Volt Birth Watch 61: WSJ Disses GM's Hail Mary

by Frank Williams

July 2nd, 2008 11:56 AM

volt birth watch 61 wsj disses gm s hail mary

The Wall Street Journal's Holman Jenkins joins the growing media chorus asking "WTF's up with GM?" [paraphrasing]. With GM's stock prices in the $11 per share range for the first time since the 1950s, Jenkins wonders if banking the entire company's future on one model– the plug-in electric gas hybrid Volt– is "nuts." In the grand TTAC style, the scribe observes "to pour hundreds of millions into a race to launch an electric car, the Chevy Volt, guaranteed to lose money on every unit sold, begins to seem a peculiar strategy for a company in dire liquidity straits." Jenkins covers all bases in his Volt diss. "For those who think the Volt's justification is greenhouse emissions, notice that electric cars play Three Card Monte with energy inputs: It all depends on where the electricity is coming from." To drive home his point, he reminds us "Rick Wagoner last week laid out the case to Barack Obama personally for turning GM into a ward of the state," and "that a big part of the company's turnaround gamble consists also of eliciting favor once again from Washington after a period in which the domestic auto makers were nothing but whipping boys on Capitol Hill." In fact, Jenkins only misses the target once: his repeated insistence that "GM executives are not nuts." In that sense, neither are pistachios.

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Phil Ressler on Jul 03, 2008
In most of the town, line drying isn’t allowed. That's a seriously dysfunctional town council you have there. 1. What was the lesson learned - or not learned - about dumping vehicles into the consumer fleet back in 2005’s “Fire Sale for Everyone?” High incentives are used to pull sales forward and then sales decline. GM spent a lot of money this month (and the Toe Tag Sale continues through the 4th - guess I oughta git me a new Jimmy before they’re gone) to ensure that August is awful. There is no substitute for the right mix of competitive product. And it looks to me like GM is worsening GMACs potential exposure. They ARE loaning well over vehicle value on very long loans. Those loans will be upside-down for 48 of the 72 months - or longer. This is not healthy. You're missing the point of the current sale. In the context of the situation GM is in at the moment, risk of tanking August sales by pulling presumed future purchases into the present is secondary to the benefit of quickly rebalancing the inventory at retail. In a crisis, you address the emergency standing in front of solving the rest of your problems. So the "72 Hour Sale" and attendant financing is the right call to unkink the hose. August will be better managed against a backdrop of reduced truck inventories in the field. And why the aych-ee-double-hockeysticks didn’t Wagoner and Lutz get going on this years ago? Fuel economy is partly an image thing and GM has done nothing about this since Wagoner took over, except to blab about how many vehicles eke out 30mpg on the highway while Toyota and Honda strive for 40 and produce a couple of cars with outstanding fuel economy. That's spilled milk and not worth the hand-wringing of answering the question. What GM has to do now is curtail the internal fingerpointing, instead knuckling down on solving their problems. Looking back at what should have been is not productive. 4. “… establish a new vector for re-imagining the car…” That sounds like Corporate Communications. That’s not a compliment. I'm not fishing for compliments. The Volt project is exactly what I've described. It is the bridge to Hy-Wire or a platform inspired by the AUTOnomy idea, which yields a car dramatically different from what we think of as an automobile now. Even if GM's own exec team seems unable to articulate this, the lineage connecting EV1 to Volt to Hy-Wire is as obvious to an outsider paying attention as Mercury and Gemini were to Apollo. Here’s what bothers me about the Volt… First, in EV-mode, it’s carrying around an engine which, in EV-mode, still has multiple functions. It decreases range and reduces useable space. Well, I didn’t say these were useful functions, did I? Without that engine, a battery-powered Volt would have to have a much larger battery, at greater weight and volume penalty, to achieve similar range. The same disadvantages you cite apply to parallel hybrids as well, with the added liability that neither the battery nor ICE alone can deliver acceptable performance. Second, in charge-maintenance mode, it’s carrying around a battery which still has multiple functions. It decreases range and reduces useable space. Useful functions? Erm… no. It's carrying a battery that is both buffer and store for recovered mechanical energy. Now, what happens if the roof is covered with solar cells? All hybrid architectures are carrying something extra. GM has stretched the range of an EV by including an on-board charger. But they’ve had to seriously compromise the vehicle to do it. How? A plain-vanilla EV would be almost as useful, cheaper to buy, probably easier to make, with more design possibilities and would have greater range for the same amount of battery. But a plain-vanilla EV would not suffice as a sole or primary vehicle for most people. It's range cannot be made sufficient anytime soon. The Volt will meet the needs of any single-car household that would otherwise be content with a same-size car. Nevertheless, since the Volt is an all-electric drivetrain car, GM retains the flexibility to build an enlarged-battery version sans the ICE at very little additional development cost, as a potentially cheaper offering for the second-car or commuter market. To get a breakthrough improvement in the Volt, GM needs a battery improved in not just cost but also in bulk and weight. This same breakthrough will likely yield a pure EV with really impressive range. For a lot less aggravation. And when that battery breakthrough comes, it will be nearly effortless to release such a variant or successor on the platform. In the meantime, the serial hybrid scheme allows them to get to market sooner with a viable primary car while launching the electric drivetrain vehicle enabling the option you advocate. And developing a “vector for re-imagining the car,” is not what GM should be doing. GM should be making money. GM is not a “vector” company, they are an automobile manufacturer. According to Lutz, the first generation will not make money (what’s a generation, 5 years?). That’s unacceptable. It’s not 1997 and GM is not a pioneer in gas-electric technology. They are an also-ran. Toyota is not going to be building a gas-electric car in 2014 that doesn’t make money, they’re making money now. Re-imagining the car for upcoming market realities is exactly what a GM that believes it has a future should be doing. All good companies have to devote a significant portion of their energy paving road for the future, not merely capitalizing on the present. Right, GM is not a pioneer in what you call "gas-electric" automotive technology as you define it because your imagination is limited by "Hybrid Synergy Drive." Volt is not an attempt to pioneer "gas-electric" technology or build another Prius. GM *is* a pioneer in modern all-electric automotive drivetrains. The Volt is only gasoline-electric in that the launch version is going to use a gasoline-powered generator. It is an electric car. The gasoline part is incidental and non-critical. The charging system could be propane, nuclear, coal, diesel, hydrogen, fuel cell, kerogen powered, or built as a battery-only plug-in. Moreover, it's not merely a charging system. When the Volt's EV-only range is spent, the ICE-driven generator is powering the car's electric motor(s) in real time. If they develop a new car, it should be to meet what they estimate to be a market need and they should be planning to do it at a supportable cost to make money. GM can make money on more prosaic vehicles. That they haven't lately does not preclude fixing their conventional car business so they can. Like Toyota and Honda before them, they can subsidize new technology introductions through a combination of conventional sales and government incentives to consumers. Phil Ressler, you continue to amuse. The bliss of mutual mirth... Phil

