The bad news just keeps coming for General Motors (NYSE: GM). The beleaguered auto giant has announced that it will offer 0% financing to help get rid of its growing inventory of inefficient trucks and SUVs, even as it is forced to raise prices due to higher raw material costs. Its once proud Hummer brand is now an albatross that the company is considering unloading. And its market cap of $7.5 billion is lower than not only Toyota (NYSE: TM) but also ailing Ford (NYSE: F) -- GM has lost so much value that a writer at CNNMoney is making the argument that it should be removed from the Dow Jones Industrial Average.
One bright spot for GM has been the Chevy Volt, a hybrid car that has generated considerable excitement in the automotive press. The design of the car is groundbreaking, with a large battery that is recharged by a small gas engine. This is an advance over the popular Toyota Prius and other hybrids, which are essentially gasoline-powered vehicles that use batteries to improve mileage and emissions. With the Volt, scheduled for production for the 2010 model year, GM could claim a real technological advance for the first time in years, and maybe regain some market share.
But there's only one problem: it is highly unlikely that GM will be able to deliver the Volt as promised, according to an Atlantic piece about the car. The article is filled with fascinating details about the ongoing development of the car, especially the frantic pace and rapid innovation required to get the car into production shape. But an unnamed executive told the magazine that this is exactly the problem. The development process has been too compressed, which will force GM to either fail to meet its target date or, worse, to deliver an inferior product. As the executive put it, "They're making a huge mistake."
Ordinarily, it takes years to develop a new car, even with a rapid development schedule. And when new technologies are involved, it takes more time rather than less. For one thing, auto companies need time to test the reliability of a new vehicle. The design of the Volt's most important feature, its lithium-ion battery, is still in flux; in fact, GM is still taking bids for its production, with three manufacturers in competition. This means that if there is a Volt in 2010, it will be a bit of a mystery car, with unknown reliability as it ages.
Another problem with the Volt is its likely cost. Even is the car is a hit, it won't make GM much money. It may even cost GM money on every unit sold, since the company will probably have to subsidize the car for quite some time. Even with a subsidy, though, the car will be expensive for consumers, with a sticker price of at least $35,000, possibly more.
Optimists say that there is much to like about the Volt, even if it experiences a rough start. For one thing, GM is finally doing something to turn the company around. The Volt's development team has been working outside of GM's sluggish bureaucracy and has already made considerable progress. For another, GM is finally ahead of the pack with a new technology.
So even if the company over-promises and under-delivers, as seems likely, the Volt will have served the important purpose of waking GM from its SUV-induced slumber. Of course, that's assuming that the company survives the process.
Reader Comments (Page 1 of 3)
6-24-2008 @ 4:27PM
Jtrost1052 said...
The only way this car could fail is if they cost to much and people can't afford them. Any car you can drive 40 mile before you start using gas to charge the batteries is perfect for the average motorist.
6-24-2008 @ 4:50PM
Smoothie said...
will you bury the dead batteries in algores back yard?
6-24-2008 @ 5:13PM
Hankster said...
A good start, and I wish them luck. BUT, the car has a fatal flaw. According to the present photos of the car, vision out the windows is very limted. It appears to be loaded with blind spots all around, and accidents will, unfortunately, be blamed on its quietness, rather on its poor design. Let's hope that GM picks up on this.
6-24-2008 @ 7:50PM
Morgan Kelps said...
How is it a huge mistake? 640 miles on a full tank (http://www.chevy-volt.net) makes it out to be a real winner in my mind!
6-24-2008 @ 8:27PM
Ed Kirkland said...
Hey Hankster... how can you say that blind spots are the fatal flaw? Chevy has not picked a body style for the Volt yet. The design is being developed behind closed doors and won't be unvailed until 1st quarter '09. What you have seen is the 'Concept Car', and concept cars never match the actual production car.
Chevy admits that the batteries are the flaw, in that they are not proven and are not yet ready for production. Even with that, I've invested heavily in GM stock based on the Volt. When they get this right and use this concept in all models GM will be back on top. I'm buying low with the thought of a good 5 year payoff. American 'engineuity' will kick Toyotas butt.
6-25-2008 @ 2:00PM
Bob said...
God could deliver a new car and these writers would not have anything good to say about the mfg. They haven't even seen one yet and it's WAH WAH WAH
6-28-2008 @ 8:24PM
rty said...
