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Hackers Targeting Executive Emails

Not focusing on Internet security is like opening the cash register to hackers and thieves; these modern-day threats require CEOs to constantly reassess the emerging dangers of the Internet, warned Champ Mitchell, CEO Networking Solutions in his article with Chief Executive {Read: Taking Internet Security off the backburner}. It's been two years since the article was published and now there are news reports of email hackers targeting c-level executives with precision malware looking to harvest intellectual information from them. Last month, Internet security firm, MessageLabs intercepted as many as 500 emails laced with malware targeted against individuals in senior managerial positions.

The precision attacks in the form of emails - often mentioned the name of the executive, his designation and other such personal information - are intended to lure the executives to open malicious attachments, says experts. According to an analysis by MessageLabs, 30 per cent of the attacks were aimed at Chief investment officers (CIO), 11 per cent were directed against Chief Executive Officers (CEOs); other job titles among the top ten targets included Chief Information Officers (CIOs), Chief Financial Officers (CFOs), directors of research, directors of developments and company presidents.

MessageLabs, suspects that these attacks are a handiwork of an organized criminal gang which has realized that C level executives make particularly good targets; the potential return from compromising a CEO is much bigger than compromising, say, a teenager still at school, email security system analysts say. "CEOs tend to have bigger bank accounts and access to such information can have substantial resale value. That is what they are aiming to achieve," Alex Shipp, Anti-virus technologist and Imagineer, Message Labs told Chief Executive Online.

According to MessageLabs, there are a good number of Fortune 500 companies which are being targeted on a daily basis. "Some of the high profile organizations including the Fortune companies get attacked on a daily basis, says Alex Shipp. However, Shipp refuses to divulge the details of the victims, saying; "the organizations have asked us not to name them, and we have to respect this," (Sic).

Zully Ramzan, senior principal researcher, Symantec security system, says that there is considerable evidence of organized criminal activity and existence of an underground economy which is a basis for such attacks. Increasingly, we are observing that there is an underground economy for all the elements that go into an attack. A black hat researcher may discover vulnerability in an internet browser and sell that information to a programmer who will use the information to infect many computers forming a botnet Ramzan points out.

A report published in eWeek says that right from adware and spyware installations to spam runs and phishing attacks, CPU cycles from botnets drive a billion-dollar underground business that thrives on lax computer security.

Botnets, - a collection of broadband-enabled PCs, hijacked during virus attacks and seeded with software that connects back to a server to receive communications from a remote attacker - are used for mostly for malicious purposes, especially for fraudulently acquiring sensitive information, such as usernames, passwords and credit card details. The hacker in this case is masquerading as a trustworthy entity in an electronic communication, today popularly known as phishing. "The programmer with the botnet may rent out its network to a spammer or a phisher who will use it to jam the network. Some programmers even create easy to use packages for other criminals to execute fraudulent online schemes. These packages surprisingly sophisticated include extensive management consoles that allow the hackers to easily configure the parameters of the attack and observe how successful it is, all from a single screen," says Ramzan.

Though it is difficult to gauge the frequency of such attacks, Internet security experts, however, say that attacks on executives have been consistently increasing for quite some time. MessageLabs has released figures showing 100 per cent increase in malicious emails to C- level executives. According to inputs from MessageLabs, two years ago the company intercepted at least two to three such attacks every week Last year figure shows five fold increase to about 15 emails every week and this current year the figure has reached its all time high with 50 to 60 malicious emails every week directed towards c - level executives.

"We believe that one gang is now experimenting with this type of attack to see whether it improves their rate of returns. During the same corresponding period, we have also seen attacks by the same gang but on a broader scale. They are probably comparing the rate of returns from these two specific targets," says Alex Shipp.

On questions about the existence of such gangs, Shipp says that most of the email attacks are routed from Asia-pacific region. "We note that a large number of attacks are similar in nature to those noted elsewhere as 'Titan Rain' (U.S. government's designation given to a series of coordinated attacks on American computer systems since 2003)," he says adding further that Asia Pacific may not be necessarily the place of true origin. MessageLabs says that it analyzes these attacks based on certain criterion which is unique to it. "To further elaborate on this is like providing the information to the notorious gangs, says Shipp with vivid apprehension.

