean it is a lot for fiat to take on and fiat is never in the past couple of decades been a particularly strong car company. >> rose: but they got a good ceo now. >> that is the poi. >> again he would never define himself as a car guy, but he did transform fiat products from ing cheap, tinny, poor

interiors, he made them look and feel like german cars, you know, well put together, well -- >> rose: like german cars. >> yeah. so he did a terrific job and when you look at the new chrysler products, they are beautiful fits and finishes, beautiful interiors, the new jeep grand cherokee has one of the best interiors i have ever seen on any product from any country, so i think what we are witnessing is all three american car compies are currently being well led by people not traditional automobile finance people. >> rose: right. >> and all three ceos have the right focus which is product cellence, so i think everybody is going to do well. >> rose: and what do you think about carlos goshe >> i think he is -- >> he is a brillnt ceo, a great leader, again, i think there was a time after he saved

nissan where he would make projections and say in two years nissan and renault will do such and such, and we will is such and such a return on sales, et cetera, and, you know, i think there may have been a time when, again, he may have been believing his own press clings and had this sense of inpalability, but obviously, none of th came true. having said that, running two car companies at the same time on different continents that are only loosely connected requires a great deal of skill and both of them are doing reasonably well and nissan right now, i would say, is toyota is not doing so well, honda is in somewhat of a decline phase. nissan is doing okay. >> rose: who is still in the racing business in formula 1? any of them? >> oh, gee.

>> rose: i think honda -- >> >> rose: do you have an idea. >> all i know is the company on whose advisory board i sit, namely group lotus is very active in formula 1. >> rose: do you like race something do you care about racing? roger ping ask level? >> back in the old days, when raci improved the brand because all of the technological breakthroughs came from racing, better tires, better engines, higher rpm, et cetera, e cetera, nowadays, it is all regulated, you are not allowed to have more than this, not more of that, tires, nascar, even the body shape is defined, so car racing today has become a circus, it is a spectacle, it is like nfl football or, you know, at best, world wrestling federation at worst, let's hope

not. but it is a spectacle and doesn't improve the grade. that is what i really would be -- some people are thinking about it, i would love to see racing formulas for electric vehicles or at least hybrid electric vehicles. and then you have an unlimited class, and you say, look, we don't care whether you have a lot of -- a few batteries on the lightweight fast car and come in for recharging all the time, or whether you have a monster battery to where y can last the whole ce and you never -- and you will be a little slower but never have to come i and all up to you, youguys figure it out. i think sort of an electric car indy 200 would be a fascinating speccle. the one problem with the spectators is the absence of noise. >> rose: they love the noise. >> who noise. >> rose: they want the noise. >> the feel, the field goes by and it is just whew, it is like

watching a race withhe sound turned off on your television. >> rose: it doesn't do it. >> no. >> you say that you, in this book, you pride in the fact you changed the culture at general motors. >> yes. >> what are you least proud of? >> that it took me as long as it did. i was tolerant of it at first. >> rose: wn you look back, do you have me great regret because you missed an opportunity, you missed an idea you missed -- you know what i mean? missed opportunity, not something you did or didn't do. >> yeah. >> you know what, as i say in the book, there were a couple of products where i didn't think they would succeed. i had grave misgivings about them and i listened to the people who trotted off the analysis and the counting and the brain cannedabling and trust thus is going to do between 90 and 120 million units a year and if you don't approve it, it is going to affect the profitability of the whole

program, all of the other mid size pickups, everything is going to be for want of a horseshoe, the horse was lost, so i finally said, well, okay. we will spend the 275 million and guess who was right? i was right and we sold 13,000 of the damned things and then had to shutter, shut down production. >> rose: what was that? >> that was the gmc -- >> rose: a truck? >> it was a sport utility xuv, gm xuv which had a roof like a roll top desk and you could roll the whole roof forward, almost to the driver, so that you could move grandfather clocks up right and christmas trees and everything. >> rose: that's all we need. >> exactly. i mean it is just what everybody has been waiting for, it was the answer to a question nobody asked. >> rose: now do you secretly have, because you love speed. >> yes. >> rose: and you went on and on when i saw you out in detroit about the nucor vet at that time, the xr, whatever it is.

