Incremental Gains to Make Chevy Volt Profitable; GM Satisfied With EPA Label

DETROIT – General Motors Co. executives call the new-for-’11 Chevrolet Volt a key first step in the electrification of all its products, while also confirming long-held assumptions the car will not make money in the first years of production.

Speaking at an event here to launch shipments of the first batch of Volt extended-range electric vehicles to commercial and retail customers in select markets, GM North America President Mark Reuss calls the car “an investment in the future of the company.”

“This is a technology-based business,” he says. “This is an investment in the future, and we will continue to innovate.”

GM will sell the Volt for $41,000 and produce about 10,000 units from the start of builds late last month through the end of next year.

In 2012, the auto maker plans to reach production capacity for the Volt at its Detroit-Hamtramck, MI, assembly plant here with about 45,000 units annually for U.S. consumption. Including export to markets such as Canada and China, capacity could reach 60,000 cars annually.

However, the typical all-new vehicle program for an auto maker averages $1 billion. Given its sophisticated technology, the Volt likely will cost much more to develop, build and sell.

GM CEO Dan Akerson says the auto maker intends to lower the cost of producing the Volt partly by spreading elements of its technology to every model it makes over the next 20 years. “So the Volt is an important first step.”

GM CEO Dan Akerson (right) flashes “V” for Volt after driving car on stage at Detroit-Hamtramck, MI, assembly plant.

Doug Parks, vehicle line executive for the Volt, tells Ward’s on the sidelines here, “In reality, it won’t be profitable at the beginning.”

But instead of waiting to bank on cost and efficiency gains with the second-generation Volt, which may not come for another five or six years if it follows a typical vehicle program redo, GM will look to take cost out every year.

“It is our hope, every year as we have opportunity to improve the performance and even take cost out, that at the end of the first lifecycle we make money,” Parks says.

He also says GM is on a path to improve the performance of the Volt’s propulsion system, where battery power propels the vehicle for the first 25-50 miles (40-80 km) before an internal-combustion engine takes over to generate electricity for another 300 miles (483 km) of range. But real savings will come from reducing costs.

That puts the onus on reaching the targeted sales volume of 45,000 units annually in the U.S. While the cost of the Volt’s advanced lithium-ion battery will not decrease significantly in the coming years, Parks does see incremental savings in the near future.

“We’re developing technology that can lead to minor increases in performance but a big cost reduction,” he says, citing specifically expensive high-voltage power electronics.

Chevy Volt window sticker indicates 93 MPG-e.

Parks says demand remains high for the vehicle, and the 10,000 units the auto maker will build for the U.S. through next year “are gone.”

“And there’s really no plan to change that slow ramp-up through next year,” he says. “Then, when we really open it up in ’12, we’ll build our planned volume and see what the market says. If we want to do a lot more, we’ll look at it.”

Parks also expresses satisfaction over the window sticker the Volt received from the Environmental Protection Agency ahead of GM’s holiday break last week.

The sticker, which GM needed before it legally could sell the Volt, indicates a miles-per-gallon equivalent of 93 combined-cycle miles (2.5 L/100 km). The closest competitor right now is the all-electric Nissan Leaf arriving at dealers later this month, which gets an estimated 99 mpg-e (2.4 L/100 km).

The Volt’s sticker also shows a gasoline-only fuel economy of 37 mpg (6.4 L/100 km). The estimated annual cost if the owner remains in all-electric mode entirely is $601, and $1,302 if run on gas only.

The EPA rates the Volt as the most-efficient vehicle in the compact-sedan segment at a combined 60 mpg (3.9 L/100 km).

But perhaps the Volt’s best testimonial of the day comes from Akerson, who says he and his wife have been driving one exclusively for the last six weeks. He says they have consumed 1.2 gallons (4.5 L) of gasoline after plugging in every night. They’ve traveled 452 miles (727 km).

“I have not seen a gas station in six weeks,” Akerson says.

GM announced shipments of the first batch of Volts today during the celebration here at the Detroit-Hamtramck plant, with hundreds of GM employees, United Auto Workers union members and state and local dignitaries in attendance.

Former GM Vice Chairman Bob Lutz, who championed the Volt and called it the most exciting vehicle program of his long career, also is here as a special guest.

In addition, GM reveals it will hire 1,000 engineers and researchers beginning this year to assist with its vehicle-electrification plans. And the first Volt for commercial use will head directly to the auto maker’s heritage collection, while the second will be auctioned online to benefit Detroit schools.

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