WSJ: Keeping the Chevy Volt alive doesn't make sense for Government Motors
by Sebastian Blanco on May 29th 2009 at 7:32PM 
Click above for a high res gallery of the 2011 Chevy Volt
With bankruptcy for GM pretty much certain for next week, the Wall Street Journal has taken a look at whether or not the Chevy Volt is a good thing for the government to be spending so much money on. Interestingly, the U.S. government will play a role in both sides of the keep-it-or-lose-it argument.
One the one hand, there is new government pressure to increase fuel economy and for automakers to design green cars with wide appeal. The Volt manages this in spades. So, it's a good idea to keep it. On the other, it's looking like the government will own about 70 percent of GM after bankruptcy reorganization and will want the company to get into the black as soon as possible. There's no way the expensive, non-"rent-paying" Volt helps GM make money - at least in the short term. So, it's a good idea to ditch it.
What this might mean, and this is something the Journal doesn't get into but just a bit of speculation, is that perhaps the Government will seriously consider an increase in the gas tax. After all, higher fuel prices will drive up demand for plug-in cars like the Volt, and GM has already said they'll tie the price of the car to the price of gas when the vehicle is launched in late 2010. Higher gas taxes could also raise money for the government, which at least some would approve of. This just calls for a poll.
Gallery: 2011 Chevy Volt
[Source: WSJ]
Reader Comments (Page 1 of 3)
why not the LS2LS7? 7:37PM (5/29/2009)
Oil is $66 on low demand right now. It's clear the days of a stable, low price of oil are over. I cannot see how killing or ditching high-mpg and even gas-replacement (for 40 miles or so) technologies makes any sense.
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Dave 12:19AM (5/30/2009)
Even if oil reaches $200 per bbl, the Volt probably doesnt make financial sense compared to a $23,000 Prius. (Or a two mode Cruze / Volt) At least it doesn't make financial sense without a government subsidy (a tax credit).
But that doesnt matter.
Hummers dont make financial sense. Escalades don't make financial sense. Camaros dont make financial sense.
But they are profitable because they match some folks' lifestyle. And so does the Volt.
The development work has progressed far enough that GM should market the Volt and see if it can turn a profit. Personally, I'd like to see a two-mode version of the Volt as well.
LMBVette 6:56AM (6/01/2009)
@Dave...you hit the nail on the head. Much of the development costs have already been paid. They're only a year or so out from production. It would be absolutely ridiculous to kill a program this far along, let alone killing one that gives the company a leg up on all of their competition.
Mike!!ekiM 7:51PM (5/29/2009)
The government should be analyzing the battery situation.
- When will batteries be mass-produced.
- Can the government improve batteries for an auto-application.
- Ultra-Capacitor/Battery Combinations.
- Can the government bring a consortium of battery manufacturer's together to share research and build a cross-patent agreement?
- What's the projected growth of the Chinese and Indian economies, and their fuel needs?
With erratic, volatile fuel prices, the only protection from risk is a PLUG. The government cannot manage this company Only for the short term, and make the same mistakes as current management.
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Matt 8:13PM (5/29/2009)
Which came first? The Volt or the battery that powers it? Contracts for batteries have already been inked, so if the Volt gets produced, the batteries get produced. If it gets ditched, so also do the batteries that would have been in it.
Mike!!ekiM 7:53PM (5/29/2009)
But, yes a 40,000 $ Volt is a tough sell and can it be expected to have sufficient demand to help drive down the cost of it's components? A 40,000 $ Volt will not have any economies of scale if it only sells 20,000 units.
They need a product that sells at least 100,000 units. ( The EV1 ).
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mister nomer 10:21PM (5/29/2009)
Mike!!ekiM says: "A 40,000 $ Volt will not have any economies of scale if it only sells 20,000 units."
I don't think that GM will have any trouble selling that many Volts, especially if they build a Cadillac version (http://www.autoweek.com/article/20081218/FREE/812189985).
I've got to say though that I doubt the EV1 would have sold 100,000 units per year even if GM had built it.
Consider the original Honda Insight. Like the EV1, the Insight was a 2 door, 2 seater built for commuting. The Insight debuted in 1999 for $19K (although I did see one on a lot in 2001, redtagged for $16K and change). Even factoring in gas at $4/gallon, with a MPG of 56 (the Insight's lowest on wikipedia) we get... $8,571 for 120,000 miles of driving.
That's $27,571 total cost for an original Insight. According to Wikipedia, the price for the EV1 used to compute lease payments was $33,995 to $43,995.
So, in the Insight, we have a car that did all the things a EV1 did, plus:
- was at least $6,000 cheaper
- would take you across the country without a thought
- wouldn't leave you somewhere out of charge with no way to quickly refuel
- didn't require you to have a garage and a plug (i.e. you could live in an apartment and drive it with no worries).
