New GM CEO OK With Losing Money On Volt, Predicts Higher Oil Prices

The poor Chevy Volt. There's a lot of pressure on it.

If the Chevy Volt doesn't work out, it will be derided and electric cars will be called unsustainable (you know, in the business sense of the word) and GM will be scolded. So it kind of has to work, and new GM CEO Fritz Henderson knows it -- in this interview with Automotive News, he says GM has to lose money with "Gen-1 and 2" of the Volt at least:

On some products, the costs, particularly in advanced technologies, are high. The Volt is the case study. We have been very clear with the task force, particularly in Gen-1 technology, like the Volt, the cost is high. And that means, it doesn't necessarily pay the rent. It actually consumes rent when it's launched.

But you don't get to skip Gen-1, you've got to do Gen-1 and 2 to get to Gen-3. And what we want to do is make sure we launch the car well, that we get the maximum learning from it, that it's successful in the market, so that when we get to Gen-2, we've got the most cost out that we can. And when we get to Gen-3, get the most cost-out we can, and that's how I look at it.

That's encouraging, considering the fact that it doesn't seem like GM can make their first mass-produced electric car both affordable and profitable for a long time. In the Automotive News piece, the interviewer sarcastically refers to flying hydrogen cars as something that Congress might require GM produce, but -- no joke -- there has been some talk that flying cars could beat the Volt to market, the way things are going.

But that's really the challenge for GM -- affordable AND profitable. Some automakers are already confident they can achieve that, but they're used to charging a lot more for cars. Tesla Motors just previewed its new Model S, and Jaguar will apparently make a Volt-like car available in 2011:

Autocar says a $407.8 million loan from the European Investment Bank will help the venerable British automaker develop the car, which will be based on the next-generation XJ everyone's still waiting to get a glimpse of.

Whatever the car looks like on the outside, under the skin it will bear some resemblance to the Chevrolet Volt.

And it sounds like not even the White House believes in the Volt right now, according to McClatchy Newspapers:

A White House official who worked on the assessment said Wednesday, however, that the statements had been simply another way of saying what GM has said all along - it will be a challenge to bring the new technology up to scale and make it cost-competitive.

GM will have to make its own decisions about the pace of its advanced technology, said the official, who requested anonymity because he wasn't authorized to speak publicly.

"You should not expect the task force will say GM should discontinue the Volt," he said.

In the Automotive News interview, Henderson revealed the one piece of information that comforts him when thinking about this problem:

We actually think oil prices are going to go up. That's what our entire plan is based on. So we're going to make the bets. And I don't think that our product portfolio is going to be out of touch with where the consumer's going to go or where we need to be in terms of regulation.

Comments

[wolverine442]

Sorry guys, The volt is dead. Its phase out in R&D started in early Feb. They are searching for buyers of the patented tech they have on file. It was determined that GM does not have the capital to fund a completely new product launch 3 to 4 years down the road with the burden of widespread infrastructure weakness in the industry and in localities where this product would have the most appeal.

[RTIII]

I'm a bit miffed that my post from yesterday - one of the first on this thread - is now missing!

My post was merely informing about the EV-1, which many are now posting about...

Hmmm...

Well, the bottom line is that GM's executives have cognative issues as they already developed the car that was needed, and every owner LOVED them. Some of the posts here that talk about them are very uninformed even though they sound informed, like those of KTM. ...I actually DROVE an EV-1. It was a WONDERFUL car, and everyone who drove it wanted to buy it. Yet, GM destroyed them all - every last one - and WHY DO THAT?!

People really should see the movie "Who Ki//ed the Electric Car?"
.

[EinChicago]

"...I actually DROVE an EV-1. It was a WONDERFUL car, and everyone who drove it wanted to buy it."

Really? You were honestly willing to pay $150,000 for an EV-1 (which is the amount it cost GM to build each one).

Really.


Pull the other one.

[Greenguy25]

Maverik; The GM EV1 was developed and abandonded long before Saturn was even a car company, but your point is taken. The documentary "Who killed the Electric Car" should be required viewing for all GM management, especially those that talk about bringing down the cost curve.

Let them spend billions repeating history.

http://www.mygreenscene.com

[KillTheMessenger]

It's not quite as bad. The Volt is basically a series hybrid with a large battery. If one were to remove the plugin-capability and modify the design a little bit, it could be a more than OK hybrid design (if they can get the battery reliability under control, that, however, might require the large battery, after all, and then all technical bets are off, again). So unlike with the EV1 there might be a downgrade path that might attract more buyers at a lower price level.

The real problem is that GM is finished today, years before the Volt has the slightest chance of actually hitting the market. Bankruptcy is the only way out. It remains to be seen what will be left of the company when it emerges. One can assume that they will try to keep the more forward looking technologies in the remaining company and let the past die for good.

[Viper]

Saturn was in existance long before the EV1 was canned in 2004.


What the Movies did not say:

1) Each EV1 cost GM 80K. They leased the 2 seater at a price of 40K, losing 80K per car.
2) The batteries had a life of less than 3 years.
3) GM was joined in its suit to kill the Electric car by Toyota and Nissan and Honda and the U.S. Government.

They were sold in Caliornia, but in a cold climate... they did not go very far.


