Hawaiian Electric Co. and Gov. Linda Lingle inked an agreement earlier this month to move the state away from dependence on fossil fuels for electricity and ground transportation.

But some of the biggest ideas in the deal — including expensive undersea power cables to move wind-generated energy between the islands — lack funding or even cost estimates for how they’ll become reality.

The transition from fossil fuels to renewable energy is a major step for Hawaiian Electric, said Connie Lau, chairwoman of the board of directors for the utility, which powers Oahu, Maui and the Big Island.

“This is a historic moment for all of us, and it really does take us far beyond what our companies have done historically,” Lau said. “(It) will protect our customers in the long run from these severe fluctuations in oil prices.”

Goal: 70 percent renewable by 2030
The goal is to create 70 percent of Hawaii’s energy use from clean energy sources by 2030. Currently, the state gets about 10 percent of its energy from renewable sources.

The accord seeks to make renewable energy easier to use by integrating it into the power grid.

Under the agreement, Hawaiian Electric commits to not build any new coal plants, integrate up to 1,100 megawatts of renewable energy into the power grid and convert existing fossil fuel generators to biofuels using locally grown crops.

“We don’t have years and years anymore to make these changes,” Lingle said. “These are not hopes or dreams or wishes, these are our specific plans that we hope to achieve.”

The undersea cables, which could cost hundreds of millions of dollars, would link potential wind farms on Lanai or Molokai to population centers on Maui and Oahu.

It’s unclear exactly where the money will come from. Private companies could step in, the state may pursue revenue bonds, or Sen. Daniel Inouye, D-Hawaii, could seek federal funds.

‘Most vulnerable’ state
Inouye said it’s essential that Hawaii emphasize its energy independence efforts because of the state’s isolation and the steady long-term rise of oil prices.

“It’s not going to be easy, but we must do it, because of all the 50 states in the union, our state is the most vulnerable,” Inouye said. “We have no fossil fuels, so we have to manufacture our own energy.”

Additional parts of the plan call for:

• Creating incentives to encourage adoption of electric vehicles.
• A requirement that 40 percent of electric power come from renewable sources by 2030. An additional 30 percent of clean energy savings would come from consuming less and using power more efficiently.
• Changing the way Hawaiian Electric is compensated by moving away from a business model that relies on increased electric sales.
• Making it easier for customers to get credits for electricity contributed to the power grid from home solar or wind systems.

The agreement stems from the Hawaii Clean Energy Initiative, a partnership between the state and the federal Department of Energy launched in January with the goal of making Hawaii a model for how the United States can become energy independent.

The state is working separately with Kauai Island Utility Cooperative on similar proposals.

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When Honora Wolfe and her husband moved to the outskirts of Boulder, Colorado, she wanted an environmentally friendly way to commute to her job as a bookshop owner in the city.

Ed Poor rides an eZee Quando II electric bike to work in New York City.

Wolfe, 60, found her solution about a month ago: an electric bicycle. It gets her to work quickly, is easy on her arthritis and is better for the environment than a car.

“I’m not out to win any races,” she said. “I want to get a little fresh air and exercise, and cut my carbon footprint, and spend less money on gas. And where I live, I can ride my bike seven months out of the year.”

The surging cost of gasoline and a desire for a greener commute are turning more people to electric bikes as an unconventional form of transportation. They function like a typical two-wheeler but with a battery-powered assist, and bike dealers, riders and experts say they are flying off the racks.

Official sales figures are hard to pin down, but the Gluskin-Townley Group, which does market research for the National Bicycle Dealers Association, estimates 10,000 electric bikes were sold in the U.S. in 2007, up from 6,000 in 2006.

Bert Cebular, who owns the electric bike and scooter dealership NYCeWheels in New York, said his sales are up about 50 percent so far this year over last. Amazon.com Inc. says sales of electric bikes surged more than 6,000 percent in July from a year earlier, in part because of its expanded offerings.

“The electric bikes are the next big thing,” said Frank Jamerson, a former General Motors Corp. executive turned electric vehicle guru.

They’re even more popular in Europe, where Sophie Nenner, who opened a Paris bike store in 2005, says motorists boxed in by traffic jams are looking for an alternative for short journeys that doesn’t involve navigating overcrowded transport systems.

