GM-VOLT : Chevy Volt Electric Car Site

We are bearing witness to an apocalypse of world finance. Square in the eye of the storm is the auto industry.

Its hard to fathom the events of the past 24 hours. The President of the United States fired GM CEO Rick Wagoner, and though he specifically said the government “has no intentions of running GM,” its hard to argue that they won’t be playing a major role. This is reasonable to expect considering how much money taxpayers have already invested and will continue to invest to reorganize the company.

It seems the White House is sincere about its intent to sustain GM either with or without bankruptcy.

But how will the Volt fit in? Certainly one might feel a bit melancholy about the loss of two of the Volt’s main linchpins, Lutz who steps down as vice chairman after today, and now Wagoner who is gone.

The Volt team and its engineers, and other supportive high level VPs remain in place.

The President’s Task Force on Autos issued a brief analysis of GM business operation ahead of Obama’s announcement that explains how they determined viability. In that document the following statement is written:

GM is at least one generation behind Toyota on advanced, “green” powertrain development. In an
attempt to leapfrog Toyota, GM has devoted significant resources to the Chevy Volt. While the
Volt holds promise, it is currently projected to be much more expensive than its gasoline-fueled
peers and will likely need substantial reductions in manufacturing cost in order to become
commercially viable.

Since the government now decides what stays and what goes, could the Volt get thrown out with the bathwater? I would think not considering how important the White House views electric cars and energy independence, and their realization that new technologies are always more expensive at first.

“As the White House has said, they do not intend to run a car company, much less make product decisions. They recognize the Volt for the game changer it is. And yes, no kidding, that costs money up front. But, this is a long term play for us.” GM spokesperson Greg Martin told me. “Not to fear, the Volt is safe.”

And to be certain, on his last day I turned to none other than soon-to-be former GM vice-chairman Robert M. (Maximum Bob) Lutz.

“Thanks for your concern. Volt will survive and prosper. We know the numbers better than the Government…we furnished them! First-generation technology is expensive, but you can’t have a second generation without a first generation,” Mr Lutz wrote me in an email. “Common sense and intelligence will prevail, here!”

GM President and COO Fritz Henderson will be replacing Rick Wagoner as CEO who will be stepping down at the Obama administrations request, in order to give GM a new fresh start.

The Auto Task Force decided that they do not believe GM nor Chrysler have met the restructuring goals that were required as of March 31st. GM will be given one more chance. They will receive enough aid to permit them to operate for another 60 days. At that point if sufficient, aggressive restructuring of debt has not occurred, bankruptcy will be enforced. The government is confident though GM with proper restructuring can be a viable successful company. And per President Obama “I’m confident GM can rise again.”

Chrysler not so much. It will be supported for 30 days, but the government has concluded Chrysler is not viable as a standalone company. If they have not completed a proposed merger with Fiat by then, they too will head into bankruptcy. If successful with their merger though, $6 billion in more aid would be given. (Late word has it the merger deal has been achieved.)

The Task Force also found that GMs current plan was not viable even if the economy improved.

Though not the administrations first choice a quick, surgical 30 day bankruptcy appears to be both companies best option for survival. The government could act as debtor-in-possession during the court proceedings.

Obama said bankruptcy would not mean liquidation for GM nor would it mean it would be stuck in courts for years, but rather would mean “using legal structure as a tool,” he said, to allow the rapid formation of a lean mean GM.

The government has also offered full support of any vehicle warranties through this time. As well an auto czar name Edward Montgomery, previous deputy Secretary of Labor, has been appointed help bring all parties to the table and produce effective restructuring.

In the end, the Volt will survive this process though your GM shares may not. GM sources have specifically told GM-Volt.com “the Volt is among the crown jewels of our recovery and is not in jeopardy.”

GM’s new CEO Fritz Henderson issued the following response:

“The U.S. Treasury has said that it strongly believes that a substantial restructuring will lead to a viable GM. Over the next 60 days, we will work around the clock, with all parties, to meet the aggressive requirements that have been set by the Task Force, and to make the fundamental and lasting changes necessary to reinvent GM for the long-term.”

“We have significant challenges ahead of us, and a very tight timeline. I am confident that the GM team will succeed, and that a stronger, healthier GM will play an important role in revitalizing America’s economy and re-establishing its technology leadership and energy independence.”

“The administration has made it clear that it expects GM to expand and accelerate its restructuring efforts. I want the American people to know that we understand and accept this guidance. The road is tough, but the ultimate goal – a leaner, stronger, viable GM – is one we share.”

Full Document of Government Conclusions: (New York Times)

President Obama is set to reveal his plan to help revive the US auto industry on Monday. According to people familiar with the plan, GM’s CEO of 8 years, Rick Wagoner will be stepping down from his position. This was at the direct request of the Obama administration and with the apparent agreement by Wagoner. Other management changes are expected as well. This effectively ends Mr. Wagoner’s 30 year career at GM and illustrates the hard line position the government intends to take going forward.

