So GM Gets Bailed Out and Brings Us the Chevy Volt...and Then What?

As Congress closes in on a "short term," bailout of the Big Three Detroit Automakers, it's time to ask what their product plans for the future are going to be, if they survive. Obviously, Congress has kind of kicked the long-term question of the U.S. auto industry's future to the next administration. The short term bailout delivers loans totaling $15 billion, out of a $25 billion fund that was established a while back, to provide the Big Three with money to revamp factories to produce more fuel-efficient vehicles. The $34 billion that the carmakers asked for last week--whether it comes from the existing fund, a new fund, or the financial bailout package--will return for debate in 2009.

Make no mistake, right now the Big Three are in survival mode. Still, each has rolled out notable, futuristic vehicles over the past year. Ford came to the Los Angeles Auto Show with a bunch of new hybrids. Chrysler, looking more pallid than its brethren, has recently showcased its own electric-vehicle concepts. And of course General Motors has debuted the production version of the Chevy Volt, its allegedly game-changing stab at reviving its storied EV1 and freeing the nation from oil dependence.

GM's presence at the L.A. Auto Show (a totally Green hootenanny overhung with the pall of bankruptcy in Detroit) was subdued, but the company did bring the Volt. Over the past few years, we've heard a lot about this car. How is it different from a hybrid of the Prius variety? Well, a Prius switches back and forth between its gas engine and its electric motor, as needed. The Volt, by contrast, is a full-on plug-in EV: it runs on its battery, a lithium-ion unit, all the time. The gas engine exists only to recharge the battery. You can also plug a Volt into a standard wall outlet and rejuice it overnight. Can't do that with a Prius, although there's a thriving subculture in converting Priuses over to plug-ins, and Toyota is working on getting a plug-in into production.

Depending on how things go with GM, there are some economic factors to take into account when considering the future of plug-in EVs like the Volt, which is supposed to hit the market in 2010. First off, the price of gas is heading south in a hurry. It's now significantly below $2 a gallon and falling fast in many areas. Because hybrids like the Prius involve a cost-premium for the technology that adds thousands to the sticker price, their sales have begun to dip. Second, the Volt will probably be a relatively expensive car--$40,000 or more. You can spend $25,000 less than that on a Honda Civic and get decent gas mileage with low emissions.

However, gas prices will inevitably rise again, driven strictly by market forces. If the government gets involved and hikes up gas taxes, the price may go even higher than the $5 a gallon we saw over the summer. So strategically, it makes sense for the carmakers to continue to develop and refine hybrid and plug-in EV technology.

But we are beginning to see some conservatism take hold. It was briefly rumored that Toyota would establish a separate Prius-branded lineup of hybrid vehicles, making Prius a stand-alone brand, like Scion or Lexus. According to my contacts at Toyota, this idea has been put on hold. Toyota of course uses its hybrid technology for other brands, but it is most closely identified with the Prius, and because the Prius was actually engineered as a hybrid vehicle, it serves up the best mileage numbers. Extending that success into a larger sedan, say, or an SUV, does not appear to be on the table.

The Volt exists in the same state of distinctive limbo. The electric carmaker Tesla, until recently, had a multi-phased plan to introduce EVs to different market segments, following the success of its pricey Roadster. GM has put forth no plan for post-Volt cars. Let's say the Volt is a hit, selling briskly and fulfilling a vision of a sustainably mobile future. It would be exiting to hear GM offer some ideas about what kind of additional product might be marketed with the Volt tech. Vans, trucks, SUVs? Anything. The Volt is a limited vehicle: it seats only four people. We're going to require more EV diversity than that if we expect electrification to mean anything more than a return to the 1980s gas-sipping, subcompact econo-box.

Single products heralding a brave new age in mobility suffer from a hero complex. Consumers may buy them, and they may buy lots of them, as they have with the Prius. But unless their innovative core technologies can be successfully spread across an entire product range, the truly meaningful changes don't take place. Instead, you have a niche product that appeals to a fanatical cadre of customers, those willing to pay for the privilege of ownership.

Longtime auto journalist Alex Taylor III wrote a cover story for the current issue of Fortune that takes GM to task for its inveterately insular culture. At the moment, the company is deploying contrition before Congress in order to gets its billions. But the lack of transparency, or a thorough and forward-looking plan keying off the Volt, should make us wonder whether GM will go back to its old ways, even as the taxpayer increasingly demands sustainable solution to the nation's mobility crisis.

Update: The $14 billion House bailout bill bit the dust in the Senate on Thursday, as that august debating body's GOP membership went after the UAW. Maybe this is a game of political chicken: The bailout can reboot if the UAW makes yet another round of wage concessions. It's worth noting at this point that bankruptcy for GM could mean the end of the Volt.

Comments

[JRE1]

Matthew, If GM get's a LOAN, the future is very bright, as it has been for the last 10 years. According to all of the recently crowned auto experts, GM is a dinosaur. Let me point out what is current. As you noted the "Volt", `10..... Chevy "Cruze" `10 (40 plus mpg.) Currently, GM has Hydrogen vehicles being tested on both coasts. Currently, GM has Hybrid buses running in all of our major cities. Currently, GM has practically it's entire fleet capable of running on flex fuels of all types. A better question Matthew might be, What direction would our brilliant members of Congress like our industry to go in? How many more Billions should we spend on the next best technology with no guidance from our Transportation Dept.
GM spent a small fortune producing the EV1 and what did they get for their efforts? A conspieracy theory movie. ( Director Chris Paine is now involved with the Volt) 800 Leases.......... YES 800
GM NEEDS a government Transportation Dept. that functions, coordinates and provides direction for our future.