Should GM Kill the Chevy Volt?

Remember the Chevrolet Volt?

Congress sure does. In what will surely be must-see TV for fans of high Congressional dudgeon, a panel of the House Oversight and Government Reform Committee plans to hold hearings next week on concerns around the Volt that caught fire days after government crash tests.

Rep. Darrell Issa (R-Calif.) and other Republicans on the panel are probably hoping to paint a story of government ineptitude, or even cover-up, as they probe the months-long gap between the fire and the National Highway Traffic Safety Administration's disclosure of it.

If you were tempted to write this off as partisan grandstanding in an election year, you'd probably be on the right track ... except for this interesting development: General Motors (NYSE: GM  ) CEO Dan Akerson has agreed to come to Washington and spend a day testifying on behalf of GM's best-known hybrid.

 And that, to my mind -- and full disclosure: I'm a GM shareholder -- brings up a question that probably needed asking a while ago.

Is the Chevy Volt really worth it?
Look, I get that nearly all of the people who've ponied up the roughly $41,000 asking price for Volts really like them. I get that GM swears that just having Volts in their dealerships has brought in lots of new potential customers and helped sell all kinds of other Chevy products. I get that, against all odds and in the teeth of a massive corporate collapse, GM's product-development crew managed to come up with a great car that pioneered a whole new technological approach while delivering on some wild-sounding promises.

The Volt was a major achievement by an unfairly maligned group of people working under impossible conditions. It's a triumph that will be remembered alongside other great milestones from GM's long history. And it's a good car that should serve its owners well.

I get that. I get all that. High marks to all involved. But I also get this:

GM isn't selling very many of them.

Depending on whom you ask and how you count, the effort to develop the Volt and put it into production cost anywhere from $750 million to nearly $4 billion, if you include the various government loans and subsidies that contributed to the effort. And despite all of that R&D, the car still costs so much to build that GM probably isn't making more than a tiny sum on each one, if it's making anything at all.

Even at a price that is way above some of the competition.

The statistic that just kills me
Late in October of last year, the first examples of Toyota's (NYSE: TM  ) new Prius v arrived at U.S. dealers. If you haven't seen one, the Prius v is a larger version of Toyota's mainstay hybrid, sort of a station wagon -- but one that gets 44 mpg in the city. Toyota compares it to small SUVs.

It's definitely a niche product, and like many Toyotas in recent months it has been in limited supply. But in just 10 weeks, it sold more examples here (8,399) than Chevy sold Volts (7,671) in all of 2011.

That just kills me. Of course, the Prius v starts at $26,400, so it's a lot more affordable than the Volt. But it's hardly the only challenge the Volt faces. Toyota's regular Prius now comes in a "plug-in" version that you can charge up at home and drive for a while without using any gas at all, giving it Volt-like functionality with simpler, proven technology.

Worse, Ford (NYSE: F  ) just leapfrogged the Volt with a purely electric version of its Focus compact, complete with 100-mile range -- and will be bringing its own plug-in hybrid sedan, the cutting-edge Fusion Energi, to market later this year. My guess that it'll be priced in the same neighborhood as the Volt, with similar mileage ratings and range capabilities ... except it'll be roomier, with a nicer interior, and I'll bet that Ford will be making a handsome profit on each example.

I haven't even touched on what Tesla Motors (Nasdaq: TSLA  ) will be offering soon: a full-size all-electric luxury sedan at a price point not all that far north of the Volt's MSRP. As special and advanced as the Volt sounded when it was first announced a few years back, it's clear that the market is now catching up -- and may even be passing it by.

So is it time to kill the Volt?
The Volt's a great car, but I can't help wondering whether it has become more of a boondoggle than it's worth. Put simply, it's not making (much) money for GM, and its contribution to GM's corporate image has been decidedly ... mixed, at least recently.

Of course, killing it could unleash a whole new PR nightmare, with the company that famously "killed the electric car" long ago getting called out for killing another one. Dan Akerson has proved himself to be a pragmatic, hard-headed manager in many arenas, but I think it's unlikely that he'll be ending the Volt program anytime soon.

Like it or not, the Volt is almost certainly here to stay. I expect GM to continue to invest in the Volt, to improve its capabilities and efficiency while bringing down the cost, and hopefully the price. When Akerson testifies before Congress next week, I expect that he'll talk up the Volt as a triumph of American ingenuity and manufacturing prowess.

Which it is.

But I still can't shake the feeling that this relationship might not be working out.