>> tr 1, you thought this was the finest thing for theoney. >> rose: i'm sorry. >> i bought one. >> rose: you bought one? >> yeah. >> rose: but it had a lousy interior, and this is what you said once about interiors. i want to see if i he it here somewhere. a quote from you. you basically said, gm's enter records were the worst in the business, dark fray, plastic, wastelands. >> yep. >> rose: some pontiac instrument panels had all the appeal of molten lava who spilled through the run roof and cooled how could you not want the same quality enter i don't your, interior you wanted in the engine. the. >>ome of them e not in the molten lava category. >> rose: but all the critics jumped on it. >> and it was kind of fashionable, some don't look at it and they see what the other guy has written and they say i better write something about the bad interior. again, it was an interior that was designed before i got to gm, before 2001, and it was

considered -- it was actually better than the gm standard at the time. >> rose: do you like ferri? >> yeah. >> rose: do you have one in your garage? >> no, no, no. >> rose: no lamb bore dwi my, no ferrari, no porsche. >> no, no, no none of those? >> no. >> rose: why not? >> well,. >> .. >> you are a car guy. >> i am a car guy but i like value for money cars and i have got an ac cobra, i have a cunningham c 4 r with 400 horse, 1952 lamont racer 400-horsepower chrysler hemi in it, and i have got -- i don't buy fashionable brands because i don't -- the cars that i own i don't own for purposes of appreciation, you know, like guys who buy the rembrandt or a pickups so they pay $6 million because the know ten years from now they can sell it f ten >> rose: buy it for 50 and sell it for 100. >> that's y i stay away from

pansy brands, you know and zr 1 will clean the clock of any, any ferrari, both ride, handling, breaking, braking, et cetera. >> rose: how. >> cruise control at 70 miles per hour o the eeway you are reading 25 to 26 miles per hour. >> miles per gallon. now the mite you avail yourself of 640-horsepower the picture changes somewhat. but the corvette -- >> rose: you have all of those horses you have to feed them, right? >> among super cars i have to be careful of the statement because i haven't checked lately, but whenever we did the comparison, the corvette, among the similarly powered porsches lamborghinis, et cetera, it was by far the most fuel efficient. >> rose: yes. all right. thank you for coming, bob lutz, car guys versus bean counters, the battle for the soul of american business.

you mean not just car business but business. >>o. because this attitude of let's safe a little and maybe the public won't notice has wrecked a lot of american companies. >> rose: we continue now to talk about electric vehicles five years ago, the electric car industry was written off, following the failure of gm's highly anticipated ev 1, since then it has undergone a revival for a range of reasons, including high oil provide prices and environmental concerns there is a new movie out called revenge of the electric car and documents the energy's recent fortunes and here is a look at the trailer. >> we are going a secure location we mind the building. notice we have plenty of security down here. the degree of excitement around electric vehicles we haven't

seen before, but somebody has to be the first one out. >> you need a lot of people to do a lot of different things and then we see what emerges. it is a race. it is a total race. >> you know, until we see every car on the road as being electric we will not stop. oh, eli is going to lose his shirt. he is going to get crushed. we have to get these cars out. things keep coming along for people outside of the car business they all fall on their butts. you didn't get the message. give us the cars that we want. i got a flood of e-mails saying you sold out to the oil companies and you killed my grandchildren. i hope you rot in hell. they have based their whole company strategy on it, if it fails, there might not be a nissan. you need to product the future, and therefore if it happens, we will be ready.

>> these people are not going to wait around to have the solution delivered to them. i want to tell the world it is truly possible. >> it is the future. >> rose: revenge of the electric car, joining me now, two of the film stars, elon musk the ceo and cofounder of tesla motors. i am pleased to have me joinn a conversation about electric vehicles. did i hear you say in that clip i have not yet seen the movie? everybody from outside think thinks they can do something is going to fall on their butt. >> yeah. because what happens is they have a brilliant thought, and -- but they have a plate deal of difficulty implementing it because they underestimate the knowledge and technology an experience raider to, required

to actually build the car. elon went through quite a bit of that and after about two years of struckable they began to think .. maybe those guys in detroit aren't that dumb after all. >> rose: who said the guys in detroit were dumb? >> i think sometimes a comedian tries to create more of an antagonist stick position that is true, i am supportive of any efforts like the volt or anything that goes in the direction of sustainable transport. the whole purpose behind tesla, the reason i put so much time and effort into creating it was to serve as a catalyst for transition to electric vehles. >> rose: has he succeeded beyond what you expected? >> yes. i think the -- i mean, elon and tesla had kind of a rocky spell there and the roadster, being a 100 plus thousand car but only seating two, that is a very thin