On Sunday Obama said the US auto industry must be maintained but "it’s got to be one that’s realistically designed to weather this storm, and to emerge at the other end much more lean, mean and competitive than it currently is." He also said “And that’s going to mean a set of sacrifices from all parties involved — management, labor, shareholders, creditors, suppliers, dealers. Everybody is going to have to come to the table and say it’s important for us to take serious restructuring steps now, in order to preserve a brighter future down the road."

Source (Bloomberg )

One of the hottest issues of discussion regarding the Volt is its price to consumers.

As many here are aware, Tesla unveiled it Model S 4 door sedan last week. It’s hard to argue that the pure electric car isn’t beautiful, and perhaps more remarkable is that such a design actually achieved a CD of 0.265.

An argument that may be more difficult to swallow is that the car is affordable. That, however, is what Tesla CEO Elon Musk claims in a newsletter he sent out after the unveiling.

“The anticipated base price of the Model S is $49,900 after a federal tax credit of $7,500,” said Musk.  “The company has not released options pricing.”  So that price is for the 160 mile model, not the 230 or 300 mile upgrades.

He contends though that “the anticipated sticker price doesn’t tell the full story,  it’s a better value than much cheaper cars.”

“The ownership cost of Model S, if you were to lease and then account for the much lower cost of electricity vs. gasoline at a likely future cost of $4 per gallon, is similar to a gasoline car with a sticker price of about $35,000. That’s why we’re positive this car will be the preferred choice of savvy consumers.”

Musk adds “Model S costs roughly $5 to drive 230 miles–a bargain, even if gasoline were $1 per gallon.”

So confident is Tesla that these cars will sell, they intend to produce 20,000 per year beginning in October 2011 as long as their department of energy loans come through.  And that’s in the setting of a lot of stiff electric competition at the time they roll of the line, including by then a lot of Volts.

What happens if we apply Mr. Musk’s logic to the Volt?  Assume the Volt is priced at $37,400 (Wagoner said mid to high 30s).  I chose this number because it is exactly in-between the mid and high 30s, and applying the $7500 tax credit the car would effectively cost $29,900, breaching the magic 30K barrier which would make a lot of marketing sense. Now, if we  apply the same ratio Musk gives, the Volt then costs $20,930.

Do you agree with Mr. Musk?

Source (Tesla)

The Obama administration has made it clear they wish to avoid bankruptcy for GM. “We need to preserve a U.S. auto industry,” said Obama “We will provide them with some help.”

The Auto Task Force has wound down its discussion on Friday icluding meeting with Rick Wagoner and it is expected Mr. Obama will make an announcement on Monday.

Reportedly he will extend more short term aid to GM and Chrysler with a new deadline to break the negotiation deadlock with the UAW and bondholders.  This deadline is expected to be short, a matter of weeks, with the threat of bankruptcy in the event they don’t concede.

An interesting piece spells out a scenario being considered to handle such a bankruptcy.

The premise is to split GM in two. One piece would be the “good GM” containing the most successful and promosing components like Chevrolet (and the Volt), Cadillac, GMC trucks, and Buick. The bad piece would contain failed brands like Hummer and Saturn, and include bondholder debts and UAW VEBA.

The company could then go into bankruptcy court and liquididate ithe bad half while allowing the good half to rapidly emerge from protection. Debtholders could then be given stock in the new company plus proceeds from the liquidated half.

The remaining new company would be politically popular since as the government would be funding the bankruptcy, they could promote the fact to taxpayers that the new GM is viable. Consumers would be assured it is safe to buy vehilces from them.

The setting of bankruptcy court also could force the unions to accept concessions in response to threat of their contracts simply being disposed of.

Either way, Volt it seems is go.

Source (MSNBC) and (New York Times)

For a long time, the MSRP of the Chevy Volt remained a mystery. Despite the concept being unveiled in 2007, and the thousands of articles, comments, and interviews about it, the exact price of the car remained unknown up until July 27, 2010.

In the past GM claimed for a long time they didn’t know how much they would charge either. It was said it would depend on the price of gas in November 2010 when the car is launched.

“We’re not wishing for higher petroleum costs, but the economic viability of what we’re doing only gets greater with higher fuel prices,” said Bob Kruse, GM’s director of EVs and HEVs, “$1.50 gallon gas is not helping our business case.”

GM also debated whether the battery packs would be sold or leased to the customer.

The Volt is profoundly important to GM’s future viability. Speaking to how critical fuel cost is in the Volt equation, GM’s CEO Rick Wagoner had gone on record stating that a mandatory federal gas tax to keep gasoline at $4.00 per gallon minimum is “worthy of consideration.”

In early 2009 GM VP John Lauckner announced when we would finally know what the Chevy Volt’s MSRP will be. He said “we won’t set the price of the Volt until 6 months prior to start of production.”

At that time best estimates place it in the mid to upper 30s range before a $7500 tax credit.
Finally on July 27th 2010, and two CEOs later, GM announced the official price of the Chevy Volt.

It is $41,000 before the $7500 federal tax credit, which makes the effective price $33,500. As a more inexpensie option GM also announced it would leas the car for $350 per month, for three years and 36,000 miles with a $2500 down payment.

To read more details about pricing and purchasing the Volt GO HERE