When does this limited volume test/debugging pre-production business end for GM? The Tahoe hybrid was introduced in late 2007. They sell a few hundred a month. The BAS system vehicles… also practically zilch for volume, introduced in 2007. One could count the weird-oh BAS Silverado from 2006 or so (limited geographically for some sort of CARB-type benefit – I’m not sure they sold any). Announced Volt volume for 2011 is 10K. That’s 3 years from now. The Saturn Vue two-mode hybrid is promised for 2009. In volume? I wouldn’t bet on it.

Memo to GM: The hybrid era started in 1997. Toyota stated the Prius was selling at a profit in late 2002.

The time for experimenting is over.

Look at GM’s financials… they can’t afford to screw around with expensive low-volume, admittedly unprofitable cars that may be likely to fail expensively inside the warranty period; they need high volume cars that they can sell for decent margins.

Tahoe is a limited quantity vehicle group to start debugging the tech. GM limits exposure of MTBF and corrects it before it hits the VOLT. GM better treat those pissed off rich people real good.

Retort #1… Well, there’s the justification of the Tahoe hybrid’s $55K MSRP… GM packs the computing power of a roomful of Xeon servers into each and every one. In addition to its other advantages, your new Tahoe hybrid can run all your web apps. No propellerhead should be without one.

Retort #2… You mean it rivals the computing capability of a machine (the Prius) which is available for about 40% of the Tahoe hybrid’s price. Yes, the Prius solves the same basic problems for a fraction of the cost.

Either way, GM’s sold perhaps 3K of these beasts this year, so it’s no big deal whether the Tahoe hybrid works well or not. The recent price promotion and rebate finally moved another one off the local Chevy lot after 4 months sitting out in the weather. The Prius, by comparison, sells really fast. I know which dealer I’d prefer to be.

And , even the toy industry can manage Li-Ion batteries. The R/C cars have had this tech for years now. Their chargers for racing Li-ion cars are really pretty advanced, and from the U.S.

GM has always been technology over rich in their vehicles, believe me. The general public has no idea how controls intensive the Tahoe Hybrid really is. It rivals machines 10 times more costly, in computing capability. What is visible to the consumer is simple user interface. If there is a way, to utilize the Li-ion tech, it’s going to come from the U.S.

Here’s a scenario using numbers I pulled out of a hat:

       Qty.   Cost   Price  Battery                 Future
Year   sold   each   each   Replacement     Profit  Costs
----   -----  -----  -----  --------------  ------  ------------
2010   10K    40K    40K    $5K in 5 years     0    $50M in 2015
2011   40K    38K    39K    $4K in 5 years   $40M   $160M in 2016
2012   60K    36K    38K    $3K in 6 years  $120M   $180M in 2018
2013   100K   32K    35K    $2K in 6 years  $300M   $200M in 2019

Again, I pulled those numbers out of a hat. You can make up other numbers to show them going into the crapper if you want. Knock yourself out.

Looking only at net profit (ignoring development costs), GM is never cashflow-negative in this situation. On an accrual basis, they go positive in year 4.

If those numbers were an accurate prediction, then GM would be foolish to wait for battery technology to catch up. They need to get on the front of this train, not chase its kaboose.

(This is also the type of funding mechanisms you see a lot in technology start-ups, not in traditional car companies.)

Better comparisons might be some GM innovations of years past: the aluminum Buick 215 (which was by no means a bad design, but during its GM career, tested the limits of GM’s metallurgical capabilities); the turbocharged Olds 215 (a belt-and-braces approach that was overengineered for its modest gains; the Vega’s aluminum-block four and the much-vaunted, highly disappointing DOHC Cosworth derivative; the Cadillac V8-6-4 (a concept that’s now all the rage, but way past GM’s state of the art in 1980)… As you see, GM has been down these roads before.

netrun called it. World’s most expensive PR gesture.

There is a plethora of new battery technology coming. I don’t see how it’s ready for mass deployment in 2010, unless you’re using the early adopters as beta testers. Ask the Edsel division of Ford Motor Company how well that plan works.

“It is still not clear who will be able to supply the Volt’s batteries in sufficient quantity and acceptable quality. Nevertheless, the dominating emotion is optimism”. Yeah right.

The low volume of the production will keep the number of potential lawsuits down and make it easier for GM to ignore their pleas for help to keep their cars running three years after they bought them.

If Toyota is chicken, it’s probably with good reason.