Industry associations estimate 89,000 electric bikes were sold in the Netherlands last year, while 60,000 power-assisted bikes were sold in Germany.

The principle behind electric bikes is akin to that behind hybrid cars: Combine the conventional technology — in this case, old-fashioned pedaling — with a battery-powered motor.

The net result is a vehicle that rides a bit like a scooter, with some legwork required. Most models have a motorcycle-like throttle that gives a boost while going up hills or accelerating from a stop. On some models, the motor kicks in automatically and adjusts its torque based on how hard the rider pedals.

Although regulations vary by state, federal law classifies electric bikes as bicycles, and no license or registration is required as long as they don’t go faster than 20 mph and their power doesn’t exceed 750 watts.

Price largely determines weight, quality and battery type. A few hundred dollars gets you an IZIP mountain bike from Amazon with a heavy lead-acid battery. For $1,400, you can buy a 250-watt folding bike powered by a more-powerful, longer-lasting nickel-metal hydride battery like those in a camera or a Toyota Prius. At the high end, $2,525 buys an extra-light 350-watt model sporting a lightweight lithium-ion battery similar to a laptop’s. Most models can go at least 20 miles before plugging in to recharge.

Joe Conforti, a commercial film director from New York, uses a four-year-old model designed by former auto titan Lee Iacocca in the 1990s for running errands or getting to social occasions.

“It’s really nice,” said Conforti, who is eagerly looking to upgrade to a newer, more powerful ride. “If you’ve got a date, you go to meet friends — you go out on a (conventional) bike, you’re gonna sweat up. You go out in an electric bike, it’s great it’s terrific, you’re not gonna sweat up and you ride home fine.”

Bike dealers said the growing demand goes beyond just the uptick in gas prices, but also because of word of mouth. Cebular said business at his store and on his Web site has been booming.

“Fifty percent of that increase is probably because of gas prices, and the rest is that there’s just more bikes out there,” said Cebular, who has run his shop on Manhattan’s Upper East Side for seven years.

Improved technology also has made electric bikes more popular, Cebular said.

“When I started, there was only one bike that had a nickel-metal hydride battery — everything else was lead-acid and was 80 or 90 pounds,” he said. “That’s a huge improvement.”

Jay Townley, a partner at Gluskin-Townley, said the latest electric bikes are sleeker, better looking and hide their often-clunky batteries better than ever. That goes a long way to attract baby boomers and other mainstream customers.

“The new designs that we’ve seen in the marketplace are going to inure to the benefit of the electric bike companies,” he said.

Ultra Motor, an England-based electric bike and scooter company, is betting big that it can capitalize on what it seems as a growing market for attractive-looking two-wheelers designed specifically for U.S. commuters. The company on Tuesday unveiled its “A2B” model, a slick, low-riding electric bike.

Ultra Motor took a conventional bicycle and redesigned it with fatter wheels, a lower center of gravity and a thick shaft designed to hide the lithium-ion battery inside, U.S. Chief Executive Chris Deyo said. The result is a cross between a motorcycle and a mountain bike.

The company already has signed up 75 dealers nationwide to sell the $2,500 bike starting next month.

“A year ago, when you mentioned the word electric bike, people looked at you and they really weren’t sure what it was,” Deyo said. “Today, what we’re finding is we’re actually having dealers call us seeking an electric bike to meet the demand.”

Jamerson, the former GM executive who has become a staunch advocate for electric transportation, believes this is only the beginning for electric bikes. He retired from GM in 1993 after helping develop the company’s EV1 electric car, and he’s been an avid follower of alternative transportation ever since.

The EV1 project, though widely seen as a spectacular failure, helped convince Jamerson of the value of electric transportation. Given soaring fuel prices and thinning patience with foreign dependence on oil, Americans are ready to embrace electric vehicles, he said.

“Did you know there are 70 million electric bikes on the road today in China, and they are selling at the rate of 2.6 million electric bikes a year?” he said. “The public at large needs to understand that it is the right thing to do to move to electric transportation, and electric bikes and electric scooters will allow you to do that, to get that familiarity.”

