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Can the Volt electrify General Motors?

Sep 26, 2008 Business Daily, Strategy

“(General Motors) turns 100 this year, but amid the birthday celebrations it can expect a slap in the face: in 2008 GM is likely to be demoted to No. 2 among the world’s carmakers. Memories of past glory make being overtaken by Toyota all the more galling. In the 1950s and 1960s, GM poured forth a stream of innovations in design and technology. In the 1960s, it manufactured nearly 60 percent of the cars sold in America. Then, of course, the Japanese arrived, the energy crisis hit, and GM began to look like the company that never missed an opportunity to miss an opportunity”

Jonathan Rauch, The Atlantic Monthly (July-August 2008)

Jonathan Rauch’s scathing witticism about GM (“the company that never missed an opportunity to miss an opportunity”) looks cruel until you consider the history. In the 1970s, with petroleum prices shooting to unheard-of levels, GM proved incapable of building a decent small car. In the 1980s, when the Japanese began redefining quality, GM failed to respond in time. The 1990s was the era of the SUV and the minivan, and GM was again caught napping.

In this decade, GM abandoned the race for the first hybrid vehicle, leaving Toyota the space in which to introduce its successful Prius model. And as Prius won accolades for being environmentally friendly, GM prominently made the Hummer range its poster-child. Hummers may be all the rage amongst Kenya’s politicians and others challenged by taste, but they are proving to be a major liability for GM.

But now, the car-making giant is learning to dance again. Against all expectation, GM has thrown everything into a ‘bet-the-company’ strategy that will either propel it back into world leadership – or will cement its reputation for backing the wrong horses.

Rauch’s article was about the Chevrolet Volt, a new kind of electric hybrid. Andrew Farah, the project’s chief engineer, says about the concept car: “Yes, there’s a lot of risk. And yes, that’s OK. It’s not a program for the faint of heart.”

Not exactly words to reassure conservative board directors, but GM is not playing safe anymore. The Volt is a neat inversion of the hybrid idea: It will charge up overnight from a standard electrical socket. Then, it will go around 60 km on a charge. A small petrol engine will kick in to drive a generator to maintain the charge, after which the car can go on for hundreds of kilometres. In other words, the Volt is an electric car with petrol assist, rather than the other way round. The energy and monetary savings will be immense.

Will it work? This is a bold new step for GM, and sceptics abound. But competitors from BMW to Nissan are paying attention. And most tellingly, Toyota announced plans for a similar inverted hybrid. That may be worrying for GM, but it does one very important thing: it turns Toyota into a follower again. That is very, very satisfying for GM.

The wider point is this: size is nothing, history is nothing. Innovation can render anything and anyone obsolete. GM is back in the innovation game, and that is a very good thing for the industry and for car-buyers. Plug-in car, anyone?

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