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Office of the Press Secretary

                       BACKGROUND BRIEFING

October 18, 1994

The Briefing Room

12:30 P.M. EDT

SENIOR ADMINISTRATION OFFICIAL: As you know, this was the first year anniversary of this new venture between the government and the private sector. The first year has, I think, come to a successful point in that we have formed a relationship between the private sector people and government and the labs of government and the university community that, at least in my experience, has been unprecedented in terms of making the whole greater than the sum of its parts.

And I think one of the most important outcomes, to me at least, is that after this year's time we have found a way to operate, integrating across the resources of government and the private sector, and that, together, these folks have been able to put together a program plan in which they've looked at all the kinds of technical ideas that are out there, and they've been able to put them into a framework, and within that framework they've been able to decide what's most important and what's less important. And they've been able to say why is this job more important than that one, because we're dealing with limited resources here.

So they've developed a map in time, as it were, a road map that says here's where we are now and here are our options. And here's the time we're going to take to narrow those options to the winner's circle. And that takes several years. And then, here's what we do with the winner's circle in terms of moving to the final product. Not only for the car as a whole that we keep talking about this new generation of vehicles, but for the systems or the subcomponents of these cars -- how much do we need out of weight, and hold on to strength of materials and safety and noise. How much do we need out of the drive train in terms of efficiency and fuel flexibility and the likes.

And they've come to a consensus across government and the industry about what these numbers need to be. And that gives you then a very firm road map that enables us to move down.

I think the individuals can tell you about the kinds of technical progress that even are showing up here only 12 months into the system. But remember that what we're talking about here is a partnership that's a generation kind of a partnership. It's a 10- year process we're engaged in, because we want to get past incrementalism, which is all -- it's very important, but we want to try this leap across incrementalism to really break out into a truly new generation of technology in our transportation fleet.

So I'm going to stand by and ask my colleague, who leads the federal agency -- seven agency consortium -- and let her say a few things. And then, if any of our distinguished partners from the industry would like to say something, fine; otherwise we'll open for questions.

SENIOR ADMINISTRATION OFFICIAL: All we want to do today is to really be available for questions. But I would just like to say a couple of words because the last 12 months have really been very important for this project.

We have been able to put the partnership together. We've actually got people actually working on technical issues as of now. It has been an exhilarating ride, to say the least, to get the government people who we had to put together to work on this thing to work with the industry people. And over the last three or four months, the whole project, I think, has begun to really gel.

And our view is that the planning that when on in the first six months -- those of you who have been involved in major redirection in R&D know that if you don't do some significant planning up front, then you're simply going to waste a lot of time going in directions that you don't understand and don't have a way to qualify them properly. So we have spent a fair amount of time in the first year getting that planning in place. But the last three or four months have really been spent in actually getting those plans actually on the ground and operating.

I feel very, very good about the project at this point. We have excellent cooperation between the agencies. There is major input for this program from the Department of Energy, major input from NASA, major input from the Department of Defense and major input from the Department of Commerce. So this is five agencies that we have to get to work together first. And then to get the car companies to work with us -- it has been a really fun thing to try to do. And I think at this point we're in the process of really beginning to make some progress.

The '95 budget on both sides, both what we've developed for the government and for the industry on their part -- which they can talk about or you can discuss with them -- but we now have significant effort both on the government side and the industry side to make this project work. And some of those programs are actually now already in place with engineers working on the ground, on the floor doing things that need to be done to make this project work. I think that's an enormous accomplishment for the 12 months when we were asked to put this kind of an R&D project together.

It is a historic project. I am extraordinarily pleased with the results. If we can make this model work, it is an enormous leverage both for the government's research money in areas where it wants to push technology and where we want end results, which are in the public and social good, at the same time that we leverage what the industry is doing. And what we think is we have a win-win situation.

And it has just been great working with the three guys behind me and with my colleague's support on a cost government agency, with the National Science and Technology Council. I think we've had a really good start, and we're really well underway.

The gentlemen behind me have been introduced, and I'll ask them if any of them would like to say anything.

AUTO INDUSTRY OFFICIAL: You've said it all.

SENIOR ADMINISTRATION OFFICIAL: Okay, so we'll open it up for questions.

Q Maybe some of the gentlemen could respond to this, but you referred to getting plans on the ground and operating the past three to four months. Can you give us some illustrations of what you mean by that.