As for Wolfe, she could not be happier with her bike, a 48-pound mountain bike with a lithium-ion-powered assist made by California-based IZIP. A self-described “tree-hugger for decades,” she drives her Honda Insight hybrid car or rides the bus when she’s not using her bike to get to work.

It’s part of her own personal campaign to reduce her carbon footprint. She also powers her home with help from a set of rooftop solar panels, and a geothermal furnace heats and cools it.

The furnace, she adds, even heats her water. Just one more way to reduce emissions, she said.

“Even my 92-year-old mother has a Prius,” she said. “So I come by my green credentials genetically.”

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and the Nimitz Highway contraflow lane from two to three — a move expected to decrease the number of cars in the lanes by about 300 daily.

The change will go into effect July 8, and comes as many Zipper Lane users are actually seeing longer morning drive times, by as much as 20 minutes, than those in the general lanes.

Brennon Morioka, state Department of Transportation director, conceded that the minimum-occupancy increase will likely inconvenience people at first, especially those who have to scramble for another passenger or face steering clear of the Zipper Lane.

But eventually, he said, "we believe we’ll be able to move more people in fewer cars."

If the Zipper Lane change works, the new restriction could spread to other contraflow and high-occupancy vehicle lanes on Kalaniana’ole Highway, H-2 Freeway and Moanalua Freeway, Morioka added.

When it opened in 1998, the Zipper Lane required at least three people per car. The requirement was dropped to two people in summer 2005, after residents and lawmakers complained the Zipper Lane was being underused. The lane now carries about 3,800 cars every weekday morning (from 5:30 to 8:30 a.m.), up from about 2,300 cars in 1998.

Once the new requirement takes effect, the state expects to see about 3,500 cars in the lane.

national trend

Panos Prevedouros, a University of Hawai’i professor who specializes in traffic engineering, said cities across the country are moving from traditionally two-person requirements for high-occupancy vehicle lanes to restricting the lanes to cars with three people or more, largely to improve the appeal of HOV lanes.

He said the lanes have become flooded under the two-person system.

Requiring three people per car often means the lanes provide a sure bet of a faster commute.

But some drivers aren’t thrilled with the new rules. In Los Angeles, San Francisco and other large urban centers that are considering or have already moved to three-person restrictions, drivers are protesting the changes, arguing the benefits don’t outweigh the costs to those shoved into the general driving lanes.

"Most of California is at two people per car. That is the standard," said Prevedouros.

"They are having resistance" in efforts to change it, he added.

mixed reactions here

West O’ahu residents who use the Zipper Lane had mixed reactions yesterday about the switch.

Richard Oshiro, chairman of the Waipahu Neighborhood Board, said the HOV change will only further congest the other lanes.

"I think it works better the way it is," said Oshiro, who said he occasionally uses the Zipper Lane. "I think we should maximize all the lanes, then everybody saves more time. With the change, you’re going to have more people in the other lanes and less, obviously, in the Zipper Lane."

Kurt Fevella, vice chairman of the ‘Ewa Neighborhood Board, said he would support the change if the other HOV lane on H-1 Freeway west-bound, located next to the Zipper Lane, were converted into a general-use lane. It won’t be, Morioka said, but cars with only two people will still be able to use it.

The Zipper Lane change is welcome news for James Gowler, a driver in the Vanpool Hawai’i program.

The 60-year-old Mililani resident said the Zipper Lane has become increasingly congested.

"When schools are in, driving in the Zipper Lane doesn’t really make that much difference," he said.

Gowler has six people in his vanpool, all of whom work at Tripler Army Medical Center.

Morioka said the change was timed during the summer so commuters would get used to the new occupancy rule before thousands of students return to the roads. And he said he believes drivers will be more receptive to the changes now, with soaring gas prices spurring more people to carpool or take the bus.

The state also noted that taking the Zipper Lane isn’t always paying off.

From 5:30 to 6:30 a.m., it takes about 50 minutes on average in the Zipper Lane from Kapolei to Kukahi Street in ‘Iwilei, compared with 34 minutes in the general-purpose lanes. Starting out at 6:15 a.m. from Kapolei, it takes 80 minutes in the Zipper Lane to get to Kukahi Street, compared with 75 minutes in open lanes, according to state DOT statistics.