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KBW on Jul 03, 2008

I think the problem here is not that the project itself is not feasible technically, but the intense competition it will face when it is launched. Toyota will have a plug in hybrid by 2009, the model is already fully designed and likely in production as I type this. The volt is still in drivetrain testing with mules. By the time the volt is released it will have to compete with a large number of hybrids, plug-in or otherwise. Given the choice between a cheap, proven tech like the Prius and the expensive(40k!) unproven volt, consumers are unlikely to choose the latter. But it gets worse, even if the volt is successful, it would be a simple matter for Toyota or Honda to create something similar. Both companies already have tech which would be fairly simple to convert to serial hybrid configurations. The Fcx clarity Honda is leasing out is basically a volt with a fuel cell instead of an ICE. If it turns out that ICEs are the way to go, I have no doubt they could crank out something within a few years. In the meantime, the existing hybrids would still be eating the Volt's lunch.

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ILoveMonaro on Jul 03, 2008

Personally I think the fact that the Volt is a Series Hybrid, consequently allowing GM to change the power supply from ICE to whatever in the future, is the key weapon over the Prius. Each component, elec motors, batteries, ICE or alternative can be updated withour requiring changes to the other parts. I wonder if GM will allow upgrading to existing Volts in 2011-2012 in the manner of Volt 1.0 upgrading to Batts/Elecs/ICE of Volt 1.1, 1.2 etc. Cheers Matthew

