GM Halts Volt Production To Realign Supply to Demand

As we documented earlier today, General Motors had been saying it would match Chevrolet Volt supply to demand, and in keeping with this assertion it is now it is saying it will shut down its Detroit-Hamtramck assembly plant for five weeks from Mar. 19-April 23.

Dealers had around 6,300 units on hand nationally at the end of February, which averages to a 154 day supply at current sales rates.

Closure of the assembly line at GM’s only Volt production facility means 1,300 temporary layoffs, as the company trims back inventory levels.

“We have more than enough to meet our demand,” said GM spokesperson Michelle Malcho.

Last month, GM’s self-described “halo” vehicle sold just 1,023 units. This was up from January’s 603 units, down from December’s peak of 1,529 units – and perhaps most significantly – not at all close to being on track for 45,000 North American sales initially projected for calendar year 2012.

In January, following closure of a federal investigation into battery safety allegations, GM’s CEO Dan Akerson told a U.S. House subcommittee hearing into the same issues that the company did not engineer its extended-range electric car to be “a political punching bag.”

GM’s contention is that the Volt nonetheless has been politically attacked, and its executives have been saying the company is having to “relaunch” it following a firestorm of negative press, while at the same time being forthright about the Volt’s sales not being what it would like them to be.

The company has said it has a public relations policy of “transparency” that it began prior to the Volt’s launch. It said it initiated this approach to rebuild its post-bankruptcy credibility, and sure enough, it has shown itself willing to face the music when shortcomings are apparent.

That said, of late GM has become increasingly unwilling to go so far as to make its Volt a sacrificial lamb, and within limits, it has begun fighting back with – among other efforts – advertisements on Fox News network and elsewhere, and a blog that rebuts other critics of its plug-in vehicle.

To those of us who’ve watched the process unfold day by day over the past year, it has been an eventful time with not a little drama as every reportable foible involving the vehicular centerpiece for the “New GM” and its Volt was fresh fodder for the media and the rumor mill.

It’s been said before, but may bear repeating: the most serious allegations against the Volt that its battery might “blow up” or implicitly roast its occupants alive were grossly exaggerated. No Volt has caught fire on the road to date, although in 2010 over 200,000 fires involving conventional internal combustion vehicles were reported.

Some have said the Volt represents a threat to an entrenched paradigm. Opponents have said it is a losing proposition. Ultimately time will tell, but that a fight is still on is at least certain.

Those who’ve embraced the car are fiercely loyal, if that is any indicator. Recently Consumer Reports gave it the highest owner satisfaction rating among all U.S. passenger vehicles sold today, yet the $40,000 plus vehicle has also been called pricey for a compact Chevrolet, even if incentives are available to defray the expense.

On the other hand, GM data has shown its drivers visit the fuel pump maybe once a month, or less. We could go on and on with pros and cons about the Volt’s value proposition, but will end this short by saying, ultimately it is a qualified individual decision, and will leave it at that.


  • Yegor T

    Yes, we are witnessing a full scale oil war against electric car :(
    Unfortunately oil money will continue to fight to death. :(

    Meanwhile I should say that 45,000 for 2012 was too optimistic.
    It is a new technology for 99.9% of the people and on top of it is is a bit expensive. So to buy a Volt you have to be an early adopter and you have to have money – so yes – not too many people!

    So 1,000 sales per month is a very good number – quite a few early adopters with money. Kudos to all of them!
    In comparison EV1 sold just 1,000 in 3 years!

    Price has to come down or you have to wait for a few years before sales will grow significantly.

  • Yegor T

    On the other hand, despite the oil war on Volt, with a proper patriotic campaign may be many patriotic people would buy it.

    This is what Volt supporters should do – respond with an blunt truth about US oil dependence and the truth about oil war on Volt. The result could be unbelievable!

  • Anonymous

    If they had only made a true electric car and not a hybrid. Someday the will learn from Tesla how to make a true electric car.

  • Terry Green

    I would love to own a Volt, however I cannot amortize the cost over our Prius, which we have owned for 5 years.

    Number one: we are retired, so the “Tax credit” is of little or no value to us.

    Number two: we have spent $2511 on fuel in 5 years. If gas prices were 3 times as high, it would still only make up for less than 1/2 the difference in cost (and they are not 3 times as high). Not to mention that there would still be fuel and electric costs for the Volt.

    GM has over-priced this vehicle in an attempt to quickly recoup their engineering costs and I predict that the result will be a failure in sales and the discontinuance of the Volt, which is too bad since it seems to be just what we need.

  • Elliot

    I would love to buy one but it’s too expensive for me.