The Zipper Lane and Nimitz Highway contraflow lane stretch 15 miles from Waikele to Downtown.

Morioka said the state has been working with police to make sure the new rules are enforced.

Technically, officers will be able to issue fines for those with fewer than three people starting the morning of July 8. But Morioka said officers will be able to use their judgment and could issue warnings to those unaware of the change. As it is, police periodically patrol the Zipper Lane to make sure cars have at least two people.

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Nice run. But unlike many automakers dabbling in greener product, Honda is already moving on to phase two, with cars such as its FCX Clarity hydrogen fuel cell sedan, which is emission-free.

“Our commitment is more for the long term,” says Barbara Ponce, manager of corporate advertising at Honda. Her job is to communicate Honda’s corporate philosophy for its cars, motorcycles and power equipment, and that doesn’t include bragging about every green trophy added to Honda’s shelf.

“Environmental advertising is not a box to check. It’s organic to the brand,” Ponce says, adding that Honda’s green messaging reflects its corporate philosophy and DNA.

Part of this strategic approach may come from the fact that Honda is no eco-newbie. For decades, the company has devoted r&d to advanced technologies, first resulting in early adopter vehicles such as the Insight hybrid and leading up to Honda’s latest green-inspired model, the FCX Clarity, available this summer via lease in California.

The Civic GX — fueled by compressed natural gas and billed as “the cleanest mass-produced sedan on the planet” — was ranked the greenest vehicle for the fifth straight year in 2008 by the American Council for an Energy-Efficient Economy. The GX joined the gasoline Civic, Fit and Civic Hybrid among the council’s 12 most environmentally conscious vehicles available.

Storyteller

In its advertising, Honda looks for the most compelling environmental stories to tell, Ponce says. Last fall, Honda launched a corporate site, www.dreams.honda.com, and loaded it with information about its technology, the FCX Clarity, the Asimo robot, solar efforts and an upcoming fuel-efficient, eight-seat jet.

“Consumers appreciate it when a company shares information with them and walks the walk,” Ponce says.

Honda also offers the gasoline-conserving Fit and Civic small cars, which help the brand tout its long-term fuel economy commitment in ads from RPA, of Santa Monica, Calif. “Reverse your thinking” is the tag for the current Civic Hybrid, which first arrived in 2002.

Honda promoted Keep America Beautiful’s Great American Cleanup through May. The automaker paired its car dealers with thousands of volunteers to beautify streets, roads and highways and awarded grants to the three organizations that collected the most litter and recruited the most helpers.

Last fall, Honda landed on top in CNW Marketing Research’s consumer survey on good citizenship, as a corporation with environmentally friendly products and clean plants.

Breathing room

The carmaker also says every one of its 2007 Honda and Acura vehicles designed and assembled in North America has achieved 90 percent or greater design recyclability. The com-pany has committed to introducing more efficient gasoline, gasoline-electric hybrid and clean-diesel-powertrain technologies in the next several years.

Honda has the breathing room to concentrate on green issues, even in the industry’s worst sales year in a decade.

Honda Division’s new-vehicle sales in the United States rose 7.1 percent through May vs. a year ago to 590,361 units. But American Honda’s upscale Acura brand saw sales fall 12.5 percent to 65,458 units.

Honda loyalists and even “die-hard Detroit buyers” have a relatively high perception of the Honda brand, says CNW President Art Spinella. And being recognized for environmental innovation builds stability in Honda’s base of people who intend to buy its vehicles.

When it comes to communications, Spinella says, Honda “appears as a humble manufacturer of competent products, and it does what it does well without patting itself on the back.”

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Chevy Cobalt: 24 mpg city, 33 highway in EPA mileage ratings.

Meetings often kick off with a roundtable format, and attendees are encouraged to pose new ideas and stray from the agenda. That’s when Vice Chairman Robert A. Lutz spoke up. Lutz, whose gravelly pronouncements routinely enliven auto shows and generate headlines, has a certain genius for challenging conventional wisdom. Maybe, he told GM’s brain trust, it was time to build another electric car — one that would use a giant version of the lithium ion batteries that power cell phones and laptops.