SENIOR ADMINISTRATION OFFICIAL: I can just start, and then I'll let them add to it. We have -- we now do have three fullblown fuel cell programs that have been -- the contracts have been put together. That work has now started. To get that off, we also had a technical conference, which the Vice President sponsored in fuel cell technology because we were very much interested to be sure that we understood where that technology was worldwide, not just what we could see from our own little pieces. So we had a major conference on that to begin with. There are three of those programs now up and running -- one in each of the Big Three.

And one of the nice things I want to be sure you understand is that that project, although it's each of them are being run by the Big Three, there are major lists of suppliers that are working with them extensively in those programs. So when you say that you have a fuel cell program being run by Chrysler, that also includes another seven or eight major suppliers who are involved in that process as well.

We have the hybrid vehicle program which is underway. Two of those programs are now going on. We hope to have a third one before -- shortly. The reason for having three programs in each of those is these are technologies that we don't know the answers for today. We want to get answers as quickly as we can. So we've put together what we call deadly competition, where each of them will run with a particular technology, and we'll sit down and figure out where we are and which one has a chance of winning. If we end up with two that has a chance, that's all to the better. But at least we will be able to check out those without having to do each of them in sequence, which would simply take too long for the time frame we have.

In addition to those major programs, there's now also in place a number of CREDAs with particularly the Department of Energy laboratories. They range all the way from work in lean-burn catalysts. There is manufacturing -- front-end manufacturing issues that are being addressed. There is computer modeling, which is being addressed, particular some sophisticated systems modeling which is being utilized out of the laboratory. So a number a number of those CREDAs are now up and running with people assigned to work on them and actually working on them both from the laboratories and the car companies.

And we could probably provide you a list.

Q What's a CREDA?

SENIOR ADMINISTRATION OFFICIAL: A CREDA -- cooperative research and development agreement. I'll get it correct. And what it is is a joint agreement cost-shared between a national laboratory and an industry partner, where they work in partnership, utilizing both some of the specific and specialized facilities and personnel in the laboratories to work on these problems.

Q I think is going to be an annual thing for us -- a year ago we were all in this room; my little baby was three months old, and I asked you --

SENIOR ADMINISTRATION OFFICIAL: And my grandson was about six months --

Q Yes -- and I asked you if there was going to be one of these cars available for him by the time he was able to have a driver's license, and you said today we really don't know, we hope so. And I want to ask you the same question again today. And if you can tell me where you are, based on where you would like to be at this point in time, and then take that out to, could this car be ready before 2004 -- that's what I want to know from you.

AUTO INDUSTRY OFFICIAL: That's a young driver. (Laughter.)

SENIOR ADMINISTRATION OFFICIAL: I'm going ask my colleagues to follow me on this one, but I personally feel that we're farther along today than I thought we'd be a year ago when I thought of it, well, i wonder if we'll get sunshine next year. It's my annual sunshine dose, I think, to sit out there with this. But I think what's really happened is that we have gone a lot farther than I had anticipated in building this kind of relationship, in coming to agreement on what the key numbers are and what the priorities are amongst these initial technologies.

If you look outside you can see concept cars that you can drive; they work. But they're concept, they're not production prototypes. And there's a big step between proof of principle and doing the necessary work to make it so you can produce it and sell it in the marketplace. The big question mark is how fast we can move in that direction.

But we now have definitive time lines and -- my colleagues may want to talk about this -- how many years are we going to go before we narrow our choices. And we have a couple benchmarks out there that drive us to the point that we want to have a production prototype vehicle long before either my grandson or your offspring is going to be applying for a licence. They might drive on the farm, but this stuff will be on the road before they're ready for a licence.

AUTO INDUSTRY OFFICIAL: I just might say that we have a very aggressive schedule now to converge. As a matter of fact, the schedule is very, very challenging. We have to make some choices in '96 and then '98 about the configuration of what this car might be.

I personally have every confidence we can come up with this car. Our major challenge is whether you'll be able to afford to buy this car for your son, your child. And the whole issue of national competitiveness and the manufacturing viability of these technologies is where the real challenge is going to be. Because I think we can configure technologies to make these kinds of goals, but keep in mind that the goals are very comprehensive. And we spent a lot of time as a team debating and developing these goals, and came together that these were the right goals. And they've been stated several times today, that up to three times for the breakthrough technology at today's level of utility, affordability, and safety, and so on.