  • Carl

    Those willing to pay BMW prices for a Chevette will be happy.

  • Yegor T

    But GM could turn all this bashing around with a proper blunt trues campaign! None of the current GM ads do it.

    Here is an example of the proper ad that has to be aired on Fox News:

    “Do you want to know the truth about all this Volt bashing?
    Oil money.
    Do you know that 91% of world oil is produced outside of US?
    Do you know that most of these oil producing counties hate US?
    Do you know that US import 50% of oil it consumes?
    Do you that we pay $360 billions per year for this imported oil ( at $105 per barrel) of US people’s hard earn money to sponsor foreign, hate us, countries instead of investing in US and giving a job to unemployed people?
    Do you know that factoring government subsidies and intangible effects such as environmental damage and medical costs from people’s respiratory issues, the “true” cost of gas is closer to $15 a gallon?
    That is why we build Volt.
    Design and build in America for American people.”

  • MrEnergyCzar

    It’s a shame that some influences in the country want to see the Volt’s workers laid off and the car not produced…. Who would have thought an American made car would be attacked…

    MrEnergyCzar

  • Orbit

    Psssst Don’t tell Obama, — he thinks the Volt is one of his biggest accomplishments..

    In Obama’s State of the Union address we were told General Motors is the world’s No. 1 automaker, and that is true only if you count the GM vehicles purchased by China. Obama didn’t mention China. Nor did he mention that General Motors still owes taxpayers at least $25 BILLION, or that Government Motors has resumed charitable (?) donations, not to the stock holders who lost everything, but to an opera house and an “African American Museum.”

  • Todd

    Drop the price of the Volt. I thought every businessman wanting to hook the public on something knows you do it by taking a loss initially and then make it up in volume! Toyota Took losses for about 4 years on the Prius, 1997 to 2001, and now look at them.
    GM could, no should, take the exact opposite tac and increase production while at the same time, drop the price. Thought that would be pretty obvious.

  • Raj

    Speaking of bumper stickers, remember “Yes We Can”, Mr. President? No one understands the concept better than the oil and gas industry. The main thing holding domestic energy companies back from making a stronger commitment to future domestic supplies is uncertainty. Capital hates uncertainty, avoids it like the plague. Your rhetoric may appease your doctrinaire base, but it makes domestic energy producers hold back, fearful that you will punish their success, or that you will change the rules on them in the middle of the game.

    Erasing uncertainty is the #1 thing you can do as a national leader if you truly desire to lower gasoline prices. Not only could it change the psychology of energy investing, there is still time for companies to change their 2012 investment plans.

    Below the fold is my humble 10-point plan: Things President Obama could (but won’t) do to reduce domestic gasoline prices by November 2012.

    1. Commit to a strategic goal of North American energy security. That includes reasonable and responsible domestic drilling. That includes taking the lead on the Keystone XL Pipeline; we could find a way to make it happen while addressing the legitimate environmental concerns of Nebraskans. It includes a commitment to maintaining the Trans-Alaska Pipeline System and opening ANWR.
    2. Ditch the anti-industry, anti-capitalist rhetoric. It is not the President’s or the government’s place to decide when an industry’s profitability is “high enough”. High oil company profits fund more drilling; more drilling means more future supply and lower prices. Besides, American oil companies are not owned by a cabal of wealthy executives, but by America’s pension funds, mutual funds and private investment accounts. “They” are “us”.
    3. Stop targeting the oil industry for punitive tax treatment. States such as Texas and Louisiana have production tax abatement programs that have successfully encouraged new drilling. If you don’t believe that the threat of increased taxes discourages drilling, just ask Governor Perry or Governor Jindal.
    4. Realize that Uncle Sam is in the energy business and is a partner in industry’s success. Oil and gas royalties are the federal government’s #2 source of revenue, after the income tax. Offshore slowdowns hurt not only industry and jobs, but government revenue.
    5. Recognize that industry does not need to be led by government; industry needs to be unleashed and encouraged to innovate. The resurgence of the domestic energy sector was rooted in the private sector, not matter how much President Obama and Dr. Chu would like to take credit for it. The growth in North Dakota, Pennsylvania and Texas happened in spite of the federal government, not because of it.
    6. Trust that no oil operator wants to be the “next BP”. The BP spill cost that company something on the order of $40 billion. Industry safety and environmental commitment is motivated more out of self-interest and less out of fear of the government. When it comes to federal regulation, the nation would be better served by Sheriff Taylor, not Barney Fife.
    7. Return offshore permitting to the pre-Macondo pace. Your overreaction to the BP Spill has cost on the order of 500,000 barrels per day of domestic oil production from the Gulf of Mexico. The ridiculous “Worst Case Discharge” calculation as a routine part of offshore permitting is engineering malpractice, in my humble opinion. The professional staff of the Bureau of Safety and Environmental Enforcement is capable of reasoned regulation, but they currently operate in fear of their political masters.
    8. Declare hydraulic fracturing & well design to be the regulatory domain of the states, not the EPA. Geology and environment vary widely; Pennsylvania is not Louisiana is not North Dakota is not California. It is insanity to think that one broadly-applied set of rules can be applied to regulate industry without suffocating development.
    9. Rescind the recently-enacted royalty rate increase for new onshore Federal oil and gas leases. Secretary Salazar’s stated rationale for increasing the government’s take by a whopping 50% – from 12.5% to 18.75% of gross production – was to equate onshore royalties with the offshore royalty rate. That makes no sense. Higher royalties mean less drilling, poorer economics of production and premature abandonment of wells. Besides, an IHS-CERA Study recently showed that the federal government’s total take of offshore cash flows makes the Gulf of Mexico the second-most punitive fiscal regime in the world, after Hugo Chavez’s Venezuela. [Update: In keeping with the First Rule of Holes, rolling back the royalty rate increase may be the first thing the government should do if it is serious about reducing energy prices. - Ed.]
    10. Encourage development of a nationwide distribution system of natural gas as a transportation fuel. Natural gas is clean, abundant and nearly 100% domestic. Its potential as a transportation fuel has scarcely been tapped.

