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Thursday March 4, 2010

Bloomberg

GM Said to Drop Volt-Based Cadillac to Focus on Plug-In Hybrids

March 01, 2010, 3:40 PM EST

By David Welch

March 1 (Bloomberg) -- General Motors Co. stopped work on the Cadillac Converj, an electric-drive coupe similar to the Chevrolet Volt, to focus on cheaper plug-in hybrids for its luxury brand, two executives with knowledge of the move said.

GM concluded that the Converj couldn’t have enough amenities and electric range to be compelling to buyers and produce a profit, said the executives, who asked not to be identified because the details aren’t public.

The decision reverses GM’s public stance of less than two months ago, when Vice Chairman Bob Lutz said the Converj was in the automaker’s plans. While plug-in hybrids can’t go as far on a single charge as a car with the Volt’s technology, their batteries are lighter and may cost less than half as much.

“The future lies in plug-in hybrids with smaller electric range,” said Eric Noble, president of CarLab, an Orange, California-based automotive consultant. Dropping the Converj is “a tacit admission from GM that they over-batteried the Volt.”

Pat Morrissey, a GM spokesman, declined to comment on the Converj.

GM plans to sell the Volt for $40,000 when the sedan debuts in November. It has lithium-ion batteries and a gasoline motor used only for recharging, not to power the wheels, and is designed to go 40 miles (64 kilometers) on electricity alone.

Slashing Range

Adapting the Volt’s technology to meet Cadillac performance and luxury standards would have bulked up the Converj with features such as larger wheels and heavier seats, slashing the car’s electric-only range to about 20 miles, the GM executives said. One of them said the cost would rise by $30,000.

GM decided to end work on the Converj in a late-January meeting, the executives said. On Jan. 10, Lutz said GM would begin making the car sometime after 2012, without giving a date. “The Cadillac Converj is cleared for production,” he told analysts on the eve of the Detroit auto show.

Like the Volt, the coming generation of plug-in hybrids from GM and other automakers will be able to replenish their batteries at household outlets. Their range on electricity will be about 10 miles, topping the 1 mile of current hybrids such as Toyota Motor Corp.’s Prius that capture power from braking.

In addition to a planned plug-in version of the Cadillac XTS sedan, GM may add plug-in technology to other models in the line, the executives said. The gasoline-powered XTS is due to go on sale in 2013.

CarLab’s Noble said a plug-in model capable of going 12 miles on a charge would need a battery costing $3,000 to $6,000, while the Volt’s battery may be $16,000. GM has said the expense will be less, without giving a figure.

Volt Outlook

GM expects to sell about 10,000 Volts in 2011, the car’s first full year of production, and has the capacity to build as many as 60,000 annually, Lutz said in an e-mailed response to questions about the car. GM also will sell the Volt overseas including China and Australia. In Europe, it will be called the Opel Ampera.

The Converj was championed by Lutz, who was put into an advisory role after Chairman Ed Whitacre took on the chief executive officer’s duties on Dec. 1.

In internal meetings, Lutz argued that the car was a fit for Cadillac because the brand’s higher prices would allow GM to recoup the cost of the technology, while other managers asserted that there wasn’t a good business case, the two executives said.

Lutz declined to comment about the Converj last week.

Toyota is also pushing a plug-in hybrid program. Starting this year, selected commercial fleet users will be able to drive a plug-in Prius that can go 13 miles on one charge. The Toyota City, Japan-based automaker will use the cars as a test program.

--Editors: Ed Dufner, Jamie Butters

To contact the reporter on this story: David Welch in Southfield, Michigan, at dwelch12@bloomberg.net.

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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