It was a provocative suggestion — and Lutz knew it. Two years earlier, General Motors had killed its experimental EV1 electric car and set off a public relations furor. The environmental lobby was deaf to GM’s assertions that the EV1, leased to a limited number of people but not sold, would never have earned its maker any money. And the greens accused GM of pulling the plug to show policymakers that such techno wonders were bad business.

By the time Lutz revisited the issue in 2005, Toyota Motor’s quirky Prius hybrid had turned the Japanese automaker into a poster boy for the environmental movement and cast a greenish halo over the entire company. By contrast, GM, at least in the popular imagination, had tunnel vision; it was still making gasoline hogs like the Hummer and fighting congressional efforts to boost fuel economy.

GM executives were furious Toyota was winning green cred despite making its own fuel suckers. But no one at the meeting wanted to hear about electric cars. “We lost $1 billion on the last one. Do you want to lose $1 billion on the next one?’” Lutz recalls one executive saying. “It died right there.”

Myopia. Fear. Inertia. All had a seat at the table in Detroit that day. And yet 20 months after the meeting, in January 2007, Wagoner stood on a stage at the Detroit auto show and surprised the world with a vow to start developing a newfangled electric car called the Chevrolet Volt. It would plug into a regular outlet, leapfrog the competition and could be ready in three years.

Why did Wagoner suddenly get religion? After years of avoiding the future, he finally understood oil prices were not going to return to earth, global warming was a de facto political reality and Washington was serious about imposing tougher fuel economy rules on his industry.

GM would have to live green or die.

Now Wagoner is racing the clock. Not only has he promised to get the Volt ready by 2010, but he also must transform GM’s entire fleet to meet stringent new fuel economy rules that take effect in 2017. As many as three-quarters of the company’s 50 models may need to be fitted with hybrid systems that combine an electric motor with a small gasoline engine. Many other existing models will be shrunk or fitted with some other kind of fuel-saving technology.

General Motors’ green strategy is akin to a moon shot. It will cost billions to get the Volt ready by 2010 and fill out the fleet with hybrids, require GM’s 22,000 engineers to stretch like never before and involve the top-to-bottom transformation of a culture wedded to big cars and horsepower. Other automakers, of course, must also hew to the new realities. Most, including GM’s two crosstown rivals, Ford and Chrysler, are rolling out hybrids, too. But the Volt is controversial in automotive circles because the technology is so new and unproven. And GM, bleeding cash and losing money in North America, is at a serious disadvantage compared with well- financed Toyota.

Inside the company, meanwhile, there is debate about how to make cars planet — friendly and desirable. And there is fear that Wagoner has handicapped GM by waiting too long. Three years ago, Toyota was the main threat.

Now GM faces competition from Nissan, which announced its own electric car on May 13, and a bunch of startups, some backed by Silicon Valley money, angling to sell their own futuristic vehicles.

Does GM’s CEO regret not moving faster? You bet he does. Wagoner wishes he hadn’t killed the EV1. And he acknowledges underestimating how the emergence of consumer societies in China and India would help put a $100 floor under oil prices.

Today all of that is beside the point. The looming question is whether Wagoner can keep his promises. “It’s the biggest challenge we’ve seen since the start of the industry,” he says. “It affects everything we think about.”

“Start Making Some Calls”

Rick Wagoner is not a visionary. Like many Detroit execs he’s a finance guy and inherently cautious. But in 2005 rising fuel prices began hammering sales of SUVs, long GM’s main source of profits. That year, GM lost $11 billion, and board members began signaling that it was O.K. to make long-shot bets to get GM out of the ditch. Lead directors George Fisher and Kent Kresa told Wagoner that, having worked at Motorola  and Northrup Grumman, respectively, they understood that new technology can take time to pay off.

That summer, Wagoner began asking his team for options. “We talk about being a technology leader,” one executive recalls him saying at a strategy meeting. “But these days technology means fuel economy.” Just about every fuel saver was put on the table, from ethanol, clean diesels, and hybrids to electric cars and fuel cells that run on hydrogen and emit only water vapor. With no consensus, recalls GM-North American President Troy A. Clarke, Wagoner stood up and said: “We may not get the calls right. But we have to start making some calls.”