    Bonus #11: Get real about the promise of alternative fuels. Recently you said: “You’ve got a bunch of algae out there; If we can figure out how to make energy out of that, we’ll be doing alright.” Maybe so, but I will stick my neck out and say it ain’t gonna happen, at least not in my lifetime, not on a scale that will impact pump prices.

    Energy policy will be a President Obama’s key vulnerability in November. His goal has always been to encourage alternative fuels by raising conventional energy prices. Alternative energy may poll well, but the average voter who fills his tank with $4+ gas on the way to the ballot box will certainly “Hope for Change”.

  • AP

    Raj, you make good points, but I’m sure you know that Obama is not interested in lowering oil prices, even if having them high hurts the economy. I don’t think he realizes or cares how tough things are on the “Average Joe” right now.

    Before he was elected, I thought he was pragmatic. Now it appears he is only an idealogue.

  • Capt. Concernicus

    @ Todd,

    —I agree with you. GM would need to do with the Volt exactly what Toyota did with the Prius. Take the loss on each one sold. However, GM isn’t in the financial position that Toyota was when it sold every Prius at a loss. I just remember back then both companies chose to invest approx. $4 billion dollars in a line of vehicles. Toyota chose the Prius, GM chose Hummer. Not sure who made the wiser choice.

    @ Yegor T,

    —Use the “patriotism card”. That works fine if people don’t know that the battery for the Volt comes from a South Korean company.

    @ AP,

    —The POTUS has very little to no ability to raise or lower the cost of oil or gas prices.

    @ Raj,

    —You have a lot of points, but I’m not sure if I agree 100% with what you say. I don’t think wanting to save or preserve the environment with strict regulations means that you are against domestic fuel production. It just means there needs to be ways to get the fuel out of the ground without killing off species, strip mining thousands of acres of land, wasting precious water resources in the west for fracking purposes and polluting water tables that humans use for drinking.

  • Capt. Concernicus

    @ Moderators of this website,

    Why did you bleep out my hydraulic fracking comment? Was it because I only used the word fracking to describe what I meant? Sorry about that.

  • AP

    Capt. Copernicus, Obama’s administration has done several things to impede increased oil production, which would reduce oil prices.

    1) He has greatly reduced the drilling in the gulf, rather than just tightening up regulations and reforming the (corrupt) federal agency that administers them.

    2) He has helped hold up drilling in Anwar, which could be done without much disruption to that environment.

    3) He has delayed or prevented the pipeline for the Canadian oil sands fields as a symbolic protest against the process. Canada WILL develop these fields; the question is whether we will buy the oil or China will.

    So yes, the president can do a lot to influence the price of oil.

  • dutchinchicago

    I am disappointed to see all these “facts” the right wing have dreamed up to get the black man out of the white house repeated here.

    Oil price is determined in a global economy. Even though the US is the largest consumer it does not mean that it has control over price. China and India are happy to take any oil the US does not want to pay full price for. There is only so much oil in the world and production capacity is not flexible. China and other developing countries are quickly increasing demand and it is just not possible to increase supply. This is the real reason why prices are up and will stay up. Anyone thinking that we can get back to $2.50/gallon gas is just naive.

