ENVIRONMENT
05/15/2009 05:12 am ET Updated May 25, 2011

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.