If GM had built the EV1, I'm sure Honda's marketing firm would've pointed this all out to the car buying public.
Considering Honda only sold 18,000 Insights (total) I don't see how GM could have sold more EV1s than that without some serious subsidies.
mister nomer 10:28PM (5/29/2009)
Just want to add with regard to the Chevy Volt:
Consider one of the competition, the Ford Fusion Hybrid: 40MPG, $27,000.
Assuming gas at $4/gallon, 120,000 miles in the Ford Fusion costs $12,000.
$27,000 (car) + $12,000 (gas) = $39,000 for the Ford Fusion.
With that in mind, $40K for the Chevy Volt doesn't seem half bad. = ))
ufgrat 10:35PM (5/29/2009)
The EV1 would sell about as well as the Tesla Roadster... maybe. While the lease payment was based on a $40,000 price tag, the actual price tag to build one was around $80k. Or more.
The EV1 would have never been more than a niche product.
polo 11:00PM (5/29/2009)
"The EV1 would sell about as well as the Tesla Roadster... maybe. While the lease payment was based on a $40,000 price tag, the actual price tag to build one was around $80k. Or more.
The EV1 would have never been more than a niche product."
The EV1 was also hand-built. Had they actually been put into mass production the cost would per unit would have gone down significantly. GM could have pitted future versions against the Toyota Pruis (also a money loser in its first few years) and they would most definitely be turning a profit right now. These things would've been flying off dealer lots last year, when gas prices were insane.
downtoearth 9:37AM (5/30/2009)
Mike!!ekiM:
> But, yes a 40,000 $ Volt is a tough sell
The bare naked BMW 328i with a manual transmission costs $33.000. The one with all the options is $60.000. And you need to refuel it. Maintenance and repair cost will also be desperately higher for the BMW
Is this 3er a tough sell?
The big question is how long will the Volt battery last.
Snowdog 8:07PM (5/29/2009)
Isn't this a repeat story? Maybe the names have changes but it is the same hollow rhetoric.
Of course the Volt doesn't make economic sense for GM or for the buyers, but it would be the worse move in GMs history (and they have done a lot of stupid moves) if they shut down the Volt program.
It would likely be regarded as one of the biggest corporate blunders in history.
Some may think GM doesn't have much reputation to lose, but that is nonsense, if they killed the Volt they kill their reputation now and forever. Volt is critical to any credibility for GM going forward.
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Matt 8:15PM (5/29/2009)
Word! If Government Motors (I like that) closes the Volt project, they may as well close the doors completely.
polo 11:07PM (5/29/2009)
"Of course the Volt doesn't make economic sense for GM or for the buyers, but it would be the worse move in GMs history (and they have done a lot of stupid moves) if they shut down the Volt program."
Really? It makes perfect sense for GM to cancel a high mpg car program, showcasing new tech that will lead the industry through next decade? The Volt program cost a third of the last Taurus program, so its not like its some unreasonable burden on the company. If they aren't going to be aggressively pursuing super-efficient, high mpg cars they might as well shut down because they WILL NOT be competitive (nor compliant with CAFE standards). Every other automaker (excluding Honda for now) has or is committed to a plug-in or extended range EV program. For anyone to suggest a company like GM - given its past and present situation - should cancel the Volt is one and the same as suggesting they close shop.
Snowdog 11:35PM (5/29/2009)
Polo:
Reading comprehension problem? I said it would be a horrible idea to shut down the Volt program.
So why are you ranting at me like I suggested shutting down the program, when I am clearly saying the opposite?
xenogears728 8:08PM (5/29/2009)
The chevy volt represents GM's final push into transforming the company. The tech put into it is of too much value. It may just be alot of the stuff put into the volt was done on purpose, simply to license out its tech to other auto companies at a later time. With companies running around creating their own electric solutions. Gm went on to develop the car fully. It doesn't make economical sense right now. But... Maybe it should be be allowed to sell right now at a lose, to help create the market for it. THe volt needs to sell for 15k- 20 k range to be successful and sell in droves.
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Matt 8:19PM (5/29/2009)
Meh, they just need to slap some chrome rims on it, throw in some HID headlights and stamp Cadillac on the grill; then they can sell it for $40k easy :p
Joe 7:58AM (6/01/2009)
IMO the Volt won't be profitable for a *while*. However, it's a halo car for GM, and the image of efficiency for the future to come.
Also, do want:
http://www.autoincar.com/wp-content/uploads/2009/01/cadillac-converj-concept-2.jpg
mike 8:22PM (5/29/2009)
Government owns 70% of a company that is about to release one of the most fuel efficient family sedans in the country.
Government raises gas tax.
Hmmmm
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letstakeawalk 2:40AM (5/30/2009)
Never saw it coming...