March 31, 2009 at 10:57 am

Report: Volt won't power GM past Toyota

The Chevy Volt is expected to sell for around $40,000, which the government says is too expensive. (John T. Greilick The Detroit News)

The Chevrolet Volt may wow the media when it arrives in dealerships next year, but the Obama administration believes the plug-in electric car will cost too much and won't attract enough buyers.

"While the Volt holds promise, it will likely be too expensive to be commercially successful in the short-term," the administration said in its evaluation of General Motors Corp.'s restructuring plan. The car "is currently projected to be much more expensive than its gasoline-fueled peers and will likely need substantial reductions in manufacturing cost in order to become commercially viable."

The analysis was a significant blow to GM. Since the vehicle's unveiling at the 2007 Detroit auto show, the Volt has helped GM reshape its image as a more environmentally conscious company. GM parlayed the Volt into massive media coverage and has invested heavily in the program.

Despite the administration's assessment, GM remains committed to the Volt and will begin production next year. The car will drive about 40 miles on batteries only; then a gas engine will act as a generator and extend its range for hundreds of miles more.

The government also said the carmaker remains at least a generation behind other automakers -- particularly Toyota Motor Corp. -- in green technologies.

"In hybrid technology, it's hard to argue that we're not behind," said GM spokesman Rob Peterson, when comparing gas-electric hybrids. "But we believe we have a better solution."

However, GM's new powertrain makes the Volt too expensive, the government said.

The four-passenger Volt is expected to sell for around $40,000 -- more than double many gas-only compact cars and thousands more than a comparably sized hybrid sedan.

That price would certainly hurt its volume, said Jack Nerad, editorial director of Kelley Blue Book, which operates a leading car consumer Web site kbb.com.

"That's just one factor," he said. "Is it even profitable at $40,000?"

Peterson said the carmaker is finding ways to reduce the cost of future versions of the car, something that happens with any new technology. The Volt uses a much different powertrain than today's hybrids. Gas-electric hybrids have very short ranges and low speeds on electric power only. The Volt runs only on electricity.

"It's a transformational technology," Peterson said. "That's part of the reason the cost is so expensive. But we believe if you start in the right direction, as the supply base matures, the volumes of the vehicle increases and the costs will go down."

The government audit of GM's restructuring plan suggested the carmaker had invested too much time developing the Volt to leap frog Toyota's lead in green technologies.

Instead of focusing on a car that will not produce a commercial winner out of the gates, GM should focus on producing better smaller cars, the report suggested.

The Volt, Peterson said, may have garnered the most media attention because of its unique powertrain, but it is only one of many green technologies coming out of GM.

The government report didn't mention other small vehicles GM plans to debut in the coming years. They include the Chevrolet Cruze, a high mileage compact car that will arrive in America next year to replace the Chevy Cobalt, and the Chevy Spark, a stylized urban microcar.

The report also noted that GM remained too dependent on trucks and SUVs.

"General Motors has a very robust plan in place," Peterson said. "We have refinements to the internal combustion engine coming, the development of bio fuels and one of the largest hydrogen fuel cell fleets on the road today."

It will take a variety of solutions for GM to keep operating, and for the next decade the high volume vehicles will run on gasoline, Nerad said.

"Are they a market leader in small cars? No," Nerad said. "Midsize cars? No, but they're closing in with the Malibu.

"That's where the big volume is," he said, "and that's where the game is won and lost."

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General Motors workers in Detroit watch President Barack Obama's ... (Carlos Osorio / Associated Press)