Autos Weekly: Can the Chevy Volt Succeed?

It was another busy week in the global auto business. Here's a roundup of key stories you might have missed -- and one Fool's take on a story you probably didn't miss, GM's latest announcement about the upcoming Chevy Volt.

Chevy Volt pricing announced, head-scratching commences
General Motors' decision to develop the Chevrolet Volt hybrid in full public view has been a publicity coup for the automaker, even as it goes against standard industry practice. The car is months away from release, but we know what it looks like inside and out, how it drives, how its propulsion system works, what its range is likely to be… until this week, it seemed like we knew everything but its price and its EPA mileage rating.

Well, now we know the price: On Tuesday, GM announced that the Volt's base price is a hearty $41,000 -- well above the $32,780 base price of the car thought to be the Volt's principal competition, the Nissan Leaf. While the Volt will come with a high level of standard equipment, that's big bucks for a smallish sedan, especially considering that Toyota's proven Prius hybrid starts at a mere $22,800.

GM has been pointing out that the Volt, which combines a 40-mile electric-only range with a fuel-efficient gasoline engine, is more of a "real car" than the Leaf, an electric-only vehicle with a maximum range of 100 miles or so (and a real-world range that is likely to be lower) and more advanced than the Prius. While both of those points are arguably valid, forty-one large is still a lot of money for a smallish car, even after the considerable federal tax rebates that will apply.

So why so expensive? The story here is the obvious one: New technology is expensive, and GM can't afford to take a loss on the Volt in order to be aggressive with pricing -- as Toyota supposedly did on the early Priuses. The Volt's price should come down over the next few years as lithium-ion car batteries become more of a commodity, and meanwhile, GM is being aggressive with leasing packages -- you'll be able to lease a Volt for 36 months for a reasonable $350 a month.

I think at that price, GM will be able to lease quite a few -- but I'm skeptical that it'll sell more than a handful, at least in the first year. It will certainly be interesting to watch.

Another eco-win for GM
Lost in the Volt hubbub was an interesting little announcement from GM: Starting in 2013, all GM models built for the U.S. market will use an innovative new air conditioning refrigerant developed by Honeywell (NYSE: HON  ) . The refrigerant, which carries the snappy name "HFO-1234yf", takes just 11 days to break down in the atmosphere, making it much more environmentally friendly than the R-134a refrigerant currently in use, which lingers in the air for 13 years.

GM isn't just doing this for PR reasons, of course: The company gets a kind of credit from the EPA for making the switch, which will help it meet stringent new greenhouse-gas regulations scheduled to take effect in 2016.

Ford reinvigorates an old nameplate
When CEO Alan Mulally first arrived at Ford (NYSE: F  ) , one of his first acts was to order the Taurus nameplate -- then recently discontinued -- revived for the company's large sedan, on grounds that the company should preserve and burnish its iconic names. Another of Ford's iconic names was reinvigorated this week, as the company took the wraps off its all-new -- and significantly rethought -- Ford Explorer.

The old Explorer was arguably the definitive soccer-mom SUV, a heavy, gas-guzzling 4-wheel-drive truck that rarely saw terrain rougher than a muddy kids' soccer field. But rather than offering up a new truck-based SUV, Ford designed the new Explorer for those customers: It still looks the part -- actually, it looks great -- but it's built on a lighter-weight platform, powered by fuel-efficient drivetrains, and filled to the brim with innovative safety and technical features.

In other words, it's likely to be yet another hit for Ford, in a space where it hasn't had a lot to brag about recently. And that success will have some positive economic repercussions beyond Ford: Several key suppliers, including Lear (NYSE: LEA  ) and Johnson Controls (NYSE: JCI  ) , will be hiring to support Explorer-related production. Ford estimates that the new Explorer will create a total of 1,800 new jobs.

Another week, another Toyota recall
Here we go again: On Thursday, Toyota (NYSE: TM  ) announced the recall of 373,000 Avalon sedans made between 2000 and 2004 for an issue with a locking mechanism in the cars' steering columns. In a nutshell, a part in the steering column can crack, possibly disabling the vehicle or making it hard to steer. Toyota says it's unaware of any accidents resulting from this issue and will repair the cars for free.

Meanwhile, speaking of recalls, the National Highway Transportation Safety Administration said this week that it's investigating a possible major issue with Ford's 1999-2003 Windstar minivans: Apparently, parts of the vans' front subframe are rust-prone, making them more likely to break over time -- and when they break, steering control can be lost.

Toyota's had a rough year in the recall department, and while the most recent issue seems minor, it's one more dent in Toyota's once-impervious quality armor. On the other hand, lest you think we're piling on with Toyota, here's some perspective: If this NHTSA investigation results in a recall, it would be the 11th time that the Ford Windstars have been recalled. Ford's current products may appear to be quality paragons, but as we roll our eyes at Toyota, it's worth remembering that things were very different not so long ago.

Fool contributor John Rosevear owns shares of Ford, which is a Motley Fool Stock Advisor pick. You can try Stock Advisor or any of our Foolish newsletters free for 30 days with no obligation. The Motley Fool has a disclosure policy.


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  • Report this Comment On August 02, 2010, at 11:58 PM, baldheadeddork wrote:

    The numbers on the Volt lease just don't make sense, John. At that price, the Volt will have to retain 70% of its MSRP after three years for GM to break even. That's 15 points better than the average for all cars, and as high as the best low-depreciation cars on the market.

    I'll bet anything that if the $350 lease does come true, it's loaded up with more restrictions than a Palm Beach HOA. GM is almost certainly going to lose money on every Volt they build, they can't afford to toss away another $10K per unit on a giveaway lease.

    My story this week was what we didn't hear about because of the Volt - the launch of the Chevy Cruze that was buried by coverage of the Volt. Why did GM go wall to wall on the Volt during the launch week for the Cruze? I don't know if this was Old GM screwing up an important launch, or if this was a shrewd move by GM because the initial reviews of the Cruze were as tepid as the car's styling.

    I'm also optimistic about the Explorer. But sales are down almost 90% compared to the peak years, so it really has nowhere to go but up.

    Also with the Explorer, the introduction of the EcoBoost 4 is a huge step for Ford. The EB6 is a great motor, but the potential of this design is really going to show itself beginning with the four.

    Finally this week, a rebound in the stock market has also boosted oil prices. It closed over $80 today. Any bets on the price when the economy really recovers? I'm thinking $130 next summer.

  • Report this Comment On August 05, 2010, at 10:07 AM, HOGridin wrote:

    I most certainly believe GM will loose money on every Volt. Debt and loss has become a way of life for Generous Motors, aka. gubmint motors. That being said, early adopters fo technology always get the short stick; consumers and producers. It is the price for being first. Many pioneers had bullets in the back to match arrows in their front.

    Leaving this 10% buying force aside, hybrids and uber efficient platforms like Ford's EcoBoost, will be the focus (no punn intended) of the majority of buyers looking for cost effective effeciency near the top of their requirements list in an auto. For me, that means two-wheeled transportation for some time to come.

    I could be wrong, but I wouldn't like that.

    ~jammer

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