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Is GM Building a Dream Car or a Bankruptcy Case?
It appears that GM has fallen in love. It is committing its future to a plug-in hybrid power plant, and its new beloved does look beautiful. It promises the dual benefit of virtually unlimited miles per gallon of gasoline if the owner drives only 40 miles before recharging plus offering a standard 300 mile range with refueling available with ordinary, universally available gasoline if so desired. Yes, if oil prices stay high and especially if they go much higher, the public will buy that proposition. So GM’s planned Volt, the first production model plug-in hybrid, is morphing into a whole range of vehicles that will virtually redefine General Motors, as described in the news item posted below.
The only problem is that a lot of people outside GM - including the U.S. Department of Energy - say that the lithium-ion battery on which the Volt is based cannot be produced at a cost the public would be willing to pay. Others say that with volume production, the battery cost will soon come down. So is GM betting the company on the unproven economics of an unproven battery? Or is it putting forth a dream so attractive that the U.S. government will be seduced into giving GM a cheap loan to fulfill it? Will the taxpayers own GM after the Volt - and its offspring - take over the company but fail to make a profit?
Maybe the real deal is that GM knows it has to go bankrupt to escape the uneconomical legacy costs that it cannot shed any other way. And maybe management is simply designing the most elegant possibly way of going into bankruptcy - by producing a dream car that America will also fall in love with and want to finance, thus giving political cover to the Congress that will have to authorize the take-over of GM.
GM thinks beyond the Volt
The automaker’s electric car isn’t even out of diapers, but General Motors is already thinking about a big new family.
By Peter Valdes-Dapena [Email address: autos #AT# cnnmoney.com - replace #AT# with @ ], CNNMoney.com senior writer
Last Updated: September 18, 2008: 12:52 PM EDT
GM vehicle line director Tony Posawatz with the Chevrolet Volt
DETROIT (CNNMoney.com) — The applause hasn’t died down for the new Chevrolet Volt, but General Motors is already planning where the technology for this new electric car can go next.
The Volt, which made its official debut Tuesday, is based on what GM calls the “E-Flex platform.” This new type of vehicle uses high-capacity lithium-ion batteries and will be able to go up to 40 miles on a full charge. If a driver wants to go farther, the car’s small gasoline engine will generate more electricity, allowing trips of over 300 miles.
But that technology doesn’t have to stop with the Volt, according to said Tony Posawatz, vehicle line director for the E-Flex program. Different body styles - wagons or small cars, for instance - and versions styled for different brands are under consideration for a future, improved E-Flex use.
“These are some of the alternatives that are being reviewed, even as we speak, relative to the future beyond Volt,” Posawatz said in an interview with CNNMoney.com after the Volt’s official unveiling in Detroit Tuesday.
He made it clear, though, that any discussions of E-Flex’s future are preliminary. No decisions have been made, but lots of options are on the table.
It’s not too soon for GM to be thinking about this, either, said Bill Pochiluk of the auto industry consulting firm AutomotiveCompass. Transferring the technology won’t be that hard, he said.
“Some of the systems and modules will be directly transferable to other vehicles,” according to Pochiluk. Add to that a much more competitive hybrid electric car market by the time the Volt comes out, he said.
By the summer of 2009, Pochiluk sees Honda and Toyota still dominating the market. But GM will move fast, he predicted, becoming the third biggest hybrid vehicle manufacturer with no one else even close.
Flexing E-Flex
As with any other vehicle platform, different body styles could easily be built on top of the Volt’s engineering. In the same way that the Chevy Cobalt car and HHR wagon are basically the same vehicle underneath while looking completely different, GM could easily put different “top hats,” as they’re called in the industry, on the E-Flex platform.
That would be an easy first step to extending the E-Flex’s market in different directions, Posawatz said. There are already indications that there could be an appetite.
“It’s grown beyond our wildest imaginations, the degree to which people connected to the idea of the car, the spirit of the car,” Posawatz said. “That’s given us a degree of confidence that this could be a family of vehicles in the future.”