The Better Business Bureau (BBB) has issued a warning on email phishing scam that uses messages claiming to be from BBB, in an effort to entice users to click on a malicious link. SecureWorks, which investigated this scam and located a stolen data repository, says that these phishing attacks were highly targeted and aimed at specific executive level company managers. The investigations further revealed that as of May 25th, there are as many as 1400 victims and 145 megabytes of data in the repository. Approximately 70 MB of data is being collected daily. High net worth individuals could be very lucrative targets. In this case, the attackers are hoping to get a high yield from one successful attack. In contrast, many hackers also launch wider scale attacks to churn out several achievements albeit at a smaller scale, says Ramzan.

"The companies that are facing the malware brunt are primarily big corporations including some of the Fortune companies. So, we think this is a whaling attack, throwing large quantities of plankton with a desire to catch a large whale, and if they can compromise the right person this could be worth vast amounts of money," says Alex Shipp.

Email security experts, point out that it is highly essential for the CEOs to take immediate steps to check this menace. Further negligence would mean losing confidential information and thereby affecting the overall performance of the company. "Executives should be suspicious of any unsolicited email containing an attachment or a link, even if it mentions the identity of the company and promises information on some critical data of the company," says Joe Stewart, senior security researcher at SecureWorks.

Experts are of the view that exposure to personally sensitive information can have serious repercussions. Most common and crucial among them, they say is the identity theft. "In case of a more targeted attack, information sensitive to a business can be abused by selling trade secrets; or a data breach would mean personal information of customers is at jeopardy," Ramzan reiterates.

When an executive's PC is compromised the attacker can easily gain access to any information stored in his victim's desktop. Information on personal and company bank accounts, retirement funds, stock brokerage accounts, all stands exposed and this can lead to siphoning of the company's capital and investments. "Company secrets harvested through this attack could be sold to potential rivals and they can manipulate the stock prices," warns Joe Stewart adding further that a compromised PC is like giving unfettered access to an outsider.

Executives must make sure that they have defense in depth strategy and they must keep a constant vigil, frequently mining data sources and devising counter measures as and how the bad guys come up with new phishing schemes, says Stewart. "For tackling such a potential threat the end-user should have a comprehensive security solution installed on his / her machine and there should be a consistent mechanism by which incoming emails can be scanned for malicious code prior to reaching the inbox of a CEO," says Ramzan.

Internet security analysts feel that creating awareness and educating the employees of the company can also be one of the important tasks for the senior executives to be taken up on an emergency basis. "Awareness that they are now being targeted is a key to precaution by itself," explains Stewart.

Stewart further laments that there is precisely no mechanism to consistently check harmful social engineering emails. "When it comes to social engineering emails (emails containing hacker-speak for tricking a person into revealing their password) there is no single technical counter measure that works for very long, so there must be a constant effort by human analysts to stay ahead of the game and protect their customers," adds Stewart.

Alex Shipp feels that despite all the precautions it is still very difficult to check these attacks. "These attacks are hard to stop by using signature based technologies, because the attack is generally executed well before the signatures are released," he says adding that most big security vendors are still stuck with the model of creating signatures for the last piece of malware they missed. "In today's world this never works, because the criminals bring changes to the malware prior to the release of signatures. So security vendors must create signatures for the next piece of malware that is likely to be released by these hackers. Creating heuristics - the ability to come up with a preventive measure even before the attack is planned - is still an art most security companies need to muster," says Shipp.

Experts assume that these attacks would continue to bother the executives. "The threats will only increase as criminals think of more ways to extract money from their victims. And of course email is one basic platform. For instance, we have recently seen a large upsurge in malware, which is designed to steal information on accounts used in online gaming, because these are valuable resources," says Shipp.

However, according to Ramzan, though email seems to be the popular mechanism in place right now, situation is constantly evolving. "As email security solutions improve, attackers will shift their focus more towards other targets. For example, we have seen phishing instances over cellular instant messaging," he says.

Safe, Carbon-Free and About Time

ECONOMIC GROWTH and technological innovation are directly related to the availability of low-cost electricity. Each percentage increase in real GDP between 1970 and 2000 has resulted in a 1 percent rise in demand for electricity. Not surprisingly, the price of electricity is one of the determinants of the competitiveness of industries, with the U.S. enjoying lower costs per kilowatt hour than, for example, Germany, Spain or the U.K. Coal currently supplies 51 percent of America's electricity, and because the U.S. has 250 years of proven reserves-more than the oil reserves of Saudi Arabia-coal will be used for some time. The problem is that as a fossil fuel, burning coal contributes to greenhouse gases that affect climate change.