In January, 2006, Lutz began pushing the electric car harder. The 75-year-old industry veteran is an unlikely champion for such vehicles. He owns a collection of classic cars, and his fetish for horsepower is legendary in Detroit’s macho Car Guy culture. He has denied the existence of global warming-so often, in fact, that Wagoner distanced himself from Lutz’s comments. But Lutz is a pragmatist who believes the electrification of the car is the only way to preserve American car culture. “We were agonizing over what to do to counter the tidal wave of positive PR for Toyota,” Lutz says. That month, GM came up with the Volt.

No one knew if something resembling supersize cell-phone batteries would work in a car. And GM executives confess the Volt was originally conceived as an image play (its original name: the iCar). But then Hurricane Katrina sent oil prices soaring. For Wagoner, it was a sign of how volatile the oil markets were becoming and a harbinger. Even the much maligned energy policy of the Bush Administration was changing: In his State of the Union address, the President urged Congress to impose tougher fuel economy rules. By January of this year, the Volt had become the centerpiece of GM’s green strategy. Douglas Drauch, who runs GM’s advanced battery lab, was surprised to learn that management had moved up the time line. His team had only three years to get the batteries ready. “For five years, I came in and played with batteries,” Drauch says. “[Now] we’re the ones with bull’s-eyes painted on the backs of our heads.”

Wagoner finds himself on unfamiliar terrain: looking beyond return on investment and placing bets on expensive, unproven technologies. But there is no avoiding the future barreling toward him. On Feb. 4, Wagoner and his team presented to the board a plan that would allow GM to meet the tough new fuel standards. Thomas G. Stephens, chief of power train development, warned directors to expect big costs over the next decade as the company invests in the Volt and all those new hybrids-as much as $6,000 per vehicle to get GM’s biggest gas hogs to comply with the new federal rules.

The first order of business was reorganizing GM to ensure that good ideas hatched in the lab make it to the dealer quickly.

It may be hard to believe, but GM didn’t have one group dedicated to hybrids and electric cars. (Toyota set one up in the mid 1990s.) The team working on hybrid SUVs that hit the market in January had to get approval from people in different departments.

Now they talk to Robert A. Kruse, GM’s recently named chief of hybrids and electric cars. An electrical engineer who has worked on such high-performance cars as the Pontiac Solstice, Kruse, 48, has the friendly but intense demeanor of a high school coach. The framed Hot Rod article touting a souped-up version of the Solstice in his office shows where Kruse’s passions lie. But he says GM gets way too little credit for its green engineering. The company began developing hybrid buses in 2001, and he notes that they save more fuel carting people around cities like Seattle than a slew of Priuses.

Nerve-Shattering Schedule

Kruse has real power and a decent budget. To free up resources, GM has canceled several vehicles, including a new minivan and sedan. And even though the carmaker is burning through $1 billion in cash a month, the R&D budget is the biggest in a decade: $8.1 billion in 2007, up from $6.6 billion the previous year. (On May 13, however, GM said if the economy doesn’t improve, it could be forced to borrow or cut spending.)

The next step is vaulting the technological hurdles. One of Kruse’s first moves was throwing a few million dollars at the battery lab.

Located at GM’s sprawling tech center in the working-class Detroit suburb of Warren, the lab is ground zero for GM’s efforts to turn itself into a green carmaker. Douglas Drauch and his team must figure out how to fit batteries into a range of hybrid vehicles and create ones that will propel the Volt 40 miles before a small gasoline engine fires up and recharges the battery, extending the range to 600 miles.

Remember the laptops that caught fire because their batteries overheated? Imagine if something like that happened while driving down the highway. And because GM is racing to catch up, Drauch must cram 10 years’ worth of testing into two.

Fear of setbacks is a constant.

This past Valentine’s Day, Drauch got a call at 1:58 a.m. His cherished lithium ion battery was running a temperature. Heat had spiked in the stainless steel chamber where computers run tests 24-7 on the 6-ft. tall, 400-lb. test battery. The temperature spike prompted an automated call to Drauch’s house. He pulled on his clothes and raced to work. False alarm. Someone had left on a 150-watt light bulb, heating the vault enough to trip the system.

