Power Breakfast with EcoMotors CEO Don RunkleBy Doron Levin August 2, 2010
Don Runkle's weekend plans were disrupted by the media uproar over the iPhone and indignant counter-claims by Apple. So instead of scooting about Pine Lake on a speedboat at his home in West Bloomfield, Michigan, or riding his Suzuki Hayabusa motorcycle, Runkle and his family visited an Apple store to learn more.
Technology has always held a special allure for Runkle, even when society isn't quite ready for what he sees as the proper solution for the problems of the day. Perversely, the public often will focus on difficulties he sees as "overblown." "The problems with the iPhone aren't nearly what the media has cracked them up to be," he said, adding with a sardonic grin: "As usual.'' Unimpressed with the reports that the latest model's reception might be weak, he bought an iPhone 4G for his wife, son and for himself.
Runkle is a mechanical engineer by profession and a gadget guy by avocation; his house is replete with model trains, kayaks, cars, motorcycles and computers. Savvier than most about things scientific and an avid consumer of petroleum products, he counts himself a skeptic of claims by global-warming alarmists and their fellow travelers in the media. Yet the onetime General Motors top engineer nonetheless sees spectacular opportunity in emerging technologies that can reduce energy consumption, such as that under development by the start-up venture he heads as chief executive officer, EcoMotors International.
"The reason we can have an iPhone or any cell phone in the first place is because of the power density of advanced batteries, the ability to pack a lot of power in a small, light package," he said, brandishing his new iPhone -- which he does a number of times during our breakfast at the Townsend Hotel in Birmingham, Mich., as he checks a fact or a date. "That's what we will do with our engine, we give you a lot more power density."
Drawbacks of the EV1, and of Subsidies
Runkle, before leaving GM in 1993, was one of the executives instrumental in creating the GM EV1, a battery-powered car that eventually flopped in the marketplace, though it won many admirers for its ambitiousness, design, technical wizardry and, most of all, for the bold statement it asserted about the potential of electric-powered vehicles. Looking back on the EV1, he admires the car in spite of having come to the opinion that current government efforts to jump-start commercialization of electric vehicles are misguided and doomed.
Multiple billions in government subsidies paid to automakers, battery makers and to consumers as an incentive to buy electric vehicles "won't work. They don't solve the problem" of finding and harnessing a more-efficient form of energy, he said. "Technology will solve the problem. Eventually economic gravity will prevail and valuable solutions will win. You can pay subsidies for a while, but you can't sustain them."
EcoMotors recently received a boost to its finances, credibility and prestige with the news that Microsoft founder Bill Gates and Silicon Valley venture capitalist Vinod Khosla had invested $23.5 million to acquire up to 20 percent of the company. Khosla, through his venture capital firm, previously owned half of the Troy, Mich.-based company, which was founded in the late 1990s by Peter Hofbauer, a former Volkswagen executive.
The next big thing...
Using an "opposed-piston, opposed-cylinder" design -- which the company calls OPOC -- EcoMotors claims its two-stroke engine, when it reaches the market, will be half the size and weight of a conventional engine, making it up to 50 percent more efficient than a conventional internal-combustion engine and cheaper to manufacture. Conceptually, OPOC sounds too good to be true, an invention that would have existed already if it were feasible. Two-stroke engines, the category OPOC falls within, are harder to control from an emissions perspective than four-stroke engines, which is one reason they are used to power garden tools more than cars as they once did in Saabs, for example.
Runkle, of course, concedes OPOC, despite its promise, eventually must be able to pass rigid emission standards, which it doesn't at the moment and won't for about a year. He is confident, he said, the emissions obstacle will be surmounted: "That's the risk. If it was done already, the engine would be for sale now."
If meeting federal vehicle emissions standards proves lengthy or, ultimately, impossible, OPOC still has a variety of uses in aviation and, most promisingly, for small-scale power generation. Following our breakfast, Runkle pops the trunk on his BMW 650i and withdraws what looks like a bulky briefcase, light enough to carry with one arm. Inside the briefcase is a small OPOC engine harnessed to a converter that can generate 10 kilowatts. ``This little guy can provide enough power for your house,'' he said. ``This version runs on diesel but it could also use natural gas.''
Though the automotive world at times seems atwitter with nothing but new developments from the world of hybrids and electric vehicles, improvements in conventional technology -- including diesel and turbocharging -- will do much to save energy and reduce the amount of carbon dioxide emitted into the atmosphere, according to Runkle and many who agree with him.
...or WWII Redux?
OPOC patented technology resembles that used by the engines powering German Junker aircraft in World War II. OPOC first attracted commercial interest from the U.S. Department of Defense. DoD invested $25 million to $30 million in the technology for an advanced drone helicopter called Hummingbird that was to have been able to hover at high altitudes for long periods, Runkle said.
Besides him and Hofbauer, EcoMotors's leadership includes John Coletti, a former Ford Motor executive in charge of high-performance vehicles. "The three of us were collectively responsible for the development of about 20 engines at the three car companies,'' Runkle said.
Cars at Heart
After growing up in modest circumstances near Harrisburg, Pa., Runkle attended Drexel University and the University of Michigan, finishing with two degrees in mechanical engineering, topped by a degree in management from the Massachusetts Institute of Technology. As a teenager he built and tore down engines, helping a cousin who raced jalopies on dirt tracks. His first car was a Triumph TR-2 right-hand drive he had torn apart and rebuilt before he was allowed to drive.
