Sometimes, you get the impression that Bob Lutz is the John McCain of General Motors. You know, says things “from the hip,” stuff that comes across as being revolutionary because people in his position aren’t supposed to talk that way. Stuff that, when you start thinking about it a bit more, makes no sense.
The latest comes from comments Lutz, product boss at GM, made to Wired magazine during the North American International Auto Show. According to Wired, Lutz said that the forthcoming Chevy Volt might not meet its target price of $30,000 and might, in fact, actually come in at $40,000. According to Wired, Lutz says the car’s not about sales, but prestige: “If it doesn’t work, it’s not fatal. But if it does work, it’ll be sensational.” Lutz portrayed the car as nothing technologically revolutionary – “[t]here is nothing magic about the technology” - and says that others will be doing the same three years after the Volt is introduced. “But there is no doubt you’d like to be able to leapfrog Toyota and come out with a car they aren’t ready to do.”
It brought to mind TopSpeed.com’s own questions to Lutz about the effect of price increases due to the new Corporate Average Fuel Economy standards, which Lutz projects at between $5,000 and $6,000 per car, possibly more. Asked during NAIAS if that wouldn’t make people want to keep their older cars and, thereby, drive down demand for new cars, Lutz seemed unprepared to answer the question, struggled for a while, and then said that higher new car prices would just increase the prices for used cars, narrowing the margin between new and used. Even though the predicted CAFE-caused price increase amounts to raising the real cost of a new car by 20%, Lutz expressed no worry over the effect of that increase, either on the company’s fortunes or that of the overall economy.
His bottom line seemed to be that consumers would just have to suck up and pay it.
Now, he’s apparently expressing the same idea with the Volt.
Is the price of a car no longer important at GM?
On its face, what Lutz told Wired is absurd.
If there’s “nothing magic about the technology” and it’s so easy to accomplish that others will be doing it three years after the Volt is introduced, then why wouldn’t GM be able to meet the car’s price target?
And, if there’s “nothing magic about the technology” such that it will be so quickly copied by others, then why is there an “if” in whether it will work? As in, “[i]f it doesn’t work, it’s not fatal”?
The reality is that price matters enormously in the auto business, as it does in just about all others. It’s not the only thing. Value counts, too. But value is derived by calculations that include price. Overpriced cars do not sell. Of all the car companies in the world, the one that should most and best understand this is General Motors.
If Lutz truly believes a $40,000 Chevy Volt will be a triumph, he’s wrong. In various ways, Toyota has already made it clear that its approach to green cars in the immediate future is further developing the current Prius nickel hydride battery while simultaneously cutting the price drastically. Manufacturing a lithium battery Volt at a price nearly equal to the base price of a Corvette will not be a triumph. It will only prove that Toyota was right lithium ion batteries.
A $40,000 Volt will, in fact, be a black-eye for GM, another automotive promise the company couldn’t keep. The GM of today is a vastly improved corporate enterprise – but, its public image isn’t much different from that of a decade ago. Missing the price target on a car as publicly visible as the Volt will confirm the impression that GM, when it really counts, really can’t deliver the goods.
GM made a high-stakes bet when it started showing the Volt internationally, long before the technology upon which it would need to be built had been validated, much less made cost effective. The bet was simple: conventional wisdom said GM wasn’t good enough to do it; GM said it was good enough to do it. But the “it” was on time and at a price that made the Volt mainstream. Basically, that’s what Lutz has been promising since he first stood beside the car at the NAIAS one year ago.
According to Wired, the introduction deadline for the Volt is November of 2010. Lutz told them that the deadline is so firm that whenever his internal team vacillates about it, he tells them, “What is there about November 2010 that you don’t understand?”
Well, Bob,
What is there about $30,000 that you don’t understand? 2007 Chevrolet Volt Picture Gallery
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