The great electric car race

High oil prices, green regs, and better batteries are behind the mad dash to create the ultimate electric automobile. So far, Asian manufacturers are leaving U.S. rivals in the dust.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Alex Taylor III, senior editor

2011_chevy_volt.03.jpg
The Volt is GM's technology leader, but it will be years before the car - which cost $1 billion to develop - makes any profit for the nearly bankrupt company.
Warren Buffett hasn't just seen the car of the future, he's sitting in the driver's seat. Why he's banking on an obscure Chinese electric car company and a CEO who - no joke - drinks his own battery fluid.More

(Fortune Magazine) -- Did a battery bring down General Motors?

Not by itself, but it helped. For several years GM has been touting the battery-powered Chevy Volt as a sign of the company's vitality and proof of its drive to become a technology leader. Former CEO Rick Wagoner drove one in Washington, D.C., last December when he went hunting for federal aid. Despite the car's limited range (40 miles between charges) and stiff price (estimated at $40,000) GM (GM, Fortune 500) had made the Volt its standard-bearer and touted it as an antidote to climate change and oil imports.

Earlier this year a GM executive declared, "We think a plug-in offering 40 miles of gas- and emissions-free driving like the Volt is the sweet spot for the majority of customers." (For those who want to go farther, a small gasoline engine acts as a range extender.)

The Treasury Department doesn't share that view. Its auto task force has cited the Volt as one reason it doesn't consider GM a viable company. As usual, the department noted, GM has been paying little attention to competitors like Toyota (TM). The 2010 Prius hybrid, which comes on the market 18 months before the Volt, can go 50 miles or more on a gallon of gas and may sell for as little as $21,000 - a lot less money for a big environmental boost.

Treasury's task force was scathing in its appraisal: "GM is at least one generation behind Toyota on advanced, 'green' powertrain development," it said. "While the Volt holds promise, it is 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."

It's just that kind of wrong-footedness that has led GM to the brink of bankruptcy. GM has no commercially successful gas-electric hybrids; it put its long-standing fuel cell efforts on the back burner; and now its big push behind the battery-electric Volt looks misguided, even foolhardy. GM has failed as badly when it comes to planning for the future as it has in coping with today's market.

It wasn't always that way. GM was the company that introduced the electric self-starter at the dawn of the automotive age, making the arm-breaking engine crank obsolete, and it developed the catalytic converter to treat tailpipe emissions. But for the past two decades it, along with other U.S. manufacturers, has been slaking America's thirst for horsepower with big V-8s while Toyota, Honda (HMC), and other Asian manufacturers have developed gas-electric hybrids that keep getting more efficient and economical. Now the Chinese are on the verge of introducing their own battery-powered cars, leaving Detroit further behind the curve.

After driving the automobile for a century, the internal-combustion engine is giving way to electric motors powered by batteries - which burn no petroleum and produce no emissions (though the electric plants that charge them may do both). Early efforts to develop battery power have focused on exotic cars with names like Tesla and Fisker made in boutique quantities, but prices are coming down and potential volumes are growing.

The U.S. has a lot of catching up to do. But just when GM, Ford (F, Fortune 500), and Chrysler need to transform their industry, they have fewer resources than ever to do so. GM, for instance, just asked the government for $2.6 billion to develop three variations of the Volt. The winnowing of brands at all three companies has been accompanied by a decline in revenue and market share as familiar names disappear and dealers vanish. Vehicles and engines will get smaller too, and automakers will have to scramble to recover the profits they used to make with larger ones. The Midwest manufacturing base will also shrink.

The process won't be pretty. The company that Walter Chrysler founded and Lee Iacocca rescued will probably see such iconic cars as the hemi-powered Chrysler 300C disappear, along with the company's private equity owner, Cerberus, whose 81% stake has been rendered worthless. GM is in the process of downsizing or dumping four of its brands, including Pontiac, which it introduced in 1926. Ford, at 106 the oldest American car company, is the healthiest, though it appears so only in comparison with its neighbors. Even it is going through resizing as it sloughs off Volvo and extinguishes Mercury through benign neglect.

Company Price Change % Change
Ford Motor Co 8.29 0.05 0.61%
Advanced Micro Devic... 54.59 0.70 1.30%
Cisco Systems Inc 47.49 -2.44 -4.89%
General Electric Co 13.00 -0.16 -1.22%
Kraft Heinz Co 27.84 -2.20 -7.32%
Data as of 2:44pm ET
Index Last Change % Change
Dow 32,627.97 -234.33 -0.71%
Nasdaq 13,215.24 99.07 0.76%
S&P 500 3,913.10 -2.36 -0.06%
Treasuries 1.73 0.00 0.12%
Data as of 6:29am ET
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Sponsors
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.