GM Officially Unveils the Volt

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General Motors Corp. lifted the cover off the production version of its Volt extended-range electric car today. But the unveiling was a bit of an anticlimax, as leaks of Volt photos, massive pre-event hype, a dismal financial first half of the year for GM and chaos on Wall Street made for a gloomy mood throughout the company’s headquarters in Detroit.

GM Chairman and Chief Executive Rick Wagoner did the honors, which were the centerpiece of the company’s centennial celebration. Calling it the car for the company’s next 100 years, Wagoner ushered in the vehicle, driven by none other than Vice Chairman Bob Lutz.

‘We’re reinventing the automobile,’ Wagoner said. But apart from giving reporters a look at the Volt’s interior, which nobody had gotten much of a peek at before, little new information about the vehicle was revealed. GM has placed huge bets on the car, reportedly investing at least $500 million in its development, as well as a ton of marketing dollars.

Still unanswered: Who will make the batteries for the Volt (A123 and LG Chem are vying for the contract); how many Volts will be produced (rumors of 10,000 in the first year of production remain unconfirmed); and how much will it cost (Tony Posawatz, vehicle line director for the Volt, declined to confirm reports that it would be more than $40,000, saying only that such decisions would be made closer to the launch date).

Oh, and about that launch date -- GM continues to say it will deliver the car in late 2010. After the event, Lutz told reporters that GM would produce about 100 of the production models in 2009 for testing around the world, and that by early 2010, the company would make ‘hundreds of Volts.’

Critics have questioned whether the program is legitimate or just a public relations effort aimed at greening GM’s image. Others suggest that the Volt is targeted at meeting California regulations requiring advanced-technology cars. Earlier this year, GM successfully lobbied the California Air Resources Board to create a special category that gives credit for vehicles that run on electricity but use a backup generator to extend range, as is the case with the Volt. GM hopes to get as much as $7,500 in government incentives for every Volt buyer, Lutz said.

Chris Paine, director of ‘Who Killed the Electric Car,’ a film critical of GM, was flown in to today’s event by GM so that he could film a sequel, which he is tentatively calling ‘Revenge of the Electric Car.’ He is among a group of electric car proponents that GM is calling ‘stakeholders’ in the project. ‘They’ve wined and dined me,’ Paine said at the unveiling. ‘I’m not an expert, but I think they’re serious.’

Overshadowing the Volt was the news on Wall Street. The collapse of Lehman Bros., the bailout of Fannie Mae and Freddie Mac, the sale of Merrill Lynch and the increasingly dire status of insurer AIG have affected almost every industry and GM in particular. Short on cash, GM depends on access to credit both for its own operations and for its customers, who need financing to purchase cars.

Automobile sales are down sharply this year, and GM has been among the hardest hit. Meanwhile, carmakers are being asked to sharply increase the fuel economy of their fleets by 2020, a government mandate that’s expected to cost the industry as much as $100 billion.

GM’s Wagoner went before a Senate committee last week to ask that Congress fully fund $25 billion in loan guarantees that were written into last year’s Energy Independence and Security Act but were never appropriated. That has been a hot-button issue in the wake of the government takeover of Fannie and Freddie, the $30 billion put up to facilitate the emergency sale of Bear Stearns earlier this year and continuing questions over government assistance for AIG.

Wagoner said today that he expected the loan guarantees would be funded. I don’t think the situation [on Wall Street] will have any impact on the auto industry loans,’ he said, adding that he was not calling for an extra $25 billion in guarantees as has been reported. I think $25 billion is a fair amount.’

A report from the Congressional Budget Office on Monday said that guaranteeing the loans would cost taxpayers up to $7.5 billion, rather than the $3.75 billion originally estimated. That’s because the cost of borrowing has risen in recent months. GM officials said that they expected the loans to be in the 5% interest rate range, far below the 16%-20% cost of borrowing cash on the open market.

David Cole, director of the Center for Automotive Research, said the loans were not a bailout. ‘It’s only necessary because of these requirements passed by the government,’ Cole said outside the Renaissance Center, where a line of vintage Corvettes was arrayed for the centennial event. He said the loan program did appear to favor domestic carmakers over foreign brands, but added that it was justified because of the long history of regulation that GM, Ford Motor Co. and Chrysler have had to comply with.

‘In any case, the cost of cleaning up a disaster is generally a lot higher than keeping it from happening,’ Cole said.

--Ken Bensinger
Photos of Volt courtesy of General Motors