Creating the Volt meant engineers had to clear the big hurdles the first time out.
But when you build an electric car that doesn’t have to compromise on utility or performance, Posawatz noted, “it’s easier taking it in different directions.”
The E-Flex powertrain, which is the car’s engine and electric motor, works well in a mid-size sedan carrying four passengers and cargo, so it has the flexibility to accommodate more or less demand for different vehicles, Posawatz said.
“This has a little bit of bandwidth,” Posawatz said. “This can go on a little bit bigger vehicle if necessary.” And it can be scaled down to create more economical versions, he said. With a smaller battery pack, a vehicle might not go as far without needing gasoline. But it would also cost a lot less, an appealing proposition to some.
“There are a number of customers out there that maybe a 20-mile [electric-only range] vehicle would work, and they would still use little to no petroleum,” said Posawatz.
All in on electric
Forgoing the gasoline engine altogether for a shorter-range car is another possibility, Posawatz said, but it’s one that creates problems.
First of all, it just goes against the whole idea of E-Flex. GM believes there’s less of a market for a limited-use vehicle. Why wouldn’t customers want the option (even if they rarely use it) of driving a car farther than batteries alone will take them?
Pochiluk agreed that all-electric cars just aren’t as attractive from a marketing standpoint. People will always be scared of getting stranded. “I think it’s impossible to go without a range extender when you’ve only got 40 miles,” he said.
Another problem is that electric only operation is harder on a vehicle’s battery, according to Posawatz. Repeatedly draining a battery down to near zero, will mean much shorter battery lives, he said.
“We’re only cycling it to a 50% state of charge,” with the E-Flex platform, said Posawatz, “so we’re not beating the crap out of the battery.”
For an automaker with the scope of General Motors, different branding creates many opportunities for the range-extended E-Flex. There will probably be E-Flex vehicles that aren’t Chevrolets. No doubt, Cadillac, Pontiac, Saturn and other GM dealers would love to get their own plug-in vehicles to sell.
But for now, Posawatz is concentrating on just getting the ball in play. “You always have to do the first car right and well.” 
Tags: peak oil energy investments
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18 responses so far ↓
1 paultaut // Sep 19, 2008 at 2:54 am
The Volt is a “show” car. you know, the prototypes which never leave the design room.
When the first cars were built they were handcrafted for the Rich. What this economy needs is a “Model T”. GM is trying to get funding to survive the coming onslaught of imports which do not carry their legacy costs. Too many product models employing current designs which continue to erode sales. They are like dodos laying only one egg and hoping to avoid extinction.
2 KV // Sep 19, 2008 at 5:33 am
Those who doubt should look up Tesla Motors and see what off-the-shelf Li-ion batteries can do.
40 miles per charge is at battery half life, where the engine comes in. The engine is small, runs at a fixed speed for the sole purpose of charging the batteries in the most efficient mode.
Batteries and engine - both - will be improved. I can see extended batteries pack, fast recharge engines and many other variations like the fuel cell in long term. I think Volt and its technology will turn out to be a winner.
For those Li investors: Volt reduces Li demand per car by an order of magnitude.
I understand Nah! sayers. Many said the same when Prius came out.
Key is the price. Below $30K and it is a winner. If Congress adds tax-rebates that benefits Volt like technology, GM is the winner. Instead of $50B loan package, tax-rebate incentives go to all. By mid-2009, I will be investing in GM. By the way, would like to know who is producing Li batteries for GM.
3 KV // Sep 19, 2008 at 5:39 am
And, DOE is married to the Republican b.s. to use coal forever! They advocate nuclear for the long term - like 30 years, and coal for coming thirty years.
Game changer is the natural gas for electrical generation and switch is already happening.
4 jkingsdale // Sep 19, 2008 at 7:25 am
KV: the Tesla sells for $110K. As you say, and as I said, the key is cost. A li-on battery with a small engine could be a wonderful and elegant solution - but can it be cost effective? If you believe it will work I think the best stock play is SQM, the largest lithium supplier in the world.
