Even taken in context that statement is still very scary. He's not saying you should use judgment on what search engine to use, he's saying you should use judgment on the action alone. The fact that he watered the statement down right after and then pulled the old "we're just following the law" doesn't make it any better.
That's not what he's saying; he's saying the product of his company is not suitable for those with very high privacy requirements. Similarity, many commercial operating systems are not suitable for those with very high security requirements. But hell, he's a witch, so let's burn him! But seriously, this sort of a mob mentality is just as embarrassing as the mob mentality seen on the far right in the US. Whether you're a global warming denier or a privacy alarmist, you're still thinking irrationally.
Don't mistake my position; my only contention here is that Schimdt's quote is taken out of context. It is poor evidence of Google's stance on privacy. Let's use strong evidence like the mishandling of Buzz to make our case against Google.