Nuclear power, which supplies 20 percent of the U.S.'s electric power, is safe, reliable and free of carbon emissions. Yet it has been over 30 years since a nuclear power plant has been built. We've let the fears of 30 years and an endless squabble over waste storage make it almost impossible to build new plants. In New York State, for example, power demand is up more than 12 percent since 1993, while generating capacity is up only 2.6 percent. The state has built no power plants since 1994, and the one nuclear facility in the southern part of the state is the target of environmental jihadists, who want to replace it with solar and wind.

Sources such as solar and wind are intermittent and unreliable and cannot replace reliable base load sources such as hydro, fossil and nuclear. Yet many of our feckless politicians and folks in the environmental movement and in media say we can do without nuclear power. But as time goes on the logic has to emerge. It is not logical to assert that climate change is the most important issue of our time and that reducing fossil fuel usage is the principal aim and then thwart the very technology that best accomplishes that. From France to Finland, other countries around the world have concluded that there is at present no other technology that offsets as much carbon emissions as nuclear. It's time we did as well.

The Long View

TURMOIL IN THE CREDIT MARKETS  coupled with the implosion of housing has triggered a precipitous contraction of liquidity and concerns that a recession is upon us. Chief Executive's own CEO Confidence Index showed the largest one-month drop in August since we began tracking sentiment in October 2002. Yet having endured six financial meltdowns since Penn Central's demise in 1970, we should keep a perspective. A lack of liquidity in mortgage securities may depress housing prices further, but the impact may not be so severe as to force the economy into recession. Job growth has been positive, with even a modest decline in the unemployment rate. In prior housing downturns, the jobless rate peaked by 3 percentage points in the 1980s and 2.2 percentage points in the 1990s.

In addition, most analysts are sanguine about continued growth in the world economy. Given that the market capitalization of the U.S. stock market is almost $14 trillion, larger than most other markets combined, wealth in stocks is still rising as real estate falls. Our CEO Index also reveals that many CEOs still feel their businesses and many areas of the economy are fundamentally sound. Almost 46 percent of those responding said that the financial performance of their own companies increased their confidence this month, and an additional 13 percent said that it "significantly" increased their confidence. Tighter credit will force some sectors of the economy to hit an air pocket, but market turbulence also creates opportunity.


The Environmentalist That Went Nuclear

When Canadian born Patrick Moore began his career more than 30 years ago as an environmental activist and founder of Greenpeace,  he was appalled by all things nuclear. In 2000, British ecologist James Lovelock, best known for the Gaia hypothesis that holds that living and nonliving parts of the earth are viewed as a complex interacting system that can be thought of as a single organism, convinced him that if one is truly serious about reducing carbon greenhouse gases from the atmosphere, widely believced to cause global warming, one had to support nuclear energy-a power source that is carbon-free.

Moore now serves as chairman and chief scientist for Greenspirit Strategies Ltd., a Vancouver consulting firm that develops strategic planning for sustainability issues and works with such groups as the U.S. Green Building Council and the World Wildlife Fund. He also co-chairs along with former EPA administrator and New Jersey Governor Christine Todd Whitman, The Clean and Safe Energy Coalition, an advocacy group of conservationists, academics, labor and business groups and environmentalists who believe greater use of nuclear energy is critical to a U.S. energy policy. Moore spoke with CE’s J.P. Donlon on why a once rabid anti-nuke went atomic, and why anyone who is serious about global climate change should also. 

Given that you are a co-founder of Greenpeace, what was your epiphany in becoming a proponent of nuclear energy?

I started rethinking the subject of energy in terms of climate change around the mid ‘90s.

James Lovelock, a British scientist and father of the Gaia Hypothesis, and an icon to the environmental movement, had always argued that nuclear power should have an important role in changing fossil fuel consumption. At the time, many of us thought he was a bit of a crank on that topic, but he was highly respected for his thoughts on life on earth and atmospheric chemistry. When I visited him in 2000 at his country home in the west country of England, he convinced me to change my opinion, which had become very entrenched. Since the 1970s many of us were focused on stopping nuclear holocaust and protesting against nuclear weapons.  