5 Isaac // Sep 19, 2008 at 8:34 am
Jim, SQM or LYN?
6 jkingsdale // Sep 19, 2008 at 9:32 am
SQM if you believe in the li-on battery. LYN too I think, but I’m waiting to see the stock start to move before taking a larger position. So far the stock has been a dud from my entry point at nearly $1. Profitability is supposed to be 15 months away or so. Maybe it’s too early. A purchase here could be brilliant - or not. I’d like to see some market confirmation.
7 KV // Sep 19, 2008 at 12:00 pm
Jim,
Tesla is way out of reach, but the darn thing goes for 200 miles, and zero to 60 in four seconds, and that with unoptimized laptop Li-ion cells! Tesla’s motor technology and power control electronics is very important for us, the USA, to regain the car for the 21st century.
I had heard A123 Systems(?) was going IPO and may be they are the suppliers of Li-ion cells for GM batteries. I saw Bob Lutz waving a Li-ion cell, that looked like batteries in old polaroid films. These cells are stacked up to get right voltage, current and charging characteristics.
while I am at it, Lutz’ main concern was the weight of Li-ion batteries, as it drives the structure design and space. They are already working on second generation batteries, and if you ad composite technology, by 2012~2015 timeframe, we could have Li-ion batteries powering cars for a range of couple of hundred miles, and if we also run a small recharging engine while driving 200 miles, we could easily increase the range to 300 miles or more while using may be couple of gallons of gas. GM is onto something with Volt.
Note: I have no inside info except one hour program on Charlie Rose show where he was able to go through Volt R&D center. I surmised the above from the discussions and what I saw.
8 aja8888 // Sep 19, 2008 at 12:15 pm
Maybe in the next 5 years Li/fossil fuel combination will be cost effective enough for the average family to afford a (Volt) version. But at the projected high entry price, the unproven cost effectiveness of Li battery technology, and the current competition (Toyota, Honda, others), this may be a GM pipe dream (maybe like Jim says…a reason to file the B word and clean up the balance sheet?).
My 2002 VW Golf 1.9 liter TDI (turbo diesel injected) auto gets 45 mpg, is quite roomy (5 door), a very spirited driver and that engine can go several hundred thousand miles with normal maintenance. We ARE starting to see more “clean” diesels in the U.S. now.
Another feature of diesel technology is the ability to run biodiesel, which, as we know, is a proven alternative fuel source. VW has shown a concept Golf/Polo (I believe) in Europe this year that is a diesel/electric powered hybrid and can achieve 60+ mpg.
And…since the “gas exec’s” have proclaimed we have (now) enough natural gas to last 100 years in the U.S., I would prefer to see the move to gas - powered vehicles along with hydrid diesel/electric.
That said, I believe the U.S. auto industry is starting to see a shift towards smaller, roomy vehicles that are substantially more efficient than the ones produced by GM/Ford/Chrysler in the last 20 years. What powers these new cars is becoming a mix of options over the traditional gasoline engine. And the general public is also becoming more knowledgeable than ever. GM may market the hell out of the Volt line of cars, but the average car buyer will have lots of choices going forward. So, it’s not “locked up” for the Volt, in my opinion.
9 KV // Sep 19, 2008 at 1:08 pm
aja8888 - Yes, turbo diesel is an option and we will possibly see it more of in 2009.
However, a small diesel optimally running to charge the batteries can also be used in Volt concept. But., at fixed RPM and torque a gas engine is way cheaper than diesel.
It is much easier to design and build reliably an engine that runs at a given RPM and torque. Volt motor technology is basically well established.
The real concern is whether GM will be able to execute Volt program, not just for 2010 but beyond.
There will be competition, even from used vehicles. However, people buy Prius, even when turbo diesels are available. Volt is ~3 cents a mile, and in trafic jams it is not wasting any fuel or battery energy.
GM, and Ford to an extent, have learned the real mantra, it is not the biggest, baddest engine and leather, but efficient and pleasant transportation.
10 KV // Sep 19, 2008 at 2:58 pm
In my first note I wanted to say that GM may go bankrupt for its past, not because of the Volt project.