And so that's really where the tall order comes in, is to make it -- to not put the technology between us and our customers, but to make it commercially viable so people can afford to drive something that is more socially responsible. So that's where the real challenge is.

Q Do you still plan to go to Le Mans with your hybrid car next year? (Laughter.)

SENIOR ADMINISTRATION OFFICIAL: He's going to hire me as a driver. (Laughter.)

AUTO INDUSTRY OFFICIAL: We don't know, frankly. We like the idea of racing as a way to put pressure on our timetable. I grew in racing in my life and I know how much progress you make when you have the pressure of racing in front of you. And the idea of trying to prove out one of the new power train technology that we are looking at through racing is an interesting one. It permits people to be motivated. And time is something very important to all of us; we have only 10 years to really reinvent the cars that we are running today. So racing is one way to speed up the process -- probably not the only way. But we don't know yet if the power train is viable enough to go racing, but we are working very hard to do it. It would be good news for the U.S. industry if we were to go and race at Le Mans next year.

Q You said in your original announcement that you were going to race next year, didn't you?

AUTO INDUSTRY OFFICIAL: No, we said we will reconfirm during the winter whether we are making enough progress there. Again, we are dealing with invention. An invention is sometimes not coming exactly the day you plan for it.

Q There's been some criticism of this program that billions of dollars, and time and resources being spent to come up with this program when there is no guarantee that you will come out with something that the people -- the taxpayers money -- that the people can buy and use. Do you provide any guarantees that the program is going to move automobile technology forward?

SENIOR ADMINISTRATION OFFICIAL: We could have set a goal that you could just about guarantee, but the goal would have been less challenging. What we did was purposefully set a goal that forces us -- that is, the American public and private sectors -- forces us into a new domain of automotive technology. It pushes us beyond the traditional internal combustion engine, which served us so well for so many decades. And because we chose such a challenging goal, both scientifically and technologically, there is no guarantee. There is not a one of us who would guarantee what the outcome is going to be.

But it's a plausible goal. It's one in which we can say, yes, we think we can make it. And that's the best shot we can give it. We're going to have an annual report on how well we're doing. The Academy of Sciences has just completed a thorough review of the program to date, and that is due to be completed in about 10 days. So you might watch for that from the Academy.

AUTO INDUSTRY OFFICIAL: I think it's also worth pointing out that -- although there's no guarantee that you're going to get a vehicle that's three times the fuel efficiency, meets all customer expectations as well as vehicles do today, and meet cost, emissions, and other issues. There is a guarantee that there's going to be substantial progress. And we've all committed to putting into the vehicles those items of improvement as they come along, as they are commercially viable. So, you're going to see these things on vehicles. Absolutely, guaranteed.

Anybody disagree with that?


Q Several suppliers have criticized the whole process of getting a CREDA, they said they'd much rather go do R&D work, than make their lawyers rich going through the paperwork and trying to hammer out an agreement. Is this something that you have run into, and if so, what kinds of things are you doing to streamline the process?

SENIOR ADMINISTRATION OFFICIAL: The answer is, yes, we have run into that problem. We have made an enormous progress over the last 12 months in streamlining the whole CREDA process. It may very well be that one of the fallout values of this program is for the government to get its act together as to how it manages these partnerships with the industry.

And, you're right, it doesn't help us very much, if it takes 12 months to negotiate one of those and spends twice as much money as the CREDA is worth on lawyers fees and the process. We now do have an umbrella CREDA, for example, in the Department of Energy, and they are now able to operate and generate these new CREDAs under that umbrella agreement in a much, much more streamlined fashion than we have ever seen before in that process.

Not only that, but it has brought a lot of pressure from the suppliers and so on, to get it done -- because people now, you know, if you have no time line, then there's not the same kind of pressure. But when you're looking at -- we've got a 10-year program, and if you don't get this CREDA out of the way and let me start working on it for another 18 months, first of all, by that time I will have had to do something myself anyway ; you're too late to help me. So we're really beginning to streamline these. And I think that in an awful lot of cases, you're finding that they can now be done rather quickly.

Q This is coming as the northeast is debating whether to incorporate electric vehicles, natural gas vehicles in their plans. If they do go with the plan to use electric, will that drive your efforts forward? Will that -- will there be a sharing of technology in there?