In retrospect, we mistakenly lumped nuclear weapons with nuclear energy as if they were all part of the same holocaust. Today that would be as foolish as banning nuclear medicine. Every technology has beneficial uses as well as destructive and even evil uses. An airplane can fly one to a meeting on world peace or it can drop a hydrogen bomb. I can’t see how we got them so mixed up, but we did. In our antinuclear revolutionary zeal we got it muddled. In the early Greenpeace days this is one big area where I think we were very wrong. 

How do former Greenpeace colleagues regard your apostasy?

With considerable disdain. They seem to be stuck in the ‘70s and unable to recognize the important role that nuclear energy can play in reducing fossil fuel consumption. It’s quite ironic that the very people who are most concerned about climate change are generally the same ones who are against the solution that from a technical point of view, is straightforward. Both hydroelectric and nuclear power are the only other base load power technologies apart from fossil fuels that can provide continuous electricity into the grid. That’s it. No other large-scale technologies can provide continuous energy. Wind and solar are both intermittent, unreliable energy sources that cannot form the base load in a power grid.  

What is your view of renewables?

Renewables are great except when they are far too expensive, like solar panels. Solar panels only make sense off the grid. My house in Mexico is powered by solar, which is off the grid. The cost is 5 to 10 times what you pay for electricity depending upon where you live, which is why it doesn’t make sense to put solar on the grid. Biomass energy is also very important, particularly if we can succeed in developing cellulosic ethanol technology to where it’s cost effective. Considering the huge amount of feed stock there is in agricultural waste and forestry waste, its use should relieve pressure on other sources such as starch from sugar cane and corn, which is already being stretched to the limit and pressuring food prices. 

The same applies to geothermal heat pumps. If we install geothermal heat pumps in our buildings to extract the storage solar energy in the earth, we have to use some electricity to run the heat pump. It doesn’t make any sense to use a coal-fired plant to run the heat pump. But it does make sense to use a nuclear plant to run that heat pump, because then you’re producing electricity without fossil fuels. 

If we will take advantage of the technologies that already have been proven to work, that are reasonably cost-effective and that get the carbon out of our electrical supply, transportation and building infrastructure will have a better future. 

With respect to nuclear energy, how should we deal with political risk?

In the U.S. political risk is not a problem because 70 percent of the public supports  nuclear. Eighty percent of the people who live near nuclear plants support nuclear because they have lived there for a while and they know the nuclear plant is good for their community. There are 64 nuclear sites in the U.S., most with one or two reactors on them, yet they were designed in some cases for up to eight reactors to be on the site. So it’s possible to double capacity without even having any new nuclear sites.

Canada has also made the decision to move forward with new nuclear. Russia just announced it will build 50 nuclear plants. So I don’t see political backlash as an obstacle.  Germany is a different story. It is the bull’s-eye of antinuclear sentiment in the world.  Compare France and Germany side by side. They share a common border. They’ve known each other for hundreds of years. France depends on nuclear for 80 percent of its power with hydro supplying another 10 percent-almost no carbon emissions from their electricity sector. They have the second lowest per capita CO2 emissions in Western Europe, Sweden being the lowest with 50 percent hydro and 50 nuclear. Germany, on the other hand, has a policy to phase out all 17 of its nuclear plants by 2020, which is 30 percent of their electrical supply. At the same time they are pledging to reduce their CO2 emissions by 20 percent by 2020. These two policies are mutually exclusive. They simply can’t happen together. If they phase out 30 percent of their electricity, they have to replace it. The only options for replacing it are brown coal, which is domestic, or Russian gas, which would put them in a vulnerable geo-political situation. 

Even more ironically, Germany imports billions of dollars worth of French nuclear power every year because it is not producing enough electricity for its own needs. German CEOs, such as the CEO of BASF, are so frustrated by this that they have gone public with opinion editorials in major newspapers telling the Chancellor to please get off this track or face the destruction of the country’s industrial base. France has a rational policy; Germany has a completely irrational one. 

What about fuel supply and waste disposal risks?

Fuel supply is not an issue because there is a lot of uranium already discovered. Nobody even was looking for uranium for the last 30 years, because so much was found that there was no point in looking for more. Now that a nuclear renaissance appears to be coming, there is new exploration. For example, in Canada, [BP1]discovered a huge new find in Labrador. There is another huge new find in Slovakia. People are finding uranium all over the place now. In addition, thorium is a perfectly viable nuclear fuel; a different style reactor must be built to use it, but thorium reactors have been built. There’s four times as much thorium in the Earth’s crust as there is uranium. Besides which, it is felt to be reasonably achievable economically to extract uranium from sea water, and there is a huge amount of uranium in the sea. Then there is used fuel recycling which increases uranium by about 20 times. So in other words, 100 years’ worth of uranium suddenly becomes 2,000 years’ worth of uranium. 