Regards

[Mainbob]

Forget GM... Forget about the hybrid auto -- Shai Agassi says it's electric cars or bust if we want to impact emissions. His company, Better Place, has a radical plan to take entire countries oil-free by 2020.... He has solved the battery problem that others in this thread have mentioned. They have a "Battery Swap" system... only takes 2 minutes to change. Cars are cheaper....

http://www.ted.com/index.php/talks/shai_agassi_on_electric_cars.html

Very ingeneous and persuasive!

[jeg]

Who Killed the Electric Car is half documentary, half fiction, and largely lies by omission.

We could have had the Volt, or something like it, as the EV-2. Unfortunately, the grants that the EV-1 was developed under were for Zero Emission Vehicles... not stupendously low emission vehicles. Further, since Saturn was the "dealer" for EV-1, your assertion doesn't really make much sense.

Lithium-ion batteries were pretty new technology when the EV-1 was being developed-- today they're much, much improved.

If the EV-1 had been offered as what it really was, an $80,000 two seater with limited storage and an 80 mile range, no one would have wanted one.

[liminal67]

All I can say is "we'll see" I'm hopeful "We won't be fooled again!"

http://pitchbendpost.blogspot.com/

[000Jade000]

In other green news, Germany is banning GM corn!!!

http://www.dw-world.de/dw/article/0,,4176790,00.html

WTG, Germany!

[ralf372]

GM had a great EV in the EV1 back in the 90s, too bad they just didn't build on that first generation car and be leaps ahead by now.

[StanlyManly]

Well, as luck would have it, they are building one now. And guess what? It only costs you billions of tax dollars, and then a mere $50,000 financed over 7 years at 9%. Oh don't forget to change those batteries every couple years for a few thousand and do regular maintence at the very few GM certified dealerships. Oh, and on top of that, you need to pay higher taxes to put in wind power, so then you can save on the electricity bill that will also increase by charging this car up.

Or something.

[jeg]

I disagree that the EV1 was great. It was a nice tech demo, but largely impractical for a single-car family. Sure, it's fine for running around town, but if you wanted to actually *go* anywhere, you'd need a rental.

The Volt on the other hand, has a 10-year battery pack, should be significantly simpler to maintain (no transmission, and the engine runs at a specific RPM, rather than having to adjust for a variety of RPM ranges) than your current car, and will still consume less fossil fuels in the long run than your current car.

Oh, and your estimated price is a bit off too, although no one knows what the final price will be. Best guess is $40k with a $7.5k break on your taxes, so if you actually *pay* $7.5k in taxes, the car costs around $32.5k.

[philosopherkingtomas]

China already has $22000 electric car with 150 miles per charge google BYD of China

[Viper]

It has batteries that need to be replaced at 3 years.. thats 10K every 3 years.

And GM can build you a 22K car also if you are willing to work for a $1.50 per day like in China ( 60 hour work week too). Get a couple a thousand of you and your friends and they can build a plant right here.

By the way the largest selling cars in China, are made by GM there.

Regards.

[jeg]

That range (which is actually about 100km, or 60 miles) is only achievable if you average 50km/h, or about 30 mph.

And they've sold 80 units as of this week.

[liminal67]

It's a step forward and let's be happy about that!

http://pitchbendpost.blogspot.com/

[StanlyManly]

Its a step forward if you dont mind paying far more than you are currently paying. Some folks might actually call that a step backwards.

[StanlyManly]

What happened when oil prices recently went up? People drove less, consumed less, spent less money.

Think raising the price of oil will encourage consumers to spend $50,000 on an electric car? Thinking like that loses you billions and runs your company into the ground... oh wait...

[rf-hawaii]

The government can effectively raise the price of gas.

[rkimball]

gmc better find a way to build electrics & hybrids more affordable or the chinese will do it for them.

[KillTheMessenger]

They never wanted to build an affordable hybrid or EV. The idea was to pretend that the Volt was real, get the break from the tax payer, then sell a couple thousand sub-par cars at an uncompetitive price. At the end of the day they could have pleaded that the technology was not ready for mass adoption and that continuing the Volt would be a burden on the company, after which they could stop making them.

:-)

[rkimball]

odd isn't it, the japanese are using american patents & licences to build hybrids & electrics. they are doing it sucessfully.

[KillTheMessenger]

GM has been OK with losing money on any car for a decade or more. That's how they kept clearing the dealer's lots of cars that could not be absorbed by the market at a price above cost. The net result? Bankruptcy. The Volt will cost them far less than their average other model... mostly because it will never be sold.

[maverk]

GM has already produced an electric car under the Saturn brand, and killed it. Has anyone actually seen the documentary "Who Killed the Electric Car?" They killed it, even though people were lining up to buy it. Now they're all freaked out that they're going to lose money on this thing, after they crushed a few thousand perfectly good electric cars about eight or nine years ago? GM is absolutely stupid. If it weren't for the workers who would lose their jobs, I'd say it's GM's karma to go down and go down in the worst way.

[twocansam]

Maybe GM (and the other two) should use some of that Tax Payer money to hire away some of the foreign Engineers who seem to "get it" and fire all those lame can't-think-outside-the-box American Engineers who don't

[rf-hawaii]

Electric is surprisingly easy. Suspect talent isn't the problem.

[Dystopic]

not the engineers, it's the product managers who can't tell Da Vinci from Falco.

We lack not engineering talent but research into products talent.