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Bosch North America

Preserving Energy, Environment and Economy Using Sustainable Mobility

Peter Marks Chairman, President and CEO, Robert Bosch LLC Member of the Board of Management, Robert Bosch GmbH The National Summit, Clean Transportation Town Hall Detroit. June 15, 2009
Thank you, Rik [Kirkland]. Good afternoon.

I am pleased to be a part of this important discussion. I would like to share my perspective on the critical juncture we are at today, and suggest some solutions to the urgent challenge we face.

Clean transportation can no longer remain on a wish list of nice things to do some day. It has become a vitally important goal that we must achieve quickly if we want to preserve our environment and our economy.

As we navigate through this global recession, and as energy
becomes a major point of concern, we more critically examine our behavior and use of resources. The nation’s consumption of 25 percent of the world’s oil is simply unsustainable.

Therefore, we have the mutual task as leaders to develop the right solutions that address complex energy and mobility challenges. Changes that we enact now help prepare for the world in 2020 and beyond – just four vehicle cycles away.

Ultimately we need a cross-section of industry, government,
utilities, labor and academia leadership all working together. I
applaud the Detroit Economic Club for organizing a dialogue
among these constituents -- dialogue that can propel us further down this change path.

Let’s first consider the evolution of clean transportation.

In the 1970s, the focus of industry’s clean transportation efforts
was to reduce pollutants such as carbon monoxide and nitrogen oxide from auto emissions, using catalytic converters. Carbon dioxide or CO2 was not a high concern. Today, we understand that CO2 contributes to global warming. As CO2 emissions are projected to grow at an average annual rate of 1.8 percent between now and 2020, clean transportation now aims to reduce and/or eliminate emissions and fossil fuels use.

Since fossil fuels have powered the internal combustion engine for over 100 years, this is no small task. The internal combustion engine will remain the dominant drive system over the next 20 years – despite the alternatives – and so we must improve its efficiency, and there is still potential for it.

This action becomes even more crucial, considering fuel
availability and cost. The International Energy Agency (IEA)
projects crude oil pricing at $200 per barrel in 2030. Studies show that the demand for oil will soon be greater than our ability to extract it – possibly as early as 2016 – just seven years from now.

Whatever the timeline, our current practices are moving us toward a world of energy scarcity. However, all is not lost. Many technologies that have the potential to, instead, lead us to an era of energy abundance are already known. For example, it would require just 0.01 percent of the sun’s energy output per year to cover the world’s yearly demand. With continued technology development in solar, wind and sea-energy generation and storage – the gap between supply and demand could quickly be closed.

So which scenario will it be, scarcity or abundance?

Both scenarios are on the horizon, and both will occur. It will take us a long time to get to abundance. And the scarcity scenario will materialize first – and much faster than most would expect. The duration of the scenarios – however - is up to us. We need to quickly and intensively improve existing combustion engine technology to conserve fossil fuels, and at the same time, ramp-up the use of alternative propulsion and renewable energy sources.

Federal and state governments have a critically important role - to provide regulations, incentives, infrastructure and certainty that encourage needed investment and purchase behavior. Initiatives by the Obama administration – provisions included in The American Recovery and Reinvestment Act, for example – lay important groundwork. Congress is discussing a national Renewable Electricity Standard, which calls for up to 20 percent of electricity needs to come from renewable sources by 2020. Almost 30 states, including the State of Michigan, have adopted similar standards.

New CAFE standards are targeted to increase the fuel efficiency requirements for new U.S. light duty vehicles to 35.5 miles per gallon (mpg) while reducing CO2 emissions to 250 grams per mile by model year 2016. We will see more downsized gasoline engines with direct injection and turbochargers, optimized auxiliary systems with efficient alternators, start-stop systems, new vehicle weight and engine management solutions.

Certainly we will see more mild and full hybrid-electric vehicles, as well as hydraulic hybrid drives – developed by our subsidiary Bosch Rexroth to penetrate the medium/heavy duty segment.

But this will not be enough, however, to achieve the new CAFE
requirements. We also need to speed up the Clean Diesel
Technology. It provides on average 30 percent improved fuel
economy, reduced greenhouse gas emissions by up to 25 percent and potentially a 20 percent higher residual value than hybrid. Clean diesels present a solid business case for the U.S. The VW Jetta TDI, named 2009 Green Car of the Year, has a combined 36 mpg minimum, great performance, less emissions and cost per mile than its gasoline-powered counterpart, qualifies for a $1300 tax credit and is an attractive solution at just 7500 miles per year. In my opinion, automaker roadmaps to achieve 35.5 mpg must include clean diesel. We expect diesel to achieve a 10 to 15 percent light duty share in the U.S. by 2015.

Hybrids will serve as a bridge to more aggressive development of electric vehicles. But even as we intensively take up the issue of electrification, the road to the electric car is a bumpy one, and it will take some time before electric cars are widespread. By 2015, global automobile production is projected to near 90 million vehicles. Of that, we expect to see between three and five million hybrid vehicles and some 500,000 electric vehicles.

Further development of vehicle battery technology is an essential step, particularly in regards to weight and cost. It will take several years to achieve a cost which makes electric vehicles competitive.

Bosch established a joint venture with Samsung SDI to develop, manufacture and sell lithium-ion batteries for the automotive industry, and realize economies of scale. Once technology hurdles as well as charging infrastructure are addressed, electric vehicles will be positioned to hit their stride.

Suppliers and OEMs are investing significant amounts in R&D – but we should ensure it is the right kind. Despite the current crisis, Bosch’s R&D activities remain a top priority. As CAFE and other legislation provides clear targets for industry to work towards, OEMs and suppliers must link technology roadmaps more closely in order to accelerate the rate of change and innovation. Such collaboration will frame the next chapter of resurgence in our industry. With like-minded actions by all constituents, it is possible for us to make the transformation with the necessary speed.

At Bosch, our ambition is to deliver technological answers to
ecological questions. We aim to create energy-efficient products that are, as our company motto says, “Invented for life.” We take a holistic approach to the topic of energy -- not only for automotive, but in all our business segments. In 2008, our renewable energies portfolio generated some $1.5 billion in sales, with supply of gearboxes for the wind-power industry, geothermal heat pumps and our entry into solar panels and photovoltaics. 45 percent of our R&D spend is directed at products that help protect the environment and conserve natural resources.

Sustainability must be considered in its entirety. Not only should our products aim to conserve resources, so should our perations.

We set an ambitious target to cut by 2020 the CO2 emissions of our worldwide manufacturing operations by at least 20 percent as measured against 2007.

As we work to preserve natural resources, along with our balance sheets, climate protection actions can help overcome the current economic crisis. The “green economy” is growing in importance and yields great opportunity. Global investment in forms of energy that do not emit greenhouse gases are planned to reach nearly $2 trillion by 2020. As climate protection efforts transform the auto sector, companies able to technologically respond quickly to the new landscape will perform well and outpace competition.

Industry success, however, will depend on a committed consumer. Surveys indicate that 54 percent of consumers care about the environment and want to help mitigate climate change. Consumers must be motivated to invest in energy-efficiency. By boosting their awareness and trust, and managing product perception, price and availability, industry can help consumers to buy energy-efficient products. Ultimately, protection of the planet will be decided with the consumer.

The need for climate protection is an issue of undeniable urgency, and we share the responsibility to address it fully. For all of us, much work lies ahead. But, everyone will benefit from the progress we make. If we start fundamental changes today, make the right decisions about energy use and clean transportation development, we can realize a world of energy abundance in the not-so-distant future. Thank you for your attention.

Peter Marks National Summit Remarks - June 2009

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