Waste disposal isn’t a technical risk. The U.S. finally realizes that it is on the wrong track here by outlawing the recycling of used nuclear fuel. Other countries, like France, Britain, Russia and Japan, have nuclear fuel recycling facilities where they can get the energy back out of fuel rods and use it again. Then the waste is just a small proportion of those fuel rods that can then be glassified or vitrified, as it’s technically referred to where you basically melt glass and put the fission material in and cool it. Basically the fission products become embedded in a piece of rock. This is placed in steel and concrete and buried deep in the ground. Three hundred years later it’s basically harmless because the fission products do not have anywhere near the longevity of plutonium. 

How do you defend yourself when activists who consider themselves to be in the forefront in the fight against global warming dismiss you as a tool of nuclear power or big energy industry?

I don’t work for the oil and gas industry. I support nuclear because I believe that it has a strong position in terms of the environment and sustainability. It’s part of the solution.  Green Spirit Strategy is an interesting company. We are a for-profit company and a consultancy, but we’re also a kind of hybrid consultancy/activist group, because we have an agenda. Our agenda is to promote sustainability and only to work for people that we think are parts of the sustainability solution for the future.

When I first publicly supported nuclear energy in a Miami-Herald op-editorial a few years ago, I had no relationship with the nuclear industry. I just made it known in public utterances that I believed that we needed to change our thinking on this subject. Soon enough, I was approached by the nuclear industry to see if I would help them, and I was  happy to do so. 

What group most needs to have its thinking changed and how might this happen?

There’s strong bipartisan support for nuclear energy among both Republicans and Democrats. The Energy Act of 2005 had strong bipartisan support in both the House and the Senate. Democrats have a little harder time with nuclear energy, because the antinuclear constituency tends to be in their camp. But this has not deterred them from being in favor of nuclear power. 

The thinking among the leadership of the mainstream environmental movement, on the other hand, needs to be changed. To some degree this has already started to occur. It started with myself and with Stewart Brand in California, founder of the Whole Earth Catalog, with intellectuals like Jarrod Diamond, Pulitzer prize winner and author of “Guns, Germs and Steel,” and with natural historian, Tim Flannery from Australia.  These are all environmental people who have come out in saying that nuclear energy has to be part of the solution. 

The problem is that most of the people in the environmental movement are not independent of their organizations. They have to toe the party line. Within groups like the NRDC and the Sierra Club, there are people who are questioning this policy now. But they’re not free to speak their minds if they want to keep their jobs. It’s hard for groups that have spent so much time and money educating their supporters into thinking that nuclear energy is evil to shift their position because they risk losing half the membership that they have worked so hard to build up. 

But as time goes on, the logic has to eventually emerge. It is simply not logical to say that climate change is the most important issue and that reducing fossil fuel consumption is the main aim and then be against the most important technology for accomplishing that.  There’s no doubt that in the U.S., no other technology offsets as much carbon emissions as nuclear technology because it’s 20 percent of the electrical supply. If that percentage wasn’t being produced by nuclear, what would we use to produce it? No doubt we’d use coal and gas. 

Yet the history of the environmental movement seems to be based less on using logic, as you pointed out, than advocating a religious commitment to an environmentally pure theology.

Yes, there is an unfortunate element of religious fervor or lack of logic within the movement. It’s not in all the groups though. The NRDC tends to be a more fact-based organization, and I know for a fact that there is quite a debate going on within the organization. There are high-level people in the NRDC who do not agree with their antinuclear policy. 

I mean, how much sense does it make for the Sierra Club to be against nuclear energy when it’s the coal-fired power plants that are making the air filthy at the Grand Canyon?  If they want clean air and pristine wilderness, surely they would be more in favor of a technology that does not produce air pollution than in favor of a technology that does.

