Chevy Volt Production Shut Down: Will GM's Plug-In Ever Be a 'Moonshot?'

ANALYSIS

on March 07 2012 12:35 PM
4. 2012 Chevy Volt.
4. 2012 Chevy Volt. General Motors

A little more than a year ago, Karl Brauer stood on stage at the 2010 Detroit Auto Show and introduced the 2011 North American Car of the Year: the Chevrolet Volt.

That decision, made by a jury of automotive journalists, catapulted General Motors Co.'s plug-in hybrid to more eyes in the general public. Suddenly, the Chevy Volt was more than a futuristic idea. It was a car that had earned praise for its design and performance, along with its ingenuity.

But even as Brauer, now the CEO of Total Car Score, announced the selection, he did so after going against the grain of many of his peers. Two weeks before, he wrote a story for Edmunds.com detailing why he gave his vote to the Hyundai Sonata and not the Volt.

I said, 'I think the Volt's going to win, and I don't think it should win. It's not a real car. It's not going to be appealing to a wide enough market,' Brauer said Tuesday in a phone interview.

I'm Jeff Goldblum in Jurassic Park, Brauer added. Man, I hate being right all the time.

About a year later, though, Brauer has yet to be proven wrong. GM's decision to halt Volt production for a five-week period was just another setback in a long line of setbacks for the car America had to build, said a GM commercial in January.

GM missed its sales target last year by 2,500 Volts. The Volt suffered through a long -- albeit overblown, multiple analysts said -- investigation and Congressional probe into crash tests that produced fires in its battery and the damaging headlines and reaction that followed. And even though Volt sales are up through the first two months of the year, the sales pace is still a far cry from GM's original predictions of 45,000 sold this year -- and even from the 30,000 revised forecast from LMC Automotive.

GM's inventory supply of the Volt stands just above 150 days, far above the norm of about 60. To bring that number down, GM will stop production for a five-week period from March 19 to April 23 while it attempts to also rebrand the Volt through a marketing blitz. Its 1,300 workers at the Detroit-Hamtramck assembly plant will be out of work during that period.

GM wants the Volt to become the car that President Barack Obama has put in the lead of his electric-vehicle push, but the automaker hopes to tiptoe away from the political theater that has inevitably followed the Volt throughout its existence.

And finally, at the same time, it faces an increasingly niche market and skepticism from analysts and experts that it can ever move past that market.

It's unfortunate, because I just knew from the beginning, Brauer said. You cannot ask $41,000 for a car that's essentially a new-age [Toyota Motor Corp.] Prius. And it's cool, it's innovative, and it's got a lot of technology. But you cannot ask the average person to spend $41,000 on it, whereas the average person will spend mid-$20,000 on a Prius.

That's why the Prius has been successful. That's why the Volt won't be.

Similar to the Prius, one of the Volt's other major obstacles sits right next to it in some showrooms. The compact Chevrolet Cruze sells for less than $20,000. The Cruze also averages 42 miles per gallon, the best highway mileage of any gas engine in America.

GM pushes back on the assertion that the Volt is competing with another GM model. GM spokesman Shad Balch said Tuesday that the Volt caters to a specific market, serving as a second or even third car for many consumers. Still, he admits that the hope is to move past that.

The Volt is completely different, Balch said. It can run on zero gasoline at all. It's not a fair comparison to put the Volt next to the Cruze. It's not the same buyer.

But there's a full-court press to increase demand, Balch added. The hope would be that we do have to ramp up production and build more cars to meet a growing demand.

THE PRESS

Obama's goal remains: 1 million electric vehicles on U.S. roads by 2015. In five years, when he is out of office, Obama even said last week that he would buy a Volt. But to do that, GM needs to move past the technologists and environmentalists that Balch identified as most of the vehicle's current market.

To do that, GM has begun a marketing blitz aimed at boosting the Volt's image. Its most visible step comes through commercials and advertisements. But another less seen step is one that Balch thinks could be crucial in boosting sales.

Since last winter, GM has taken an unusual step to lure buyers. It allows potential owners to keep the Volt at home for a period of three to five days. The Volts come from a special fleet GM has set aside in San Francisco. The rationale: if consumers like it and like living with an electric car, they go out and buy a Volt. And they can help spread the word to other potential buyers.

These are the right people who are becoming knowledgeable and then are turning into advocates for the car, Balch said. And a lot of times, they are buying one. We have seen this firsthand in ways that we have never seen with any of our products before.

GM also expects Volt sales to ramp up because of its modifications to the vehicle that make it eligible for a $1,500 state rebate in California, the car's most important market. The modifications also qualify its drivers to travel in the state's carpool lanes.

Gas prices are higher than they have been in a while, said Michael Omotoso, an analyst at LMC Automotive. The combination of the HOV [high-occupancy vehicle] lane access and higher gas prices could help boost sales of the Volt not just in California but across the entire country.

'POLITICAL FOOTBALL'

Since its inception, no vehicle has inspired such politically charged reactions as the Volt.

There's a little bit of a political football going on here, said Peter Fenn, a Democratic political strategist whose Fenn Communications Group has worked with GM previously.

Fenn echoes the sentiments of GM CEO Dan Akerson in January, when he testified before a Congressional committee. The testimony of GM executives and members of the National Highway Traffic Safety Administration, in which Akerson also referred to the Volt as a political football, is far from its only political complications.

Consider: Since January, the Volt has come under attack by mostly conservative and Republican politicians while Democrats rush to its defense. Republican presidential candidate lambasted the Volt as an Obama car. Conservative radio host Rush Limbaugh recently boasted that he predicted before they made it that it was not going to be something that the American people make a mad dash for. (This, of course, happened in the midst of another little controversy involving Limbaugh, so no one really noticed.)

And so, the questions pile up as to whether GM can move past the political theater of its prized, futuristic vehicle.

It's a question of leadership, Fenn said. It's a question of being out in front on technological innovation.

CHALLENGES AHEAD

Just more than a year after Brauer introduced the Volt as the North American Car of the Year, the plug-in hybrid was bestowed with another honor, despite the impending production halt: European Car of the Year.

It validates the product story here, Steve Girsky, GM's vice chairman, said to reporters at the Geneva Auto Show.

But the product is still far from finished. In fact, the Volt and other electric options remain more of an idea than a reality to most. The idea is blurred by an array of factors that cloud the Volt's future in the next year, and even the next few weeks and months as GM begins halting production.

The challenges are significant. An increase in fuel prices could be mitigated by political factors. A decrease in price could produce dramatic losses for GM.

Brauer points to the two 2000s documentaries focused on GM: Who Killed the Electric Car? and Revenge of the Electric Car, which was earlier titled Who Saved the Electric Car?

The question is: Can GM save its own poster child for alternative-energy vehicles?

It's going to be an interesting thing to see, Brauer said. It's going to be quite a mess if in the next six months Volt sales have plunged and they're having trouble justifying its continued production. It could be ugly.