Can the Volt Save The General?

By Dino P Delellis

Amongst GM employees, aside from the fear of getting a pink paper next week ( or the week after ) speculation is high as to whether the concept vehicle, being called the Volt, is going to be as revolutionary as the hype suggests.

After the disastrous shelving of the original working EV1 a few years back and taking incredible heat for being one of the BIG 3 engaged in fighting California in a bruising battle of who has the largest team of Lawyers, GM has gone back to square one ( perhaps a little unrepentant ) and is once again making an electric car.

Yep, sold the patents to a MIT. Just kidding. If the patents had been sold to MIT, the car would have been rebuilt and the Toyota Prius hybrid would never have been created. Whoever bought the patents wasn't interested in building an electric car. There is enough anecdotal evidence to suggest the battery patents were purchased by Texaco who has done tremendous work with them since ( NOT ).

Some might say, that was a wise business move to recoup costs, but most of the public would in acute dismay exclaim "Why would oil companies be interested in automotive patents that would/could eventually diminish their own returns ?"

So much for the history lesson, this week, we are back at square one watching a video interview with GM's Chief Designer as he discusses the new GM Chevy Volt.

GM has almost entirely "bet the boat" on the new technologies going to market in the electric Chevy Volt. We are sure that GM Detroit Management exactly didn't plan it this way, but their European operations must have seen the writing on the wall many years ago as gas hit 3+ dollars per gallon in europe and continued on through the equivalent $4 dollar mark. With the global credit crunch, increased gas prices and declining sales of the big cash SUV's GM is feeling the pinch like never before. The Volt must become iconic.

GM's response to public outcry shortly after co-jointly winning the lawsuit against California on the grounds that only the federal government had the right to determine zero emission, was to go on a publicity campaign extolling the virtues of their own version of Zero emissions - Hydrogen gas by 2010. Which probably prompted BMW to wake up and create a wonderful Hydrogen Gas vehicle which is already 4-5 years old and in its fourth or fifth refinement. So zip forward to 2008 and GM has backtracked on its Hydrogen promises and is now attempting to leap frog the Toyota Prius with technology that will get a commuter 40 miles of gas free driving on a nightly electrical charge.

Because most daily commuters in the U.S. don't travel that far, GM says many drivers will not have to use any fuel at all, simply recharging the vehicle via a regular outlet at home overnight. GM is still wrangling with the Environmental Protection Agency over the vehicle's efficiency, but executives say the final number should be north of 100 mpg for both types of power.

On the surface, unless you have significant shareholder shares in an oil company, we all want a Volt. The dream of being able to cross Europe or United States basically on plain cheap electricity without having to pay between 3 and 5 dollars a gallon for gas is a like a dream come true.

So will or can the dream car Volt save the General?

I suppose it might be presumptuous but perhaps we should first ask - Does the General really need saving?

BusinessWeek estimated GM's Liquidity position to be 45 Billion in May of 2005 with a burn rate this year of over a Billion a month here in 2008 ( Boston Herald ). Estimated reserves now stand at about 25 Billion and analysts say that even with the 10 Billion in future cost cutting, GM may need another 10-12 Billion in cash to see their way through to 2010.

According to an article in Detroit News Oct 14th 2008

GM had access to about $21 billion cash and $5 billion in available credit at the end of June and is in the midst of cutting $10 billion in costs by the end of 2009 and raising $5 billion through asset sales and borrowing.

Those cost-cutting moves intensified Monday when GM announced it was closing plants in Grand Rapids and Janesville, Wis. The moves affect about 2,500 hourly workers at plants that produce sport-utility vehicles and parts for pickups and SUVs.

So, since 2005 to 2008, GM and it's fat cat, top heavy management burned thru 25 Billion in cash and part of that was during 2 years of strong sales. The rumour is, that GM is eyeing the cash reserves of Chrysler ( estimated 11 Billion ) to help it through to 2010 when the Chevy Volt and Cruz are expected to help effect a rescue

So, what are our expectations for the Volt? GM says its expecting to sell about 10,000 Chevy Volts at between 30-40,000 USD each in 2010. So, that's about 3-4 Billion dollars in gross sales with a net of about a 800 Million dollars annually at an estimated 20% profit per car.

Without being redundant, back to my original question. Can the Volt Save GM?

Looking at these numbers alone, I would wager, most emphatically no. - 23208

About the Author:

Dino De Lellis writes on a number of interesting topics. To see more of the Dino personal journals hop on over to Dino P. Delellis and catch his odd views on the world at large.