market segment, and after about a year, everybody who wants one has one. i don't have mine yet, but the transition to the four-door sedan, think that is going to open the window to a much broader market and to a sustainable commercial fure. >> rose: here is a picture of that four-door sedan, what you said to me, you think is a fine looking automobile. >> yes, i do. i think it is one of the clearly one of the best styled medium size to large size four-door sedans in the rld today. >> rose: so are you betting the company on the success of this? >> we are. >> rose: see there. raight talk. >> yeah. sure. >> rose: so this has got to succeed. how did you go about the design? >> well, first of all, i should maybe just perhaps start by saying that the strategy of tesla are the beginning has always been to start with a low volume high priced car and go to a medium volume medium priced car and end up with low price, high volume and sometimes people

think the reason we started with the sports car is cause i thought there was a shortage of sports cars for rich people, that was not the reason. it was simply that anything we produced would be expensive because we did not have the economies of scale necessary/mess to make thing inexpensive. so down, done the roadster which was very, very difficult you can image as a new car company trying to sell an electric sports car during the let's call it the worst car market since the great depression presented a challenge. but we managed to get through that narrowly, and now we are on the verge of delivering the sedan, the four-door sedan model s. and it is really quite a significant leap forward, i will tell you a little bit about that. it has got a range of -- this is pure electric. it has a range of over 300 miles. there is a performance version that will go zero to 60 in 4.4 secondshich is fter than a porhe 9/1

carrera. it will actually be passed our crash catery in every category in every category by 2012 andards it is difficult to meet this. so we will be the only once. it will be the safest car in the world. >> rose: what does he need to know, bob, at this stage? >> i think they have got obviously a brilliant design staff, a very sound engineering staff, they have got a great production facility in the old plant in fremont, california. yeah. i learned that word because the dealer network is going to be a challenge, having sufficient marketing money is going to be a challenge but i think this has a high chance for success. >> rose: you do? >> yes, i do. >> rose: because he has all of the things that are significant -- >> well, here is the problem, you have got a sound product and

90 percent of this business is having, as you and i were saying earlier, 90 percent of this business is having a product that people want. and part of making them want it iis the design. >> rose: right. >> nobody -- you could have a 400-mile range if it was ugly nobody would buy it. i mean, it is sad but that is the truth. >>ose: aesthetics are extremely important. >> >> rose: how much. >> 50,000. >> rose: 50,000 for the car that we just saw? >> yes. the starting price is sort of like a bmw 5 series, 50 k goes up to 100 k if you g the high performance version with all of the extras 100 k buthe base version is 50 k, that looks just like the one you pictured. >> rose: so the movie, what it documents is the fact that what you did in announcing the tesla you used to spur the development of the chevy volt? >> yeah, because i wanted to really leapfrog toyota with all of the accolades that were being

elevated to god like status, because of the prius, and i was convinced that toyota's next act was going to be a fully electric car, so i wanted to do one at least as a show car, and i was told that the only good reason i heard was the whole automobile industry is in litigation with the state of california over the ev mandates. how is it going the look for our case if we are litigating against california and then we put one on the show stand? well that argument i kind of understood, but the -- all of the other arguments were, well, lithium ion isn't going to work, lithium ion is years away from being capable of being a car battery, and then tesla announced the roadster with i think it was zero to 60 in four and a half seconds, 120 miles per hour top speed, 20mile range, it is like, wow, and so i said, okay, i mean, this is

outrageous, here is a small startup car company on the west coast, obviously, very confident about lithium ion batteries, is going to go into productn with this car, and we, ma of us would still say technologically the most coetent -- technologically the most competencar company in the world, and we say it can be done, so then we got into the well maybe let's take a look phase, which was the beginning of the volt development. >> whether tesla is ever hugely successful or not, i will always own a debt of gratitude for having kind of broken the ice. >> bob lutz being a champion of electric cars is quite a switch from the bob lutz we ud to know. >> my sold the board the fact that this technology would leapfrog toyota. >>hich had been gm's nemesis. >> the electric car, which was pushed all the way up the ladder by lutz himself, in a way that

is very, very personal, a way that suggest he regards it at his legacy at the company. >> rose: how is the chevy volt doing. >> the last i check it is doing well. >> it has done everything you intended for it to. >> yes. and what it is people keep thinkingwell, the chevy volt is a failure becse they only do this many a month, this is all production relat we are still in the rampup phase, and it is only being distributed in certain parts of the country right now, we started with california and with washington, d.c., and it was remembered coors beer, you know, sort of did a long march across. >> rose: across town. >> yes. right. it is kind of that way with the chevy volt, the chevy volt is doing well and in terms of customer satisfaction it is just about off the chart. >> i have driven a lot of things during my long career, and to drive a fully electric car, lap after lap after lap around the grounds here, i really had the

