G.M.’s Electric Lemon
By EDWARD NIEDERMEYER
GENERAL MOTORS introduced America
to the Chevrolet Volt at the 2007 Detroit Auto Show
as a low-slung concept car that would someday be the
future of motorized transportation. It would go 40
miles on battery power alone, promised G.M., after
which it would create its own electricity with a gas
engine. Three and a half years — and one
government-assisted bankruptcy later —
G.M. is bringing a Volt to market that makes
good on those two promises. The problem is, well,
For starters, G.M.’s vision
turned into a car that costs $41,000 before relevant
tax breaks ... but after billions of dollars of
government loans and grants for the Volt’s
development and production. And instead of the sleek
coupe of 2007, it looks suspiciously similar to a
Toyota Prius. It also requires premium gasoline,
seats only four people (the battery runs down the
center of the car, preventing a rear bench) and has
less head and leg room than the $17,000 Chevrolet
Cruze, which is more or less the non-electric
version of the Volt.
In short, the Volt appears to be
exactly the kind of green-at-all-costs car that some
opponents of the bailout feared the government might
order G.M. to build. Unfortunately for this theory,
G.M. was already committed to the Volt when it
entered bankruptcy. And though President Obama’s
reported in 2009 that the Volt “will likely be
too expensive to be commercially successful in the
short term,” it didn’t cancel the project.
Nor did the government or G.M.
decide to sell the Volt at a loss, which,
paradoxically, might have been the best hope for
making it profitable. Consider the Prius. Back in
1997, Toyota began selling the high-tech,
first-of-its-kind car in Japan for about $17,000,
even though each model cost $32,000 to build.
By taking a loss on the first
several years of Prius production, Toyota was able
to hold its price steady, and then sell the
gas-sippers in huge numbers when oil prices soared.
Today a Prius costs roughly the same in
inflation-adjusted dollars as those 1997 models did,
and it has become the best-selling Toyota in the
United States after the evergreen Camry and Corolla.
Instead of following Toyota’s
model, G.M. decided to make the Volt more affordable
by offering a $350-a-month lease over 36 months. But
that offer allows only 12,000 miles per year, or
about 33 miles per day. Assuming you charged your
Volt every evening, giving you 40 miles of battery
power, and wanted to keep below the mileage limit,
you would rarely use its expensive range-extending
No wonder the Volt’s main competition, the Nissan
Leaf, forgoes the additional combustion engine —
and ends up costing $8,000 less as a result.
In the industry, some suspect
that G.M. and the Obama administration decided
against selling the Volt at a loss because they want
the company to appear profitable before its
long-awaited initial stock offering,
which is likely to take place next month. For
taxpayers, that approach might have made sense if
the government planned on selling its entire 61
percent stake in G.M. But the administration has
said it will sell only enough equity in the public
offering to relinquish its controlling stake in G.M.
Thus the government will remain exposed to the
company’s (and the Volt’s) long-term fate.
So the future of General Motors
(and the $50 billion taxpayer investment in it) now
depends on a vehicle that costs $41,000 but offers
the performance and interior space of a $15,000
economy car. The company is moving forward on a
second generation of Volts aimed at eliminating the
initial model’s considerable shortcomings. (In
truth, the first-generation Volt was as good as
written off inside G.M., which decided to cut its
2011 production volume to a mere 10,000 units rather
than the initial plan for 60,000.) Yet G.M.
seemingly has no plan for turning its low-volume
“eco-flagship” into a mass-market icon like the
Quantifying just how much
taxpayer money will have been wasted on the hastily
developed Volt is no easy feat. Start with the $50
billion bailout (without which none of this would
have been necessary), add $240 million in Energy
Department grants doled out to G.M. last summer,
$150 million in federal money to the Volt’s Korean
battery supplier, up to $1.5 billion in tax breaks
for purchasers and other consumer incentives, and
some significant portion of the $14 billion loan G.M.
got in 2008 for “retooling” its plants, and you’ve
got some idea of how much taxpayer cash is built
into every Volt.
In the end, making the bailout
work — whatever the cost — is the only good reason
for buying a Volt. The car is not just an
environmental hair shirt (a charge leveled at the
Prius early in its existence), it is an act of
political self-denial as well.
If G.M. were honest, it would
market the car as a personal donation for, and vote
of confidence in, the auto bailout. Unfortunately,
that’s not the kind of cross-branding that will make
the Volt a runaway success.
Edward Niedermeyer is the editor of the Web site The Truth About
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