GM’s Volt Miscalculation Not Cost, Cachet

The Chevrolet Volt a money loser? No kidding.

Despite recent media brouhaha, that should come as no surprise to anyone and it certainly isn’t a shocker to the brass at General Motors.

No one would expect a low-volume, engineering tour de force like the Volt to make money out of the box. The car is – and always was intended to be – a ground-breaking, segment-busting public-relations play to establish GM as an environmentally conscious, technological leader.

Like the Toyota Prius before it, the Volt is a pricey dip of the toe in the Green Movement water that won’t be profitable for at least another generation or two.

But GM has known that all along. What it miscalculated on was the image-building cachet the car would bring.

Former Vice Chairman Bob Lutz pointed out long ago that GM initially whiffed on the hybrid-vehicle market, allowing Toyota to take command of the sector with its innovative Prius because the Detroit auto maker rightly determined hybrids would lose money in the short run.

In retrospect, GM should have considered hybrids a marketing expense rather than a profit center, Lutz said, and entered the fray as a way to promote its brand with environmentalists and tech-savvy early adopters, just as Toyota did.

The Volt was GM’s second chance at that. It was designed to leapfrog the Prius with its extended-range electric powertrain and shift direction of the technology-leadership spotlight away from Toyota.

Unfortunately, GM’s walk through a government-backed bankruptcy has morphed the Volt from engineering showpiece to political football. Critics are eager to bash the “Obama-mobile” at every turn, and the positive rub the Detroit auto maker hoped to get from the Volt has turned into a recurring headache that has moved GM from the offensive to defensive side of the ball.

To fix that, the auto maker needs to double down on its investment by cutting prices to get more Volts into consumer hands and win over the non-politically charged half of public opinion. That, not short-term profitability, was the Volt’s objective all along.

Yes, for now a price cut would mean even bigger per-unit losses (pegged at up to $49,000 by some estimates). But what more can the critics say?

Sure, it would be a roll of the dice, but maybe not all that bad a bet. After all, thanks to its government-funded restructuring, GM is still playing with house money.