    The US is currently exporting petrol (made from imported oil). Why do we need a dangerous pipeline that is bringing the worst most polluting oil into our country so that we can then sell it as petrol to China? I am sure that it is great for a couple of people (brothers in fact) to get oil to their refineries cheaper but why would the rest of the country want this?

    To get back to the article. I love my Volt. It allows me to drive electrical 99% if the time but when I need it I can continue driving and fill up anywhere in less than 5 minutes. I used to own a Leaf so I can attest to the benefits of a plug in hybrid.

    I know for sure that my next car is going to be a Volt again. It is really a great car and it is hard to understand why until you have owned one for a few months. I was pretty anti electrical car killing GM but I know must admit that they did call it right. If I had room to buy a second car it would be a Leaf but for my first car the Volt is the clear winner.

  • AP

    dutchinchicago, I’m not sure why you mentioned the president’s race. I think we need to look at these things without any prejudice.

    I stand by my points.

    You’re right that the oil market is global, but increasing production anywhere reduces the price somewhat. But I also don’t expect $2.50 gas.

    Acquiring oil from a nearby source, especially in a pipeline, also reduces transport costs, pollution, and the likelihood of a spill. They are not “dangerous.” We have them everywhere.

    Finally, I think we can all agree that we’d rather be dependent on a country like Canada than any in the Persian Gulf.

  • Capt. Concernicus

    AP,

    I guess my initial question to you is. How much (if the POTUS were to enact your changes today) could he affect the price of gas? $.25? $.50? $1? I’m just wondering because if you say $.15 I could believe that. If you say $1.50, well I would be inclined to not believe that at all.

    Whether oil from Canada is sold here or sold to China doesn’t affect the price of a barrel of oil on the global market. It just means China doesn’t buy that same amount from someone else. The price of a barrel of oil would go down a little with the introduction of a new source of oil because of Canada (depending on the bpd produced from Canada). Not because of the POTUS. True it would be easier for the U.S. to get our oil from Canada since they are our neighbors. So transportation costs would go down. Although I don’t know how much of that is factored into our gas prices and what the difference would be. Plus, it would be coming from a friendly country vs. a non-friendly country.

    The Middle East is still the biggest factor in which way the price of oil fluctuates. The fear of the Strait of Hormuz being shut down factors into price of oil a lot more than if we buy our oil from Canada or not. Or if Saudi Arabia the king of swing producers of oil decides to use it’s 3 million barrels a day of spare capacity or not.

    I beleive the combination of the Saudi’s spare capacity and the Iranian’s possibity of closing the Strait affects the market price way more than an increase of a half million barrels a day or so of production from the Gulf, Anwar, Canada or any combination thereof.

  • veek

    Looking at the math, it’s easy to understand the, ah, resistance to the Volt.

    Comparing the Volt with, say, a conventional Prius, and assuming for the sake of argument that the Volt gets 150 mpg and the Prius gets only 50, then if you drive 12,000 miles per year, you will save $800 per year with the Volt (at $5/gallon). Don’t forget, though, to add in the Volt’s extra cost (probably several times the annual fuel saving). Add the extra electric costs for the plug-in, and the high-amp plug. Although many states tax cars based on expense, let’s consider that a wash, and let’s assume insurance costs are identical.

    Now, consider the Really Big Cost for any new car — Depreciation. It’s probably safe to assume the Volt will depreciate significantly faster than the Prius. All of a sudden, the Volt seems like a relative money pit. But wait — if you plan to hold on to the car long term, you need to consider repair costs, and here, you are comparing the record of Toyota to GM (and be realistic). The Prius is also kind of a known quantity by now, so the Uncertainty Cost is less, and it’s kind of iconic, so people aren’t bothered by the “you say you paid how much for it?” questions. Of course, you can say the Volt is saving teh environment from an extra 160 gallons of fuel per year, but for all that extra money, there are probably other ways to save that much fuel (if he wanted to, the president could probably save that much fuel hundreds of times over by taking one stay-cation in DC instead of using Air Force One on one of his frequent Hawaiian vacations or fundraisers — uh, reported working vacations/fundraisers. Of course ;-] ). If you want to Buy American (hey, it’s our money), the new Fusion hybrid will apparently have mileage costs fairly close to those of the Prius in the second paragraph above, it is a better overall car, it is cheaper than the Volt, and it is using a more established system than the Volt’s.

    Maybe the math helps explain the surplus Volts. Yes, at the risk of making a real groaner, the math for the Volt kind of Hertz!

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