GM prepared to take loss on Volt

Carmaker to stick with plug-in through initial sales; admits mistake in early hybrid strategy.

David Shepardson and Eric Morath / The Detroit News

NEW YORK — General Motors Corp. could some day sell more than 500,000 Chevrolet Volts annually worldwide, but the company is preparing to lose money "for years" on the range-extended electric vehicle, Vice Chairman Bob Lutz said Wednesday.

While speaking to a group of Volt fanatics at the New York International Auto Show, Lutz said it was a mistake that GM didn’t beat Toyota Motor Corp. to market with hybrid vehicles even though the Detroit automaker had electric vehicle technology dating back to the 1960s.

He said GM won’t make that error again, even if it means losing money on initial Volt sales.

"We won’t make a dime on this car for years, and the board is OK with that," he said. GM was hesitant to go to market with hybrids a decade ago because he said the automaker was likely to lose $250 million a year selling such vehicles.

Lutz said being late to the market with hybrids has cost GM billions in sales because it lost its image of having superior technology.

GM’s initial estimates of 60,000 to 100,000 annual Volt sales could grow five-fold, Lutz said, adding that the car is a "game changer" on par with the Ford Model T.

More than 100 Volt fans accepted GM’s invitation to attend the New York show and meet executives.

Mark Haines traveled from Melbourne, Fla., to hear more about the Volt. An electrical engineer who built his own electric vehicle, he said he’ll be among the first to buy a Volt.

"For me it’s a national security issue and we finally have technology to end our dependence on foreign oil," he said. "I have to support that."

The Volt is not GM’s only effort to increase the fuel economy of its vehicles.

Lutz said Wednesday that the automaker would have to produce 80 percent of its vehicles as some type of hybrid by 2020 to meet new, tougher fuel economy standards.

"We cannot get to 35 miles per gallon with anything resembling the current product portfolio with conventional technology," he said in an interview.

Automakers must average a combined 35 mpg by 2020 for passenger cars and light trucks, a 40 percent increase. Lutz said to meet the first increases in the requirements, GM would build about one-third of its vehicles as hybrids by 2015 — when new fuel economy standards "really start to bite."

By the end of 2008, GM will have eight hybrids. Lutz said GM will be forced to add hybrid engines "to a lot of sport utilities and pick-up trucks."

David Healy, an automotive analyst at Burnham Securities, said Lutz may be overstating how many hybrids they have to produce.

"The companies have always complained that fuel economy standards are impossible and enormously expensive and the government has always grossly underestimated the cost, and the truth lies somewhere in between," Healy said.

GM will build future versions of hybrids that are less expensive, Lutz said, "and without the premium, where today if you buy a Toyota Prius you have to live to 150 to get back the premium over a conventional car."