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Chevy Volt is exception to 'pay the rent' rule

Automotive News reports on the future of the Chevrolet Volt.


Automotive News

DETROIT--Although General Motors CEO Fritz Henderson has said that every GM model must "pay the rent," there will be at least one prominent exception: the Chevrolet Volt.

Last week GM disclosed that it had requested $2.6 billion in government loans to finance advanced technology, including tooling and development costs for the Volt and two Volt variants.

The Volt, touted as an important image-changer for General Motors, is scheduled to arrive late in 2010. Company executives previously had acknowledged that the first generation of this plug-in hybrid-powered car would not be profitable.

Chevrolet Volt
The Chevrolet Volt, shown in the Battery Lab at General Motors' Tech Center, gets special treatment on GM's balance sheet because it plays a special role. Automotive News

"We can't make money on the first Volts," said Troy Clarke, president of GM's North American operations. "But as we get a chance to change the generations of technology, we'll lose less and less."

Even the second-generation version may not make money, Clarke added during an interview last week with Automotive News. John Smith, GM's group vice president of global product planning, also participated.

The Volt's finances are important because Henderson said last week that all GM vehicles will have to "pay the rent" under a restructuring plan that GM will submit to the federal government.

Clarke said: "It's not our intention to lose money forever," so all vehicles "have to have a line in sight to be commercially viable."

Clarke is unsure whether even the second-generation Volt will be profitable. "It would be my hope that we'd be close to breakeven," he said. Most cars are redesigned every five years or so.

Also last week, Clarke and Smith said:

  • In its revised turnaround plan due to the federal government within 60 days, GM probably will plan to break even when annual U.S. sales are at 10 million to 10.5 million units. In its Feb. 17 plan, GM planned to break even at 11.5 million to 12 million units.
  • There are three serious contenders that have made offers to buy Hummer. GM is close to an agreement in principle with one of them to buy the brand. A GM source, who spoke on condition of anonymity, said GM wants $500 million for Hummer.
  • If Saturn doesn't find a buyer within the 60-day window, GM will proceed with plans to phase out the brand.
  • GM has had preliminary talks with investors about buying Saab.

Asked how a bankruptcy would affect GM's dealers, Clarke said: "Does it have an effect? I'm sure it does. Can I give you a definitive answer on that? No, because we haven't spent any time on that."

(Source: Automotive News)