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KixStart on Jul 03, 2008

Phil Ressler: "That’s a seriously dysfunctional town council you have there." Oh, yes... Phil Ressler: [Volt is seriously compromised.] "How?" The battery, drivetrain and size constraints necessary to the energy budget are squeezing everything. The Volt is going to have very little trunk space and room only for 4; there will be no middle place in the rear seat. If I understand the bodystyle correctly, it will be a coupe, which says no one's putting baby seats in it. In spite of its 4-seat limit, it will still be relatively wide. GM is talking about a fuel tank of 6 or 7 gallons, which they want us to think leads to an effective cruising range of 300 miles. In fact, this is not the case. The Volt will do, without recharge, no more than 240 miles comfortably, if it gets the 7 gallon tank, and 200 if it doesn't. No one cruises until the tank is dry... when you have 100 miles range remaining, you start to think about a gas station. There's lots of places you can be driving in the US where having less than 100 miles left causes you some concern. We take an annual trip to the East Coast, 1300+ miles. If we take the Rav4, I refuel every 300-380 miles or when we stop for the night. If driving the minivan, I refuel every 400-450 miles or when we stop for the night. If range wasn't important, no manufacturer would mention it in their ads. But they do. In spite of the Volt's allegedly impressive fuel economy, compared to my minivan, it will want refuelling twice as often. Any gas-electric car is, necessarily, a bag of compromises. The Prius is a successful one because they picked the compromises that work for people. The Volt is not going to do that. With the exception of a very noisy minority, few people are dying to get off gas at any price. The Volt is for them. And them alone. Phil Ressler: "But a plain-vanilla EV would not suffice as a sole or primary vehicle for most people." So? What family owns just one car? Nobody in my neighborhood. We've got three. At times, we've had five. At no time were ALL of them twenty-five miles or more away from the house. The Volt is going to have limited appeal, why should other vehicles with limited appeal be dismissed out of hand? Especially when they're likely to be more cost-effective for their primary mission? Phil Ressler: "Re-imagining the car for upcoming market realities is exactly what a GM that believes it has a future should be doing." Revectoring imaginary cars that will turn a profit in 6 or 7 years, if things go well, is something that profitable companies can do. GM can't afford it. And if GM was any good at forecasting "upcoming market realities," then they wouldn't be in the pickle they're in, would they? Phil Ressler: "Right, GM is not a pioneer in what you call “gas-electric” automotive technology as you define it because your imagination is limited by “Hybrid Synergy Drive.” " The idea of a serial hybrid occurred to me long before I heard Lutz babbling about the Volt. As for the limits of my imagination, that's unimportant compared to the limits that we term "physics" or "the state of the art in materials science." The Chrysler minivan broke the mold (or, perhaps, discovered a little-used mold originally owned by VW and fixed it up for market acceptance). A vehicle company can imagine new uses for a vehicle and new formats (within limits) for a vehicle and have a good chance of realizing them but they can not imagine a new powertrain into existence the same way. Phil Ressler: "GM can make money on more prosaic vehicles." They can? Then why aren't they? Phil continues, ignoring my obnoxious interruption: "That they haven’t lately does not preclude fixing their conventional car business so they can." It's a matter of finite choices. GM is running out of money. As a business, are they doing what's appropriate to stay in business so that they can someday realize The Dream? No. For some reason, they would rather do an Institutional Moonshot, rather than take the steps necessary to fix their current product. They don't have the resources to do it all. Phil continues: "Like Toyota and Honda before them, they can subsidize new technology introductions through a combination of conventional sales and government incentives to consumers." Ahhh... we get down to cases... A different flavor of the Government Bailout to save a Valued Element of the National Economy. Well, it's true that the Prius enjoyed some government largesse (Toyota denies receiving funding from the Japanese government... which makes some sense because they don't share the resulting tech with Honda). Tax credits, to some extent, kick-started the market for hybrids. But that was years ago. The market for hybrids is established. Several companies took advantage of it. GM chose to let the opportunity go by. Where's the societal impetus to do it again? What happened to all the Precept money? What are my other choices? I can think of plenty of things to do with government money that make much more sense than supporting GM so that they can bring a vehicle of questionable utility to market in an completely untimely fashion. Phil Ressler: "The Volt project is exactly what I’ve described. It is the bridge to Hy-Wire or a platform inspired by the AUTOnomy idea, which yields a car dramatically different from what we think of as an automobile now. Even if GM’s own exec team seems unable to articulate this, the lineage connecting EV1 to Volt to Hy-Wire is as obvious to an outsider paying attention as Mercury and Gemini were to Apollo." This comment, the lineage of the EV1 to the Volt and on... brings me back to something else... what makes anyone think GM can actually build a Volt? Let's look at GM's record: The BAS system is a flop. The two-mode hybrid is a flop. The Volt concept went into the wind tunnel in the late fall of 2007, 9 or so months after GM had started showing it off at auto shows and committed to it and GM had to re-learn a lesson from the EV-1: aerodynamics is critical. And the Volt concept aerodyamics apparently sucked rocks. Did it occur to GM to ask, "Why does the Prius look the way it does?" Or "Where are the files from EV-1?" Or "Can anybody find the Precept files?" The perfectly conventional Camaro is late. GM is still talking about supply issues for the Malibu and the Enclave. They're going to do the world's most allegedly advanced vehicle and not lose their shirts? They've allegedly got EV-1 and Precept experience, yet they're relearning lessons from those programs? It was reported, elsewhere, "We can get anything we want." That's a really bad way to run a project. God help anyone that tells me I can have whatever I want to do a project. It will be beautiful (because I'm extremely good at what I do) but it will cost a fortune. And it will be late. There was an article - a great article - in Atlantic Monthly, recently, about the Volt project. It was blogged on TTAC. [paraphrasing...] At the beginning, the author happens to relate that, due to various schedule slips, underbody testing time will be squeezed to the minimum allowable. Towards the end of the article, the chief engineer, Farah, is lamenting something that's not going right. "Well," the author remarks, "at least as one of your top execs said, you're building on a well-tested platform, so no worries there?" Farah shoots him a look... "There's a giant hole in that 'well-tested' platform where this battery goes."

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