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GM Claims Chevy Volt
There’s no doubt that GM’s ambitious plan to produce the Chevrolet Volt, a range-extended electric car, is costly. In a regulatory filing last week, GM said, “Our competitors and others are pursuing similar technologies and other competing technologies, in some cases with more money available.” This led to rampant speculation that the Volt program was in jeopardy. CEO Fritz Henderson clarified today that he expects GM to receive stimulus loans from the Department of Energy to help fund the money-losing Volt program. “Nissan got the loans, so we have every reason to expect that we will, too.” I suspect the filing last week was merely posturing to drive home the point to the DOE that GM is expecting a healthy loan or it will cry foul. Assuming GM gets the credit line it needs to sustain the Volt program, how long will it need support before the cars can be sold at a profit? According to Bob Lutz, head of marketing and former product czar at GM, the Volt program will lose money for five to six years before it becomes profitable. How will that happen? Says Lutz, “You either have to increase volume significantly to drive the costs down, or you have to sell fewer and position the vehicle at a high price, and eventually the costs come down so there’s a profit.” My guess is that GM will throw as much money as it has available at increasing Volt sales volumes in hopes that the costs go down and the demand goes up as quickly as possible. On the flip side, while GM hasn’t officially green-lighted the Cadillac Converj, a coupe concept shown at the 2009 Detroit auto show that is based on the same Voltec platform as the Volt, such a vehicle could be a low-volume, high-margin complement to the high-volume, low-margin Volt. Whatever pricing strategy the company chooses, there’s no waffling among GM execs as to the Volt’s future; it will happen. To drive the point home, dozens of journalists were marched through GM’s special assembly facility for pre-production vehicles, where we saw over a dozen Volts in various stages of production. The PR stunt had the effect of making the 80 pre-production Volts planned for this summer (at a rate of 10 a week) seem more like a real car than vaporware. GM has made a lot of promises about the Volt, so it can’t really turn back now, despite the cost and risk. I hope the company can score enough cash to keep the Volt on track. Related posts:
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