AUTO INDUSTRY OFFICIAL: Any diversion of efforts to shorter-term goals is going to subtract away from things that we can do on fully breakthrough items. The most important thing on electric vehicles clearly is to improve the range of batteries at an affordable cost. We have a very substantial program ongoing with the government to pursue that. Batteries over the past, oh, half century have probably improved by about a factor of two, I would say. We have a program now which looks like it may be speeding that process up by about a factor of five. But we're a long way yet from having a viable battery. We're doing what we think is prudent in that area. But if we have to divert efforts toward other aspects of making electric vehicles -- getting them on the road in terms of product development, it's going to come out of the pursuit of longer-term goals.

Q What would be the harm of having some interim increases in the CAFE standard along the way toward the 80-mile-pergallon goal?

SENIOR ADMINISTRATION OFFICIAL: Well, CAFE, when we began this agreement, we're talking here about a partnership that removes itself from the year-to-year regulatory processes that can and must go on in terms of public safety and air quality and the like. And we're trying to find -- to put in place a set of capabilities that will enable us to take, I think as my colleague said, take the pollution out of the equation.

So what we're trying to do here is to make a leapfrog. But that in no way is seen by either party as a substitute for the incremental change that is an undercurrent in this industry and its work with government. But we're approaching it from a different, and I think a totally complimentary perspective, and we believe that this is going to help really fix the problems in the long term.

Q Some of the company officials outside spoke of the need to hold the line on existing regulations. Why is that so important when your goal is to increase fuel efficiency anyway?

SENIOR ADMINISTRATION OFFICIAL: Well, I don't want to speak for them, but the extent to which you try to accelerate in to the current performance capabilities that you do not have mature technologies on causes you to pool your resources to meet the nearterm needs. And there is a tension between meeting near-term needs and investments for the long-term. That's a natural tension, and it's always a trade-off; but one does not exclude the other.

AUTO INDUSTRY OFFICIAL: And I think it's safe to say we've tried to find a middle way. The middle way isn't to say, well, 10 or 15 years or long enough away that you will forget, we will come up with some miracle invention; but in the meantime leave us alone and trust us. What we have said is that we have committed to implementing the improvements that result from this joint effort as they become commercially viable.

So, although we're keeping our eye on the long-term goal, we're also committing to making sure that as the progress is made by both of us -- by government and industry -- industry will put those things into the vehicles as they are commercially viable. So we're trying to do both in a way that at the same time satisfies all of the customer's concerns. Remember, that's a ground rule of this. If you deal with something that is as narrowly construed as CAFE, what gets lost in the equation isn't fuel economy, it's whether it answers the customer's needs. We're committed to doing both, and I think by having an open program which is being reviewed by the highest level of science and engineering capability in the United States to make sure that we're on course to doing both is about the best we can do.

Q We heard a lot of talk out front about jobs in the auto industry in the United States. I was wondering if there were any plans to allow any of the American subsidiaries for foreign manufacturers, who have several hundred thousand jobs in this country, to participate. And where is the administration on that?

SENIOR ADMINISTRATION OFFICIAL: The issue with respect to participation by non-U.S. owned firms is a significant one. Let me use the example of the advanced technology program at NIST. As you know, that program does allow that, provided the companies have certain attributes. The first test, however, is whether or not there is major value to the United States to have those people participate, in terms of jobs and technology in the United States. That's the first criteria.

The other criteria also have to do with reciprocity and other kinds of issues. But the important issue is that the administration is absolutely committed to U.S. programs which have visible, viable value to the United States, both in terms of manufacturing in the United States and technology in the United States. Both of these are very important, and they are tied together. Okay?

Q As far as the budget for this, between what the Big Three are spending or, let's say, plan to spend next year, is this going to be a ramp up? And may be if you could just give us some dollar figures on what the investments are.

SENIOR ADMINISTRATION OFFICIAL: Well, to give you one figure, I think the Fiscal Year '94 expenditures identified in the federal side of things on this program, across the agencies is a little bit in excess of $250 million -- now, that's $250 million new dollars, but that's the size of the federal program. In '95, it's going to be similar, but we hope increased because we see this as a very high priority item as we retune our federal resources to the post-Cold War world.

We have put together a very detailed program plan for F.Y. '96, which we will be submitting in the President's budget in February. And that will be the first fully integrated federal plan. But if you take those resources, say a little over $250 million, and add to that roughly another factor of two, which is -- because most of these things are going to end up being about 50-50 -- it'll change from one to another -- but that tells you it's a level of about a $500-million per year activity in '94.