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Fool contributor John Rosevear owns shares of Ford and General Motors. You can follow his auto-related musings on Twitter, where he goes by @jrosevear. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of Tesla Motors, Ford, and General Motors and creating a synthetic long position in Ford. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (10) | Recommend This Article (4)

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  • Report this Comment On January 21, 2012, at 11:03 AM, raysview wrote:

    Regarding the Volt...I agree that way too much government money was spent on this. No government money would be much, much better. I would be a much happier taxpayer if subsidies of all types for electric vehicles were eliminated

    I agree that the Volt likely to sell poorly, as do most hybrid and electric verhicles. I do not agree that most of the cars your compare it with are in fact comparable. The Volt has unlimited range, which makes it a valid choice for many scenarios where a full electric car - Tesla, Leaf, etc - are clearly not a choice at all.

    I would wager that Tesla will fail as a company once the handful of eco-celebrities buy their showcase car to park in their driveway.Fortunately for GM, the Volt is a tiny niche product for them, and its failure will be embarassing, but not fatal.

  • Report this Comment On January 21, 2012, at 12:08 PM, 50yardline wrote:

    The key to success in automotive sales is "right product, right time, at the right price." I don't think the Volt is the best product out there - "Strike One!" . Gas prices have fallen, since the Volt was introduced, and this has hurt sales - "Strike Two!!" . The price is sky-high, $32,500 after tax subsidies - "Steerike Three!!!" If the government had not taken over GM, this vehicle would never it had come to the marketplace - the Volt has three strikes going against it.

  • Report this Comment On January 21, 2012, at 2:14 PM, Bagginz wrote:

    What boondoggle? The car's in production, and hasn't even reached overseas markets yet. It's been lauded by the automotive press. Consumer Reports likes it. It's not a Pinto. It's not an Edsel. It's not even an Aztek. There's been more FUD than fact, flamed by think-tanks and bloggers with an anti-Obama agenda.

    You could take almost all your arguments against the Volt, and apply it to the early Prius.

    Toyota spent a bundle on development of the Prius. It took years before sales took off and economies of scaled kicked in. When brought to America in 2000, it cost about 40% more than a comparable Corolla. Gas was $2/gallon, and fewer Priuses were sold in its first year of introduction than the Volt, when money was not nearly as tight as it is now. Adoption of the Prius (along with other hybrids) was greatly accelerated by tax credits.

    Today, more than 1M Priuses have been sold in the U. S. alone. They have demonstrably reduced oil consumption and smog. Hybrid technology has found a place for itself in almost every major car manufacturer. And that is A Good Thing. Toyota has been been lionized for its forward thinking and risk-taking.

    Oil security is not a sure thing, and hasn't been for a long time. The western world needs alternatives. Way before the bailout, GM stuck its neck out with the Volt, and came up with a remarkably good car that is unique in the marketplace and technologically leap-frogs the Europeans and Japanese competition. The benefits of this is not just something to have in its portfolio if gas prices shoot up (whcih is what helped the Prius). They gained the knowhow and a briefcase full of patents on Li-ion battery technology. Because Li-ion packs more power in a smaller size than the Prius' NiMH battery, it can make conventional hybrids lighter.

    The comparison of the Volt to the plug-in Prius is a little off. The plug-in Prius (which, contrary to the above article is not available yet) only has a 13 mile range on its battery, compared to 40 for the Volt. The starting price, after the tax credit, is about $30K -- not that much less than the $32K Volt after its credit.

    Finally, to 50yardline, you claim that the Volt would never have made it the marketplace without the bailout. Maybe, maybe not. Still, by your thinking, we wouldn't have the Chevy Cruze either, and GM is selling plenty of them now.

  • Report this Comment On January 21, 2012, at 5:07 PM, baldheadeddork wrote:

    Good question, John.

    I think GM made one big and one maybe mistake with the Volt. The big problem is the styling, especially in the side view. The fat, black plastic panel running beneath the windows just kills the looks of the car. It makes the car look like a goth girl or televangelist's wife who puts on mascara with a paint brush. I'm amazed GM sells them in any color but black. (Lower-case ditto for the black plastic panel on the rear. Ugh.)

    The second mistake is that GM followed Toyota's lead and created the Volt as a Prius-esque model almost totally divorced from the rest of Chevy's lineup. Even if they nailed the styling, does it help GM to have the Volt as a separate model? They were following the example set by Toyota so I can't blame them too much. But I think in the long run Ford has a better approach with branding their dual-mode system as the Energi powertrain and incorporating it into multiple vehicles.