Runkle worked his way through school on a co-op program with Ford and was about to start a career with Standard Oil of California when a former professor introduced him to Lloyd Reuss, who would rise to be president of GM. Reuss, whose son Mark Reuss is now president of GM North America, hired him and became his mentor. Along the way he supervised engine design at Buick, was chief engineer for Chevrolet and organized GM's participation in LeMans and at the Indianapolis 500.
In 1993, following the boardroom coup that swept Reuss and others from GM management, Runkle moved from GM's vehicle operations to its parts subsidiary, joining the team that was preparing eventually to spin off what would become publicly held Delphi Corp.
Delphi Coulda Been a Contender
"I was excited about an eventual initial public offering, maybe a chance to run the company myself one day and to work internationally with all these car companies, since part of the idea of Delphi was to spread its customer base beyond GM," he said.
Delphi, under the terms of its spin-off agreement with GM, promised to retain for eight years the United Auto Workers union contracts that forced it to pay above-world-market wage rates to manufacture parts. By Runkle's reckoning, Delphi was forced to spend $4 billion a year in excess labor cost, a critical factor leading to bankruptcy in 2005. And, yes, he acknowledged a labor contract -- even an awful one -- has two signatories, labor and management: "We went into it with our eyes open," he said.
Once it was clear Delphi was stumbling toward insolvency, Runkle was nominated as a candidate to succeed J.T. Battenberg as CEO, a contest he lost to Steve Miller, a former Chrysler executive who had gained renown as a turnaround expert. "My plan would have sold off pieces of Delphi and avoided bankruptcy," Runkle said. "I don't think the bankruptcy outcome was a good one for suppliers or employees."
Runkle left the company, thinking -- mistakenly, it turned out -- he wouldn't have to be concerned again about how to support his family. Among the eventual casualties of the bankruptcy was his retirement account, which he valued at about $10 million.
A number of former Delphi executives, including Battenberg, were charged by the Securities and Exchange Commission with accounting irregularities in transactions the government alleges were improper. Runkle said he was questioned as part of the investigation. He wasn't charged. "I wasn't on their long list, never mind the short one." But he was angry and "felt violated" that his company was the target of a government investigation, that he didn't get to be CEO and he lost his retirement account to boot.
Alternatives for Beginning Again
Automotive mogul Roger Penske, former Ford CEO Jacques Nasser and former Chrysler executive Hal Sperlich were among those who called to give Runkle career advice.
"They told me I should look into private equity," he said. Unfortunately, he had no idea what private equity was. But he did know John Doerr, the legendary venture capitalist at Kleiner, Perkins, Caufield & Byers in Menlo Park, Calif., who'd helped to find seed capital for Netscape, Amazon, Google and others. Doerr explained to Runkle that venture capitalists financed budding companies; private equity specialized in fixing or improving companies that already are going concerns.
"Doerr told me that, given my age, private equity would be better for me than venture capital, since the time horizons for VC can be pretty long," Runkle said. He joined Tennenbaum Capital Partners LLC and through the private-equity firm became an adviser to Eagle-Picher and then its chairman. He is a director in several other firms in which Tennenbaum has stakes.
Recharged by the Prospects of New Technology
In May 2009 a headhunter called Runkle for advice on who might be a good CEO to succeed Hofbauer, who wanted to spend more time on the technical work developing OPOC. "I knew Peter; we had a good relationship. I thought to myself, what a fascinating technology," he said. "I flew out to visit Vinod. We hit it off well."
Khosla, who is invested in high-tech batteries, hardly shares his associate's global-warming opinions. "I would call him a 'just-in-case' believer in global warming," Runkle said, smiling. "Every time I send him something to read that's skeptical, he sends it back covered with lots of marks. I've stopped sending."
Since Khosla Ventures owns more than half of EcoMotors, Khosla's opinion counts heavily in any major spending, such as the hiring of additional executives. "I told Vinod we needed a chief financial officer. He said, what for? You don't have any money," Runkle said, laughing and blushing simultaneously, perhaps struck that some of what he'd best unlearn from his days running big corporations remains with him.
The chance to do business with Bill Gates and perhaps to bring a new technology to the world that could have an impact on a par with Amazon.com, if not Google, has recharged Runkle's battery. "Henry Ford changed this country," he said, "by inventing a way to move people and goods at low cost from one point to another. I think the EcoMotors engine could do the same thing for the developing world.
"I think that potential is what really appealed to Bill Gates,'' he added.
Runkle said in future meetings with Gates he'll take care to leave his iPhone in his pocket, lest the historic enmity between Apple and Microsoft cause his choice of phones to be held as a mark against him, however slight.
Photos by Lauren Migaki
About the Author
Doron Levin is a contributing writer to Edmunds' AutoObserver.com, writing commentaries, profiles and interviews, including AutoObserver's Power Breakfast with Power Brokers feature. Levin has been reporting on business and financial subjects from Detroit, specializing in the global auto industry since 1984. He has been a correspondent for the Wall Street Journal, bureau chief of The New York Times, and a columnist for the Detroit Free Press and Bloomberg. He is the author of two books, "Irreconcilable Differences: Ross Perot vs. General Motors" and "Behind the Wheel at Chrysler: The Iacocca Legacy."
Power Breakfast July 19, 2010 - Rugby Grille at the Townsend Hotel, Birmingham, Mich.