feeling of it being a historic moment. certainly was in my career. >> rose: are you on board that the united states should lose its addiction to oil? >> i would certainly hope so. and certainly primarily i would like to see it lose its addiion imported oil. that would be the highest -- >> rose:. >> let's say a friendly canadian tar sands would be -- i would count that as domestic. >> rose: yes. >> making gasoline out of -- i mean, if we have a immediate for petroleum products in the future, and we will for many more years, because electric physician of the car fleet is not going to occur, totally within the next ten to 20 years. >> the electric car is back from thdead. >> rose:. >> >> wl, you could argue was it ever, because i think people were even after we recalled the

e-1, there are still electric vehicles out there but i think it is back with a vengeance and i would sa the electric physician of the electrification of the automobile is a foregone conclusion. >> we will need a lot of oil and need oil for jetliners and so forth, but, you know, the germans fought world war ii with a lick physician of coal. >> he questionfication of coal. >> we have the technology to create gasoline out of it exists and nobody is talking about it, i don't understand it. >> rose: all right. do you accept his idea that -- he doesn't believe that global warming is produced by man-made, man activities, human being's activities. >> well,. >> rose: you don't agree with that, do you? >> >> we are going to, he is going to get himself in trouble like i did. >> the way i look at the co2 thing is that we are running an

experiment which is to see what the co2 capacity of the oceans and atmosphere is before earth gets cooked. i don't think that is a wise experiment. that experiment let's say that peerment is 99 percent likely to show that co2 is no problem, but one peent likely to show it is going to cook the plan. i don't think we want to take that one percent chance, it is not just smart. >> rose: you think one percent is the right number? >> i think it is more than one percent. >> rose: you think it is what? >> >> well it depends on how many tons of co2 get pumped into the atmosphere, there is no question at a certain level it will destroy the earth or destroy large portions of the earth, the question is just what is that level? and how soon do we stop pumping vast quanties of co2 into the atmosphere? given that oil -- and even coal are a guy night resource it does. seem to make sense that we would run that experiment when we have to get off them anyway, because they are simplify night. >> rose: what was your motivation to do all of this?

>> my motivation actually all of my companies has been to be involved in something i thought would have a significant effect on the world and when i was in college there were three areas i thought would most effect the world, one was the internet, the other was sustainable energy, production and consumptionnd the third was sce exploration, particularly making life interplanetary at things have, as things have turned out i have been involved in all lee. >> rose: what have you done in terms of enter planetary exploration. >> a private rocket company. >> yes. nasa selected my company to space >> rose: i want you to tell about it. >> sure. i rent twocompanies, tesla and space x, that is short for space exploration technologies, and we build giant rockets and spacecraft and nasa selected us to tak over the carver trance,

cargo transport of the space shuttle and do our first mission to the space station hopefully in january, so that will be a big milestone, we have done several rocket launches already. d we buildhe whole rocket from scratch, in california. actually. the raw metal comes in and we build the structure, control and watch from cape, launch from cape canaveral. >> rose: that makes him your kind of guy. >> absolutely, a hardware guy. >> may i say i really like bob lutz, by the way. >> rose: you heard car guys versus bean counters. >> i never got a copy of his book. >> rose: you say he free with most of the things he is a says. >> i actually agree with most of the things that bob says, and i have a lot of respect for bob. i want that to be clear because sometimes people may sortf make out that somehow i don't like bob, but i actually have a emendous amount of respect for bob and. >> rose: or you wouldn't come here and appear with him. >> yes.

right. >> rose: i mean, what is the biggest challenge for the -- how did you say, the electric physicn of the fleet. >> electric, electrification of the fleet? >> .. we have a vast number of vehicles that are gasoline. we need to make, therefore, a vast number of compelling electric vehicles, just building up that production line and switching out the install base will take decades, so we will have -- and addiction to oil for some period of time, the question is, really, can we minimize that time and in doing so minimize the potential damage to the environment. >> rose: all right. much success to you. thank you. >> rose: the tesla will be available when. >> in july of next year. >> rose: july of 2012. >> we sold outf next year's production. >> rose: what is is the annual production. >> producing about 20,000 units a year although starting sie it takes a little t of time we

will produce 5 or 6,000 cars next year. >> rose: produced where. >> in california, fremont. the old toyota gm plant. >> rose: all right. great to see you again. captioning sponsored by rose communications captioned by media access group at wgbh access.wgbh.org