When it comes right down to it, the choice is between fossil fuel and nuclear for base load power production. Look around the world and see the choice that people are making. It’s irresponsible of established organizations like The Los Angeles Times that recently published an article where the paper said tax dollars are better spent on windmills than on cooling towers. Replacing nuclear energy with wind power is simply not possible. There is a fundamental difference between intermittent and unreliable sources like wind and solar and reliable base load sources like hydro, fossil and nuclear. Replacing base load power with wind simply can’t be done. Yet there are people in the environmental movement, in politics and in media who are saying we don’t need nuclear power, we can do it with wind and solar. That is an untrue statement. It’s not possible in the real world, because you can’t make the wind blow all the time and you can’t make the sun shine all the time.

You can make hydro, nuclear and coal power all the time, night and day. But the general public doesn’t make this critical distinction and is being purposefully misled by people who ought to know. It’s irresponsible.


Where Target team leader Bob Ulrich finds his mark.

22nd CEO of the Year Celebration webcast

EDA CEO Michael Fister: Designing Mind

Michael Fister left a 17-year tenure at Intel to take the helm at San Jose, Calif.-based Cadence Design Systems, an electronic design automation (EDA) company that produces software and hardware methodologies used to design and verify advanced semiconductors. Fister recently talked with CE about evolution in the EDA industry and computer power.

How is the approach to EDA shifting?

There's a perfect storm of things coming together-impossibly complex physics, complex devices, short time-to-market cycles, automation-right now. When I was a young man, five of us would work on the chip. Now hundreds of people work on the most complicated chips in the world.

There's no one person who understands the totality of what's going on-just as someone who manages a $1 billion corporation doesn't know every detail about everything.

You left Intel to join Cadence-what do you view as the company's competitive strengths?

We bring a breadth of technology, as well as geographic coverage. Early on while I was at Intel, you had to buy one capability from one company, a different one from another company, and yet another from a third company because they were all very point-tool-oriented. First, that makes it hard to integrate and optimize between those pieces, and second, none of the players have a view of the total problem you're trying to solve because they're all too point-based. So one of the advantages we offer is an end-to-end dynamic, what we refer to as a consolidating phenomena. When you can show that you have that technology breadth, geographic coverage and financial security, you become a dependable partner. That's an earned respect that involves a commitment both ways.

How do you ensure you bring enough value to justify the fees you charge?

Computer design must be rooted in the practical. So much of the history has been, "Here's an impossibly complex software tool that you couldn't possibly understand, but please pay me for it, and I hope it's good for what you do." I used to call that YoYo, "You're on your own. Use my tool, pay me, and let me see what it is."

When you develop partnerships, you learn together, evolve and depend on each other. That's what made the IT industry move and made Microsoft the stalwart of operating systems or Oracle of database technology. Oracle used to say things like, "Mine's better, because mine's object-oriented or mine's relational." Now they say things like, "I want to help you solve customer relationship management for your business," or "I want to help you with a people application." That's what we're trying to do in our industry, which is still a little bit stuck in the "my technology's better than yours" mode.

Are Chinese or Taiwanese firms trying to give you a run for your money?

You can count on one hand the number of Chinese EDA companies.

How long will that last?

I don't know. Maybe not very long, maybe for a long, long time. We're trying to ensure the second with a solutions-oriented approach, because that's a natural value for us as a broad line supplier. It's very difficult for someone to start that type of business. I'm not saying that there won't be some kind of local capability develop in China. If there is, we'll compete with it. Most of what we see is the opposite of that.

When I visited China at the end of last year, there were over 800 fabless semiconductor startups (companies that contract out chip production). There are a lot of people out there starting businesses to try to figure out how to build a special integration or a simpler add-on device. We're an enabler to that, because we give them the tools, reference examples of how to do it, and even help them use the toolbox. In a sense, we're unlocking Chinese evolution.

Where is computing power going?

It continues to grow and grow. We are essentially a facilitator of computing power, because anybody who builds a semiconductor probably uses some or a lot of Cadence software. It's just kind of the way the world works when you are a market leader in this racket.

GM North America Chairman Robert Lutz: Lutz Free Wheelin’

Since starting his career at General Motors in 1963, Robert Lutz has logged time in top posts at every major U.S. manufacturer as well as BMW. In 2001, he returned to GM, where he is now chairman of GM North America. CE recently spoke to Lutz about U.S. auto industry competitiveness, GM's revival and electric cars-and, of course, his own favorite ride.

Domestic automakers are once again in a tailspin involving various factors-legacy costs, manufacturing, globalization. What will it take to pull out of this secular spiral?