With open checkbook corporation, it is highly unlikely for any company to go bankrupt as they can sell the debt at a loss to the open checkbook corporation, book the massive losses that will eliminate the profits for may be two generation, pay no taxes forever!
One way to break the safety-net is to create massive deficits and unservicable obligation. There will not be social security, medicare or any other stuff.
This was the grand plan of neocons and they will accomplish it before Jan 20, 2009. McCain is smart, he does not want to be President of a failed country.
11 paultaut // Sep 19, 2008 at 9:38 pm
Do not even consider GM as a purchase Unless you include their Financing Division and its exposure to all things Arcane…0% financing, etc. You are not buying a standalone Car maker.
Land Speed records, electric vehicles, Altair Nano.
12 Robert Essian // Sep 20, 2008 at 8:11 am
QTWW might be a company to look into. The Fistler do next year could make this company a bargain.
13 GILBERT P YSAIS // Sep 21, 2008 at 7:36 am
GM SHOULD GO BANKTRUPTCY….
IT WON’T SURVIVE TO SEE THE DAY THEY CAN START BUILDING THE VOLT AND START MAKING MONEY.
14 KV // Sep 21, 2008 at 1:48 pm
GM will not disappear under bankruptcy. All the pension plans will disappear. Most dealerships will change hand. Most retirement accounts will have a haircut, some trim, others full.
Volt will be bought by a Korean/Chinese company and built in Korea or China.
It will not affect GM executives, they are golden! New guys will come in and they will write new contracts.
New GM will void old warranties. Ultimately, average Joe will be holding the bag.
If Volt succeeds many of these things may be managable. After Volt is in the market, most current managers will be gone, retirement or otherwise.
15 paultaut // Sep 22, 2008 at 4:29 am
The average Joe holding the Bag, will never ever buy a GM car again, regardless of its future name if your scenario unfolds. No Asian carmaker would assume the Bad Karma willingly. Russia? Maybe.
16 Robert Essian // Sep 22, 2008 at 5:13 pm
Paul, respectfully the Big 3 (little 3) will come storming back especially if cars like the Volt are tide to their future.
Great car, great design and we need them. Lets see…
Here’s hoping because if they fail my beloved City and State will be no more.
It’s true they all may bankrupt but that’s business and if you need that to compete and save what jobs you can…
17 paultaut // Sep 23, 2008 at 2:13 am
Bob, 60,000 volts a year will not bring Detroit back to life.
IMO, what Detroit needs is to retreat from the Aerodynamic cars of today to bring back cars which were historical moneymakers.
Forget about streamlined Volts and bring back the old styles, say Mustangs, etal with the old styles thereby increasing demand as well as providing better mileage. The population is not getting younger.
All electrics remove too many parts, the unions would lose too many jobs. CNG retains almost everything and will probably get their nod. It has never been about whats good for the People but like you said and I’ve said before you, Each individual State’s needs have priority for each state above those of the Nation. Only a major crisis will change this. We are not there yet.
Mark to Market will resume its deadly march if Congress does nothing by the end of the Quarter. Thats why the implementation by the Bailout date is so important.
18 Robert Sczech // Sep 26, 2008 at 9:06 pm
The crucial question is: where will the primary energy come from to power electric cars when gasoline runs out? If that energy is going to come from natural gas, then it makes more sense to power the car with a combustion engine running on natural gas instead of producing first electricity (at 40% efficiency), then charging a battery (at a efficiency of 80%) and then discharging the battery to power an electrical motor at an efficiency of 70%.
Second point: For a given size of a battery, the mileage of an electric car depends on the weight of the car. The smaller the car, the less weight it has and the greater the number of miles driven on one battery charge. In my opinion, GM made a mistake by designing the Volt to be more like a conventional car which means high weight, hence low range. They should start by producing a flashy small car with a long range using existing battery technology.
Long term, I believe GM will not survive for one very simple reason: America does not understand the implications of scarce resources. America is still dominated by advertising an marketing.
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