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When Cynicism Pays Off

November 9, 2009, 11:32 am

Those of us who accused Chrysler and GM of hyping their electric car programs merely as a honey trap to capture money from the Obama Administration were accused of being ridiculous cynics.  But...

Chrysler has disbanded a team of engineers dedicated to rushing a range of electric vehicles to showrooms and dropped ambitious sales targets for battery-powered cars set as it was sliding toward bankruptcy and seeking government aid.

The move by Fiat SpA marks a major reversal for Chrysler, which had used its electric car program as part of the case for a $12.5 billion federal aid package.

As late as August, Chrysler took $70 million in grants from the U.S. Department of Energy to develop a test fleet of 220 hybrid pickup trucks and minivans, vehicles now scrapped in the sweeping turnaround plan for Chrysler announced this week by Fiat CEO Sergio Marchionne.

I don't know if you remember, but during the GM bankrupcy deliberations, the airwaves were flooded with commercials for the Chevy Volt.  Seen one lately?  It is clear in retrospect those messages were political ads seeking subsidies, not marketing ads seeking to sell cars.

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Category: Government
  • K

    Clearly GM and Chrysler grabbed whatever subsidy money and/or outright gifts they could get. Chrysler, being both the weakest and the most poorly run, needed the most help.

    Both got a lot of help but another and more total failure seems certain. IMO the only question is how much good money will follow bad into this particular black hole of government bailout and fantasy. Let historians sort out who was to blame.

    Another bad aspect is the effects upon Ford. Every government $ used to prop up Chrysler and GM makes the survival of Ford more difficult. It keeps competing vehicles on the market while giving the Ford UAW workers less reason to face reality. It also gives creditors and stakeholders less reason to provide capital to Ford.

  • Michael

    I don't see the Volt ever being a success. The potential market is too small. You need people with suburban homes with a garage free of crap and wired to charge the thing. The price, even with government rebates, makes it unavailable to most people. Plus how many people are going to risk 30 some thousand dollars on version 1.0 technology from a shaky company even if GM gives it a lifetime warranty on everything.

    I don't even know if GM has a working prototype. The volt they took to Washington for the hearings was a non functional mock up rigged to move a few hundred yards and the release date is now 2011. GM has a better chance of being in bankruptcy than getting the volt out.

  • James H

    "Plus how many people are going to risk 30 some thousand dollars on version 1.0 technology from a shaky company even if GM gives it a lifetime warranty on everything."

    This made me think of the movie "Tommy Boy" where Chris Farley is trying to sell brake pads to auto retailers. He talks to some of his customers about lifetime warranties, etc. Anyway, you always wonder whose lifetime the warranty will end up covering, yours, the car's, or just the company offering the warranty.

    I think that O offered some government-backed warranty for GM and Chrysler cars, but this doesn't seem any better. Once the black hole is big enough or the leadership changes in the government, the companies may be dissolved anyway.

  • Nick S.

    "I don’t see the Volt ever being a success. The potential market is too small. You need people with suburban homes with a garage free of crap and wired to charge the thing."

    That criteria covers 95% of my extended family, and a large majority of the Midwest. If the price were in the $20,000-30,000 range, it would definitely have a market here. Low 30s would probably be acceptable too if Chevy had a better reputation.

  • Michael

    This from Coyote's battery site.

    Chevy's taking a moment to clear up some misconceptions about its eagerly anticipated plug-in hybrid, the Volt, which had long been assumed (by most) to use its gasoline-powered engine like a WWII submarine -- kicking on and charging the batts to full before switching off again. Alas, that's close but not completely accurate. The engine does serve only to feed the batteries (it's not connected to the wheels in any way) and will fire up when they are getting low. However, it will not fully recharge them, serving only to maintain a 30-percent charge as you keep on motoring. In other words, you'll need to plug that puppy in overnight if you want to get back to silent running and successfully avoid detection by destroyer battlegroups on your morning commute.

    With a Volt, which you're only filling with 8 kwh of energy, you can do that today without batting an eye." At 120 volts, Posawatz said, a depleted Volt battery pack will recharge in six to eight hours, drawing 12 amps. Most household circuits supply at least 15 amps. If the only circuit available is a shared one, he said, the owner will be able to flip a switch and draw only 8 amps to prevent blowing fuses. At this level, recharging a depleted battery takes longer than eight hours, but Chevy won't be more specific at this early stage.

    I think as more information comes out on this car, the more people are going to want to pass. I checked Duke's rates and this car would cost $4 to $5 a day to use plus gas.

  • Tom Wilkinson at GM

    The Chevy Volt is still on schedule and headed for production, so please don't lump it in with the Chrysler program. Stay tuned for further updates at the upcoming LA auto show.

  • Tim

    I'm sure that Tom can add a lot more than I can about this; but GM had Volt mules (I believe they're using Impala bodies) running powertrain durability testing since last year -- so the technology is there.

    Also, a more careful reading of Chrysler/Fiat's announcement will show that they disbanded the separate battery-electric vehicle powertrain group; in favor of integrating the function into their existing vehicle teams. This is the much smarter way to do it -- you create a platform that can accomodate both traditional powertrains and hybrid/electric powertrains, and this lets you share cost. You can also do it the way GM has -- by creating an electric/hybrid platform that you can share among multiple brands; such as the just announced Cadillac Converj as a production model on the same platform.

  • YT

    Waren,

    Congrats on getting "zero hedged". In a few years time, I think that will be equivalent to getting "slash dotted" but for economics/finance nerds instead of just regular nerds.

  • http://islandturtle.blogspot.com Corky Boyd

    Anyone who thinks this decision was made anywhere other than Washington better take a reality check. The reason it was made is Chrysler simply won't be around in the 5 years it would take them to market an EV or PHEV. GM will be made to take over the remnants of what was Chrysler. GM has at least a 4 year lead on EV technology development. Chrysler would simply be reinventing the wheel and then throwing it in the trash bin.

    It's a bad sign for Chrysler that Washington doesn't see them being the vanguard for clutting edge eco vehicles. It doesn't want to throw good money after bad.

    Governments just don't like to run two competitive operations. How many government owned railroad companies does France have? How many postal delivery services are owned by the US federal government? How many airlines are owned by the Italian government?

    Answer to all: One.

    Bye bye Chrysler