We are actually larger outside the U.S. than we are in the U.S. and operating at impressive growth rates in other parts of the world, such as Latin America, Russia and China. But you hit on some of the factors affecting the U.S. market. You cannot compete with automakers like Toyota and Honda with a disadvantage of almost $2,000 per car of legacy costs. Either you try to operate at equal profitability and be overpriced or you are pricecompetitive, which means your margins are compressed. It's a penalty you can't live with. But I believe that there is now a realization on the part of our union work force that we cannot really reestablish our competitive position as long as we're fighting this very substantial cost disadvantage.

A second factor exposed in a recent book by John B. Taylor, a former Deputy Secretary of Treasury, involves Japanese currency manipulation.

When we complained about the manipulation of the currency in Washington, the administration would say, "We wish we could do something about that." It now turns out that it was aided by the administration to turn the Japanese economy into a reliable bulwark, stemming the tide of forces hostile to us in the Far East. Taylor goes so far as to say, "We basically threw U.S. industry under the bus, but it was worth it. You can't please everyone."

What about internal factors?

GM once had more than 50 percent market share. As markets become fully open and competitive, market share inevitably erodes. If our experience is like the experience of other formerly dominant manufacturers in their home markets, it will probably stabilize at about one-quarter of the market. Volkswagen used to have 60 percent of Germany, now they're down to about 20 percent. For some 20 years, GM has been in an almost constant process of reorganization.

Why couldn't we [have gone faster]? Organizations are like organisms, which is why the word is similar. You can't whack it all at once or the place comes to a grinding halt. It has to be an evolutionary process. That process probably preoccupied senior management so much that we may have taken our eye off the ball when it came to doing fully competitive vehicles. That part of the equation had nothing to do with legacy costs or cost advantage. It was us.

When will we see GM in fighting trim?

We are in fighting trim. But we are now extremely lean and focused on best-in-class product. For example, the Pontiac Solstice and the Saturn Sky are today the world's best-selling two-seat sport roadsters and completely sold out. Pontiac sold this concept car at the '02 Detroit show. It was met with great enthusiasm. We targeted bringing it to market at a base price of under $20,000. Everybody said, "Impossible." Three years later, we had finished cars at a base price of $19,995. It is now a best-selling vehicle of its type by a wide margin, and it hasn't even been introduced in all markets yet. That's an example of a segment where GM had no presence and now arguably dominates.

How do you induce, manage and then leverage creativity?

Of what use is physical diversity without intellectual diversity? With diversity, we've focused on making sure we have a bunch of people who all look different. Not enough attention is paid to making sure that we have people whose brains are wired differently. We now actively recruit people who are well-educated and enthusiastic and conversant with cars, but do not necessarily have a finance or even an engineering background.

The other thing we did was unshackle design. Over the last 20 years, design was compressed into a very narrow box. Other priorities took precedence. How far away is the side glass from the occupants' head? How much headroom is there? How good is the visibility outside the car? When everybody else had defined the car with these limitations, design was told, okay, now wrap this for us.

You can't get there from here. You must let designers have a new, off-the-wall idea and then ask, "What is the minimum amount of compromise we have to accept to make this design feasible?" That's how we run it now, and it makes a huge difference. Just look at the Malibu, the Saturn Aura, our new big crossovers, the GMC Acadia, the Saturn Outlook, the soon-to-be-introduced Buick Enclave. GM is hitting its stride again both in terms of execution but also in terms of creativity.

When will we see the plug-in hybrid, the Chevrolet Volt?

Before the Automobile Show, we were more prepared for a long-term research program. We have now drastically bent that curve because of the nerve it touched with the American public. The cards and letters are just pouring in. We are overwhelmed by the reaction to the electric vehicle. We see it as a potential game-changer.

Is it a production vehicle yet?

No. We are studying production ASAP, but in the auto business that means three or four years. And we have to work with the battery producers. We can execute and gauge exactly what the vehicle portion will cost, but until I drive some prototypes with experimental batteries in them that do the job, I will not rest easy. As it is, I'm nervous that we might get a battery that gives us the range but not the recharge time. These are the things that preoccupy us.

What do you personally most enjoy driving?

My Alpha Jet [French-German fighter jet], by far the most thrilling, exciting toy any person could own. A close second would be the BMW K1200S Motorcycle; roughly 186 horsepower. It's an amazing piece of equipment that will provide more on-road pleasure than any automobile known to man.