    GM has (to my pleasant surprise) nailed the reliability and overall performance of the Volt powertrain. Even if its a niche product they'd be foolish to walk away from that. But I would be pretty happy if the Volt car went away and was replaced by the Malibu Volt and the Equinox Volt.

  • Report this Comment On January 22, 2012, at 9:17 PM, gsned57 wrote:

    The Volt is one of the most critically acclaimed vehicles of all time (see below list) and to even pose the idea of canning a car that was production limited for 9 of the last 12 months, sold only in select markets, still has back orders in parts of the country, and has a significant number of orders overseas is insane.

    I'm in my 30's and have never owned a GM product in my life and in fact never though highly of GM. I've been following this car however since it debuted in 2007. I'm an engineer and to me this car is the perfect engineering solution utilizing today's technology (Not the never ending 5 year down the road solution). This is a no compromise car that could in a major way put a dent on the amount of oil we import and also give a boost to American electric companies. The only flaw with this car is that it costs too much to be massively adopted (no i don't consider hitting a pole sideways, rolling the car over a few times, and then sitting for 2 weeks before a fire breaks out much of a flaw).

    I hated the GM bailout and hold the government responsible for dishing out the cash. It wasn't this cars fault. The Volt didn't go to Washington and write policy (it's a smart car and could probably write policy better than most of those idiots but I'm pretty sure it's safe to say it didn't). You hate the bailout blame the government. You hate the 7500 tax credit blame the government (GW Bush and the Dem congress who signed it in). I'm 100% for taking away the subsidy to this and all other EV's but also end the subsidy's to the oil industry and the refineries, Make the oil companies that benefit from our armed services keeping the oil flowing pay back our government for those services. While we're at it pay back the cost of the Iraqi war to our government and make reparations to the families of fallen soldiers. I essentially want the true cost of a gallon of oil to be known at the pump same as the true cost of a Chevy Volt felt at the dealership.

    GM sold more Volts than Toyota did Prii in it's first year here in the states. Also, if you are going to compare the Volt to other cars you need to explain some key differences. First, the Plug in Prius does not go 12 miles before the gas engine kicks on. to get close to 12 miles without burning gas in the plugin prius you'll need to feather the acceleration, stay under 60 MPH, and not go up any hills. Also, after the tax incentive a loaded Volt is cheaper than a loaded plug in prius (most comparable models). The pricing on the Ford EV is out and it is the same as the Volt (40K before incentives) so realy if you are to knock something knock Ford. They have the same range as the Leaf for $7000 more. Yes the Focus EV looks better than a leaf but $7000 better? And you are just as stranded after 80 miles driving.

    Again, below are just some of the awards that the Volt has won. I would encourage all of you out there to take a test drive of the Volt. Driving an electric car is thrilling, driving without using a drop of terrorist oil is liberating, and knowing that it was designed/built in America gives you a sense of pride in American Engineering. GM aimed to leapfrog the Prius and avoid range anxiety issues associated with the EV1 and they hit it out of the park. GM, just get the price down10K and you won't be able to build enough of em.

    Vehicle awards/Achievements

    · 2009 Green Car Vision Award by the Green Car Journal

    · 2011 North American Car of the Year at the 2011 North American International Auto Show.

    · Motor Trend 2011 Car of the Year

    · Automobile Magazine 2011 Automobile of the Year

    · MotorWeek 2011 Driver’s Choice Best of the Year

    · Car and Driver 10 Best for 2011

    · 2011 Edison Award

    · Highest-rated compact for 2011 J.D. Powers and Associates APEAL Study

    · 2012 Car of the Year in Denmark

    · Consumer Reports rates Volt #1 in Owner Satisfaction

    · Named “2011 Collectible Car of the Future” by Friends of the National Automotive History Collection (NAHC)

    Environmental awards

    · 2009 Environmental Grand Prize awarded at the 2009 Festival International Automobile

    · 2011 World Green Car announced at the 2011 New York Auto Show

    · 2011 Green Car of the Year awarded by Green Car Journal

    · MotorWeek 2011 Best Eco-Friendly

    · Chicago Auto Show Best Green Vehicle

    Technology awards

    · Ward’s AutoWorld 10 Best Engines for 2011

    · SAE 2011 Best Engineered Vehicle

    · Top Michigan Innovation in 2011

    · Edmunds 2011 Green Car Breakthrough Award

    · Popular Mechanics 2010 Breakthrough Technology

    · Popular Mechanics Top 10 Vehicles Award for Technology

    · Popular Mechanics Editor’s Choice Award for OnStar MyLink for Volt

    Mobile Application awards

    · Popular Science Best of What’s New 2010

    · Consumer Electronics Show’s “Top Products” Award for OnStar MyLink for Volt Mobile Application