Despite the tight schedule, Kruse says the batteries will be ready by 2010. “We’re making history,” he says. “Fifty years from now, people will remember [the] Volt-like they remember a ’53 Corvette.”

There are plenty of doubters, however. Toyota engineers wonder privately whether the battery industry, which currently isn’t producing many lithium ion batteries for cars, will be able to make enough by 2010 for GM to sell the Volt in any real volume. One executive at Tesla, a California upstart working on an electric sports car, also questions whether the technology will be able to pass a 100,000-mile warranty test.

Even as the engineers toil to get the science right, Wagoner and Lutz are pushing to change GM’s culture. That’s a daunting prospect.

Had Dr. Seuss depicted the company, he might have drawn a skyscraper in which the CEO hands out an edict from the top floor and a pastel-colored arm reaches out each window, passing the note 40 floors below to the rank and file.

Wagoner is not given to cheerleading or, as one executive puts it, “Vince Lombardi-like speeches.” But he has been making the rounds to show he means business. In mid-April, the CEO dropped by GM’s test track, where the Volt team is putting the prototype through its paces. Wagoner didn’t issue a fiery proclamation; he just asked if the engineers had what they needed. One likened the encounter to “the Pope visiting.”

Lutz, meanwhile, is trying to make himself heard over the din of company traditionalists

He says his marketing staff is still showing him research that consumers want the gas-guzzling horsepower of a V-8 engine, or at least a powerful V-6. In late February, Lutz and his marketing people met to discuss a new Cadillac sedan due out in 2011. The marketers, Lutz says, insisted the car needed to be bigger and more powerful. “They said: That’s what those buyers want.’ I said: It is now, but it won’t be in 2011.’” Lutz ordered the team to make the car smaller and demanded 37 miles per gallon.

“You people don’t understand,” Lutz said. “Everything has changed.”

Not all of Lutz’s staff agree with his thinking. He wants to shrink cars like the midsize Cadillac, but some engineers and designers say doing so will make the cars less appealing to luxury buyers and families. A better strategy, says one senior product developer, is to keep those cars roomy while developing better subcompacts to compete with hot sellers like the Honda Fit and Nissan Versa.

“Bob thinks the world is being turned upside-down,” says a product developer. “He wants to shrink everything. That Cadillac is so small he can’t even get out of the back seat.” (Lutz is 6 foot 3, but you get the idea.)

Getting the product mix right isn’t the only worry weighing on Wagoner and Lutz. GM also has a long way to go before it can make its new technology cheaply enough.

Toyota has cut the cost of its hybrid system to nearly $4,000 a car, says consulting firm 2953 Analytics. Lutz figures GM will be lucky to get the cost down to $10,000 per vehicle by 2010. Translation: GM will have to charge consumers a lot more for hybrids.

“GM, like everyone else, is serious about this because they have to be,” says a Honda executive. “But how many of their hybrids and how many Volts will they sell? Their technology is very expensive.”

Then there is the marketing challenge. Even Ford has been selling a hybrid SUV for several years. GM, best known for the Hummer, will have a hard time persuading consumers its cars are green.

On a more prosaic level, there is the execution issue. GM insiders fear they could repeat the mistakes of the 1980s, when new fuel-economy rules and a spike in oil prices forced Detroit to switch to cars with smaller engines. That was a wrenching departure for a company used to big V-8s. And the fumbling results helped precipitate GM’s descent in the quality rankings, which only recently have begun to recover.

“When those ’80s cars stalled out, no one blamed the legislators,” says a GM engineer. “We won’t let that happen. But there’s a fear that as we’re racing with new technology, it won’t work right.” It’s instructive that when GM launched two hybrid SUVs in January, it sent dealers just one of each. GM wanted to make sure there were no quality issues before ramping up production.

Can Rick Wagoner, after ceding the technology lead to Toyota, redeem his company? Multibillion-dollar losses have a way of focusing the mind. Insiders also say Wagoner may retire before he turns 60 five years hence. In other words, the man has a legacy to consider.

“We believe we can be, and must be, a leader in this transformation of our industry,” says Wagoner. “It’s critical for our future.”

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