Tuesday, March 6, 2012

Chevy Volt: Why production was halted and what it means

A GM spokesman said Friday that the company will shut down production of the Volt from March 19 until April 23, idling 1,300 workers at the Detroit-Hamtramck assembly plant.


The Volt was rolled out with great fanfare in late 2010 but has since hit bumps in the road. Sales have fallen short of expectations, and its reputation was bruised by an investigation into a possible fire risk.


It carries a high price tag — around $41,000 before a U.S. tax credit of up to $7,500. Rising gasoline prices should boost the Volt’s appeal, but there are plenty of other less-expensive cars that also get good mileage.


GM sold 7,671 Volts last year, below its original goal of 10,000 cars. The company stopped publicly announcing sales targets last year. It sold 1,023 Volts in February and 603 in January.


“The fact that GM is now facing an oversupply of Volts suggests that consumer demand is just not that strong for these vehicles,” said Lacey Plache, chief economist for auto information site Edmunds.com.


GM spokesman Chris Lee said the company was “taking a temporary shutdown” of the assembly line.


“We’re doing it to maintain our proper inventory levels as we align production with demand,” he said.


Why has the Volt failed to catch on? Brad Plumer writes:




GM executives have said the recent frenzy over a Volt battery fire in crash tests has hurt sales. On the merits, the fires weren’t a huge concern — the Volts only caught fire days or weeks after extreme lab testing, and according to a government investigationthey’re no more likely to catch fire than gas-powered automobiles. Still, panicky headlines ensued. Conservatives started denouncing the company (Rush Limbaughcalled GM “a corporation that’s trying to kill its customers”). And GM needed to retrofit new vehicles. Add that up, and GM sold only 603 Volts in January, down from 1,520 in December.


But the scare over batteries is only a partial explanation. After all, Volt sales rebounded in February to 1,023 vehicles sold, and it looks like the fire scare is slowly subsiding. But neither the pre-panic nor post-panic numbers were anywhere near the rate needed to meet GM’s goal of 45,000 Volt deliveries this year.


A more likely explanation is that the Volt is just far too expensive for many customers. The car gets about 94 miles per gallon, according to the EPA, but it starts at $39,195, and only upper-income buyers with a big tax bill can qualify for the $7,500 federal tax credit. As auto blogger Jonathan Welsh writes, “Even if you never used gasoline in the Volt, you’d wait about 12 years before you saved enough on gas to make up for the Volt’s price premium.” (The Volt has a gas engine that kicks in when the battery runs out.)


AP