For years, the sale of gas-guzzling power vehicles drove General Motors to the top of the industry.
But today GM reported second quarter losses of $15.5 billion. Last year the company not only lost more than $40 billion, it also lost its place at the top, getting beaten out by the smaller, more fuel-efficient cars made by Toyota.
"I think the basic economics are changing people's view on what they really want to have in their driveway. As oil becomes more expensive, people are putting a much higher premium on cost efficiency," said Rick Wagoner, the chairman and CEO of General Motors. "It's clear to us that large numbers of people used to buy large SUVs and pick-ups, and I don't think they're going to come back to that category given the high cost of energy."
As the relationship between the automobile industry and the oil business evolves, Wagoner said this "marriage of convenience" may not last.
"We're not saying we won't continue to produce vehicles that run on oil, but I think we won't, five and 10 years from today, have 98 percent of the power for vehicles supplied from oil," he said.
In fact, GM said that in just two years the company will introduce a fully electric vehicle called the Volt -- a battery-powered car that only uses gas to recharge the battery, not to drive the engine. In road tests, the car travels about 40 miles on a fully charged battery before the gasoline-powered battery generator kicks in. From that point onward, the car can travel up to 400 miles using only six or seven gallons of gas.
It has been said that this may be the miracle to save GM.
"This is an important part of the future of General Motors, no question about it," said Larry Burns, vice president of GM research and development.
The Volt won't hit streets until 2010 and its final design is under wraps.
"I think we are really at a tipping point for our industry. We've been [for] almost 100 years pretty much fully reliant on petroleum," said Wagoner. "And I think it's clear, both the way things are today and the ways they're going to go in the future, that we're going to have to develop alternative sources of power for vehicles, and we think electricity is going to be a winner long term."
Last week, GM partnered with the nation's top utility companies to start working on a plan to cheaply and efficiently power up electric cars.
"[The utilities] will have to add capacity," said Wagoner. "Whether it's nuclear, whether it's solar, there is no question that they are thinking about the best way to add capacity that we might generate through this sort of vehicle."
This isn't the first time GM has tried to electrify the market. Back in 1996, the company introduced the EV1, the first battery-powered car with zero emissions.
But GM said consumers weren't ready to be plugged in. So it scrapped the EV1 and went back to making trucks. Some said it's a sign that GM's commitment is to its bottom line, not the environment.
During a closed-door meeting in January, GM vice chairman Bob Lutz told journalists that global warming is a "total crock of s***," describing the need to replace oil as a greater concern than carbon dioxide levels.
"For sure climate is changing," Wagoner said. "And so our job ... is to offer a future vision for our industry where we can help address the issue and take concerns off the table rather than contribute to them."