GM will screw this up as well as all the other products it produces. Cheap looking plastic parts will be common in this as they are in 35,000. SUV they produce. You can never trust GM to produce a quality product with out major flaws.
6-28-2008 @ 9:19PM
BOB said...
The HUMMER...over large, over thirsty piece of junk!! For NBA guys who don't want the ESCALADE!!! Hummer and Saab...How did GM wind up with these two worthless cars??????
6-28-2008 @ 9:32PM
Rick L said...
The Volt is nothing new. There was a set of plans back in the late '60s in Mother Earth News for a car which ran on batteries, using a heavy duty starter motor for power and a small lawn mower size engine running a charger to charge the batteries as needed. The car in the article was an older Triumph Spitfire, as I recall.
6-28-2008 @ 9:36PM
Rocky said...
If the trade rights agreements were correctly done by the gov't of this country where in if some foreign country sends over example ten thousand cars than we should be able to send ten thousand to their country and taxes should be the same on both ends these things would not happen.
6-28-2008 @ 9:50PM
goodearth10 said...
GM release an inferior product? Who would have ever thought that. GM's inferiority is the main reason I have not purchased anthing new from them since 1993. GM sucks.
6-28-2008 @ 9:52PM
Bill said...
I thought that people who work in high places were supposed to be intelligent. How come those supposedely intelligent people didn'see that bigger cars, suv's and trucks were a thing of the past, about five years ago? I knew it and they should have. They are partly responsible for the gasoline crisis in this country now.
6-28-2008 @ 9:52PM
John Garrity said...
Hey why won't GM copy the German cars like the japanese have done forever- There has never been a Japanese car, only counterfeits of German cars, cameras, printing presses, lenses, motorcycles etc.-
if you can't beat'em join'em.
6-28-2008 @ 9:55PM
dranged1 said...
Fortunately this article is as poorly researched & fact based as so much junk on-line.
GM is the same giant it has been and will continue to be. As the USA moves forward into the 21st century GM helps us all move with it. For all of you doomsayers, sorry but we are the USA, and we're here to stay. I've lived through enough life and have been fortunate enough to have traveled into the world and seen and touched it to know that we live in the greatest country on earth and
we welcome adversity. We thrive on it and through it we become even better.
Wait and watch.
6-28-2008 @ 10:01PM
PheCSU said...
I always liked the Hummer. It is big enough to fit everyone in my family, and safe on the streets. Plus, it looks COOL! Too bad, I cannot afford it. Guess I'll have to settle for my Suburban, the stationwagon for a family of 6. You think this new Volt will fit all of us? Will it be safe? If we can all squeeze in there, will there be enough room to add groceries? Hmmmm.
6-28-2008 @ 10:05PM
ed schwarzmann said...
What's so difficult that GM is having so much trouble?
The simple answer is to have the batteries charged by a small, low horsepower (or fractional HP) engine running constantly, the same as in a conventional gas-powered vehicle using one for drive power.
6-28-2008 @ 10:06PM
virginia potts said...
I live in Suffolk County and the Toyota's Smart Car is everywhere. Why doesn't GM send all the Hummer's to Iran, where they are needed, and get a government credit. The Volt looks good, but while they work on a mid-size car, they should also work on a mini, or two seater car. The days of the huge gas-guzzler SUVs are over. Thank God!
6-28-2008 @ 10:28PM
DS said...
GM hasn't made a car that I would buy for the pasr 40 years. GM has been focused on profit and not product and now they have neither a product nor a profit. There has to be monumental changes in the way GM build cars or GM will go the way of the Dodo bird.
6-28-2008 @ 10:55PM
Matthew said...
Gm makes the best cars in the world. We have always owned Gm vehicles and NEVER had a problem with them. They arent fire plagued like ford. Their electronics are innovative and ahead of ALL the other makers. Ford wouldnt know how to make a good car if God gave them the plans! I would rather drive a GM vehicle than have to push all the others. Anyone that drives anything other than a gm vehicle doesnt know quality and wouldnt if it smacked them upside their head!
6-28-2008 @ 10:58PM
john bruno said...
GM and Ford will both be filing bankruptcy to get rid of the pension obligations due hourly employees.
Doesn't matter what they make. They are dead in the water as an investment.