    Safety acknowledgements

    · Top Safety Pick by Insurance Institute for Highway Safety

    · National Highway Traffic Safety Administration Five-star overall vehicle score

    · Euro NCAP Five stars (out of five) in all categories

    Value acknowledgments

    · Best Electric Car awarded for 2012 resale value by Kelley Blue Book”

    · Kiplinger demonstrated in five years time the Volt can earn back 91 percent of a $19,000 cost differential between it and a Cruze internal combustion powered cousin

    Economy acknowledgements

    2011 Volt names most fuel-efficient compact car y the U.S. Environmental Protection Agency

    2012 Volt again named by EPA most fuel-efficient gas-powered vehicle

  • Report this Comment On January 22, 2012, at 9:25 PM, gsned57 wrote:

    Reply to baldheadeddork about styling. The Volt spent more time in the wind tunnel than any other car in history so a lot of it's looks can be attributed to eking every Watt out of the battery pack. Most of us that follow the car were disappointed at the difference in looks from the concept to the production model (although i think the production model looks just fine). Personally for me it's what's under the hood (and under the backseat) that matters most and it could look like a giant POC but I'd still be impressed with all the technology the Volt packs.

  • Report this Comment On January 23, 2012, at 6:59 AM, mmcc2012 wrote:

    If they do, I hope they wait until after I buy one. Almost there.

  • Report this Comment On January 23, 2012, at 12:18 PM, wishboneash007 wrote:

    The Prius was in demand right from the get go (the 2nd gen anyway). I think the Volt though has a place in today's electric/hybrid line up and should not be scrapped. For me, I prefer the all electric Leaf (or Fusion etc..) which is simpler, more efficient and no compromises.

  • Report this Comment On January 23, 2012, at 12:52 PM, bobbleheadguru wrote:

    John,

    Thank you for your thoughts, particularly about the virtues of the car/technology.

    However, I would like to offer the following to counterpoise some of the main points of your article.

    1. The Prius V is essentially a trim level for the Prius. The roof line is modified so it is more of a wagon than a hatchback car. Other than that, the car is essentially identical to any other Prius... and very different than a Volt.

    Completely unfair to compare that to Volt. Would actually be fairer to compare the Prius V to a Cruze Eco, which is a modified version of a Cruze.

    2. The Prius V launched in Oct 2011. The Chevy Volt launched Nationally in NOV 2011. The Volt was only available in 6 of 50 states for most of 2011. The Prius was released nationally for LONGER than the Volt.

    3. The Volt may be expensive in MSRP. However, its lease deal (aided by tax incentive) is really good. Breakeven is possible... where fuel savings offset higher payment TODAY... (depending on which car is being traded in). In my case I am paying about a net of $20/month more to upgrade my car from a pedestrian Impala to a much more fun to drive Volt.

    2.

  • Report this Comment On January 23, 2012, at 1:32 PM, elibutton wrote:

    Example of another "feather" in GM's hat. The dysfunctional culture and leadership continues to linger throughout this company. This Volt was supposed to be a revolution, changing the world, setting a new standard, reducing dependency on gas and moving down the green path. Instead after millions and millions of dollars and quality issues later, you have a vehicle w/ a sub-par battery that is having issues getting off the ground in its first year of sales.

    GM has such a poor quality for reliability, no one has confidence in buying their products. Their cost model is so predictable and backwards-thinking: more problems = more R&D = higher price tag for the consumer. What started out as a potential $28K affordable electric / hybrid car turns into a poorly designed and managed project which equates to an additional $20k price tag for the consumer. And what do you get for it? Battery issues and your lucky to break even.

    So it's a two fold issue now w/ GM: not only have you limited the population of who can afford the car, but that population isn't completely sold on the Volt. The only way to improve that factor is to vastly improve their reputation and track record for quality and reliability in order to restore confidence, and that takes time.

    So in the near future, GM should take a lesson from Toyota's current model (for 2012 Camry): give the public more for less. Unfortunately, that requires a paradigm shift w/in GM's leadership and culture that's likely too difficult to comprehend or grasp.

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