Does that help your question?

Q What you're saying is, it will go up substantially, then, in '96?

AUTO INDUSTRY OFFICIAL: I don't know the numbers for '96, and I don't think I could even tell you if I did at this point, because the President hadn't looked at them yet. And, believe me, I've been through a session with the President for it; he looked very hard at these numbers. But I can tell you this: It remains, as I think you witnessed this morning, a priority program of this administration, not only for what we're doing in the automotive sector, but as a model of how we can work better in partnerships.

Q What you're saying is, then, is that the Big Three are spending, between the three of them, about $250 million also?

AUTO INDUSTRY OFFICIAL: That's a physicist-type extrapolation from where we are on a roughly 50-50 deal. But if any of you guys want to speculate the roundness of that number --

AUTO INDUSTRY OFFICIAL: It's probably about right, but we don't add them up that way. Basically, what we've been doing is on each individual program, we come to an agreement with National Laboratory or the appropriate government agency on what kind of a program is this -- is it a program that is aimed at something that is very far out and very high risk; for example, developing a new material that might have one-tenth the weight of steel and the same cost and the same strength -- in that case, if it's very far out, very high risk, the majority of the cost will be borne by the government.

As we get closer in, for example, in some manufacturing technologies, the majority of the expenditure of the cost is handled by industry. So there is an attempt to have a very deliberate shift. So each individual program is weighed that way. At any given point in time, it might be shifted in one direction or another, but we try and do it on each individual program, not have an arbitrary number.

AUTO INDUSTRY OFFICIAL: Just one more point. I'm sure that if you read the GM, Ford and Chrysler annual report, you can find out how much money our industry is spending every year on research in general, which is up in several billions of dollars -- that, every year, we reinvest in the business, we have thousands and thousands of engineers working in the various tech centers -- so when John is telling you about the specific match that we have to come up with when we work within the CREDA, the -- a portion of the research that our industry is committed to for the long term of our industry.

Q I wonder if you could describe how, in '96, this program will become more integrated. There is some concern among start-ups that this is getting to be a program in which the Big Three control what happens and they squeeze out government funding for projects the Big Three are not directly involved in. This becomes a concern since the Big Three are now actively suing in several different courts to block implementation of some technologies in the Northeast and elsewhere. What is it that you're doing in '96? You said something about coordinating these expenditures.

SENIOR ADMINISTRATION OFFICIAL: I spoke of what we have developed is a coordinated, integrated plan with agreement from the six or seven federal agency participants as well as the automotive industry. And so that represents a consensus statement that we, in turn, are developing in the federal budget. But I think it would be more appropriate if I ask my colleague to respond to your question which is very reasonable, and I think we can close on that one.

SENIOR ADMINISTRATION OFFICIAL: One of the issues with respect to that question is the following: We are committed in this program to get the very best technical ideas wherever they exist, and we are absolutely sure that some of those ideas will rest with small, either small start-up companies or with people who have new ideas. And we're working out ways to be sure that they do not get excluded from this program.

In fact, there's another issue as well. And that is to be sure that all of the suppliers to the automotive industry have equal access to the program also because, as you know, a great deal of the technology that actually finally gets expressed as an automobile, that that technology gets developed within the supplier community. So, the whole program is based on the automotive companies talking about what the product has to be because they will define that at some point, okay?

But within that, then, we're looking at ways to be sure that the supplier community is involved. We're looking at ways to be sure that there is perhaps some technology within the government that we may know about, particularly things like some of the issues in NASA, new materials -- that that gets into the mix. And we're very much interested in the whole business of the small entrepreneurial kinds of firms, because some of them have ideas that we would miss otherwise and we want them to play.

And, in fact, we've created for the program what we call a creative track. Now, the problem is to find within the government ways to fund, if they need funding, for those ideas to get them developed and to get them in the mix, to get them discussed. But to give you an idea -- when we had the technology meeting for fuel cells, we invited everybody we knew who had a major interest in those fuel cells. We will do that same kind of technology briefing in other areas like -- things like the electric systems; things like flywheels; things like ultracapacitors. When we do that we will invite all of the people who believe they have a technology that needs to be shared to those. So we are taking special care, hopefully, not to miss any of those kinds of issues.

SENIOR ADMINISTRATION OFFICIAL: Thank you for very good questions. If you want to catch us individually, that would be fine.

THE PRESS: Thank you.

END1:04 P.M. EDT