With cars, I greatly enjoy the top-of-the- line Buick Lucerne with the sports suspension. It's slick, it's silent, it's fast. It's a car that does everything well. But if I had to pick one car to drive for the rest of my life, it would have to be the Cadillac STS V-Series, the 470 horsepower. It's a comfortable five-passenger sedan, yet it has performance closer to a Corvette and it's a spectacular value.

If you could correct one misperception people have about GM, what would it be?

The famous phrase, "They just don't seem to be capable of producing cars and trucks the American public wants to buy." If I read that one more time, I'm going to shoot some editor somewhere.

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J.P. Donlon Rejoins Chief Executive As Editor-In-Chief

Montvale, N.J.- Chief Executive announced today that J.P. Donlon has rejoined the magazine as Editor-in-Chief. He replaces William Holstein, who previously served as Editor-in-Chief. Donlon worked for Chief Executive for 22 years, including serving as Editor and Chief from 1981 through 2001 and brings with him tremendous knowledge of Chief Executive and CEOs.  While at Chief Executive, J.P. launched two of the magazine's most exciting and successful programs -- the Chief Executive Roundtable and the CEO of the Year Award.

 "We are excited to have J.P. back at Chief Executive. He is without peer when it comes to knowing what keeps CEOs up at night and is committed to exploring those issues in the magazine and at our events," commented Edward M. Kopko, Chairman, Chief Executive Office and Publisher of Chief Executive. "We understand the importance of providing CEOs with the tools they need to compete in today's world. With J.P.'s help, we look forward to bringing the magazine and events to the next level," added Kopko.

Donlon said: "Chief Executive is the preeminent brand and forum for business leaders and I am delighted to rejoin and help the team take it to the next level of success with new products and ways to help CEOs elevate their game."

Prior to rejoining Chief Executive, J.P. Donlon was Editor-in-Chief of Directorship, the business monthly of views, best practices, and issues driving corporate governance published by Directorship Services LLC.  In addition to his editorial duties, he was actively involved in the firm's governance and leadership conferences, communications, and business development.

Before joining Directorship in 2004, he served as a principal since 2001 with The Dilenschneider Group, a New York based strategic communications and public relations firm where he was extensively involved in the firm's CEO leadership and corporate governance practice.  Donlon originally joined Chief Executive in 1978 as senior editor, progressed to managing editor in 1979, and became editor-in-chief in 1981.  During this time J.P. focused on raising the editorial quality of the magazine as well as launching Chief Executive's unique CEO events.

Prior to joining Chief Executive, Donlon wrote and edited business and financial features for Fairchild Publications.  He was feature editor from 1974 to 1976 and senior editor from 1977 to 1978.  Before his work in business journalism, he was a music critic for weeklies in Boston and London. He edited and contributed to "The Best of Chief Executive" (McGraw Hill), which was honored as one of the top 30 business books of 1993.  A frequent commentator on management and business, he addresses CEO leadership and governance issues from time to time on CNN, CNBC, and Fox News Channel among other broadcast business media.

He is a member of the board of directors where he is, chairman of the nominating and governance committee and member of the marketing committee of AIESEC-U.S. (Association International des Etudiants en Science Economique et Commerciales), the largest international student exchange and business training organization in the world devoted to developing management skills.

Chief Executive is a controlled circulation magazine that has been published since 1977. It reaches 42,000 chief executive officers and their peers, reaches a total readership of 170,000.  Chief Executive Group facilitates "Chief Executive of the Year," a prestigious honor bestowed upon an outstanding corporate leader, nominated and selected by a group of his or her peers.  George David, Fred Smith, Hank Greenberg, Bill Gates, John Chambers, Michael Dell and Sandy Weill are just some of the leaders who have been honored during the award's 20-year history.  Chief Executive also organizes roundtable meetings and conferences to foster opportunities for top corporate officers to discuss key subjects and share their experiences within a community of peers. 

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Ability to harness and sort through data for meaningful insights remains a hurdle, many say. “The key is...finding what is actually relevant.”


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August Poll Finds Surging CEO Optimism About A Potential Recovery In 2023—Or Sooner

After four months of continuous decline, our CEO Confidence Index jumped this month, as CEOs report early indications that by this time next year, the country will be in a recovery. “Business is picking up, and our clients are looking beyond 2023.”