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Will the Chevy Volt save the world?

Please! It isn't even enough to save General Motors.

By Alex Taylor III, senior editor
September 23, 2008: 9:00 AM EDT

GM says it will have the Chevy Volt in showrooms in 2010.

NEW YORK (Fortune) -- Given the prolonged drum roll of publicity that accompanied the unveiling of the Chevrolet Volt electric vehicle last week, it isn't surprising that any number of onlookers got caught up in the enthusiasm. When people begin referring to it as a "game changer" and a "paradigm shift," it's time to inject a bracing dose of reality.

To put the Volt in perspective, it is an expensive, low-volume automobile that will have no visible impact on GM's market share, CAF average or profitability. One cynic calls it "a Viper for tree huggers."

Start with the sales numbers. The best available estimates are that the Volt will sell for around $40,000 and that production volume will be in the "tens of thousands." That gives it more in common with a Cadillac sedan than a Chevy Cobalt. Nor will the Volt make any money. GM (GM, Fortune 500) executives concede that, given the cost of development, the first generation of Volt vehicles will not be profitable. This project isn't going to turn GM into a money spinner.

Second, although GM revealed what the Volt will look like last week, the car is far from ready for production. Developing the advanced lithium-ion batteries required to power the Volt and getting them ready for production is an enormous undertaking. No one has ever built auto-sized batteries of this description in significant quantities. Worse, GM has yet to sign a contract with whomever it is will supply the batteries. GM has promised to get the Volt into showrooms by November 2010, but it could be many months after that before significant numbers are available.

Even if GM can meet its deadlines and the Volt turns out to be a huge success, it isn't going to matter to most people. At best, it will become a second or third car in the garages of the affluent. Yes, it is designed to go 40 miles to a charge of electricity. But it won't be economical for long trips after the batteries lose their charge, because it will be hauling around hundreds of pounds of excess weight in those non-productive batteries, and its performance is lousy - zero to 60 miles per hour in around nine seconds. Most cars in the $40,000 class get to 60 in well under eight seconds.

If you want a car for everyday use that scrimps on gasoline, Toyota (TM) can sell you a very nice Prius based on proven technology that costs a lot less. To be sure, the Volt will look more upscale and include nifty technology features like a liquid crystal instrument panel that the driver can configure for himself. Sniffed a GM spokesperson: "The Prius is a stripped-down Corolla. The Volt is drastically different. Just compare the interior." Still, the price difference between a $40,000 Volt and a $25,000 Prius will cover a lot of operating expenses.

So why is GM lavishing so many scarce resources on a rather impractical vehicle? Its original plans to make fuel cell cars the avatar of its technology appear to have foundered on a variety of problems, including infrastructure for hydrogen refueling. It is hoping the Volt will help it regain bragging rights from Toyota. Mike Jackson, CEO of Autonation (AN, Fortune 500), the largest chain of car dealerships, is a fan of Volt. He calls it "a very compelling environmental and technology statement." But he adds: "Profit generator? No way. It is a sure loser. You will have to charge the losses to the corporate image campaign."

So give GM credit for taking the plunge with unproven technology that may actually help the environment and reduce gasoline consumption. And wish the automaker well as it starts its second century having dug a very deep hole for itself in North America. But keep the Volt in perspective. Except for its celebrity appeal, the Volt is about as relevant to the survival of GM, much less the world, as Paris Hilton is to the future of Western civilization. To top of page

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