Posted by: David Welch on August 6, 2010
With all the hype surrounding the pending launch of the Chevrolet Volt and Nissan Leaf electric cars, Ford's Transit Connect EV has gone almost unnoticed. It's easy to see why. When the van goes on sale later this year, it will sell primarily to commercial fleets. In the car business, there are few things less sexy than commercial vans.
Still, Ford and Azure Dynamics, the company that engineered the electric drive system for the car, may be onto something. Companies like AT&T;, which has agreed to buy a few Transit Connect EVs, have drivers motoring around all day in stop-and-go traffic. They burn a lot of fuel even though they travel fewer than 50 miles in a day, says Curt Huston, Chief Operating Officer of Azure. Since the Transit Connect EV can go about 80 miles on a charge, their needs are mostly met. The van has a 28 kilowatt-hour battery that takes six to eight hours to charge and has a top speed of 75 mph. The Leaf can go 100 miles on a charge, but it's a compact car. This is a small deliver van. For range, the Volt beats both since it can go 40 miles on electric drive and another 300 miles once the gasoline engine kicks in and starts charging the battery. Again, it's a small car. The Transit Connect will appeal to business owners.
Commercial fleet owners can install a charging station in the garage and get the vans juiced up overnight before heading out the next day. It's actually a great application. Huston says the fuel savings should return the added cost of an EV in four or five years. Unlike some of the startup EV companies, Azure partnered with Ford. That means vehicle owners can take them to a Ford dealer for service. The company will have 75 dealers to start and may add more later on.
If it takes off, building sales volume through fleet sales can help drive down the cost of the technology and make electric cars more affordable in the future. There is one catch to the whole plan. The price has to be right. Ford and Azure have not set a price yet. Commercial buyers will look at the car purely on a fuel cost savings basis. It's dollars and cents. If the car costs too much, they won't see the savings at the pump that they want as quickly as they want it, says Jim Hall, principal of consulting firm 2953 Analytics in Birmingham, Mich. The car also won't appeal to environmentalists and technology buffs the way a Volt or Leaf will. But for what its target buyer wants, Azure's Transit Connect may be the right idea.
Posted by: David Welch on August 2, 2010
President Obama served up red meat for his hard-core supporters in Detroit yesterday, proclaiming that the government's bailout of General Motors and Chrysler to be a success. Had he not intervened and invested in the two companies, Obama said, they would have fallen into liquidation and 1.1 million jobs would have evaporated. In the past year, the auto industry has regained 55,000 of the 334,000 jobs lost, he went on. "The fact that we're standing in this magnificent factory today is a testament to the decisions we made," Obama said while visiting Chrysler's Jeep Grand Cherokee plant in Detroit. His comments were aimed clearly at the critics on the other side of the political aisle who opposed the bailout 18 months ago and who still criticize government ownership of GM and Chrysler to this day.
So far, it is tough to argue that the bailout hasn't worked. GM is in the black, having reported an $865 million profit in the first quarter with black ink looking likely for the rest of the year. GM's results are strong enough that the company is preparing for an initial public offering that should start selling stock in November. Chrysler is at least making an operating profit, which puts the company in much better shape than most analysts thought it would be a year ago. With much lower costs, both companies should be able to make money going forward. Let's not forget that GM, Chrysler and cross-town rival Ford cut out 2.9 million cars worth of production capacity during the crisis, according to the Center for Automotive Research. That was a quarter of capacity in the U.S., Canada, and Mexico. Cutting out the fat has allowed them to post profits even though sales are slow.
The real test will be if the government breaks even on its investment, or at least comes close. Obama Administration officials say they are hopeful that the taxpayers will be paid back in full. GM got $49.5 billion from the feds and Chrysler took $10.8 billion. For the government to break even on GM, the company must be worth at least $66 billion, and even more if the bondholders and United Auto Workers union exercise warrants and dilute the government's investment. But nearly breaking even would still be an accomplishment. Here's what I mean: Based on where GM's bonds trade, the company is worth about $53 billion right now. That would be an 80% pay back on the government's investment if GM's stock were so valued. Stock in GM will be more liquid than its current bonds, so it should be worth even more, analysts say. But for the sake of argument, assume an 80% recovery on the $60.3 billion direct investment in GM and Chrysler. That would leave $12 billion unpaid. Would that be a reasonable price to save two industrial icons and hundreds of thousands of jobs? I would have taken that deal in the depths of the financial crisis, and I wager that most critics would have, too.
Posted by: David Welch on July 30, 2010
The Chevrolet Volt may be wearing out its welcome. General Motors has been hyping the gasoline-electric car ever since the company showed it off to the public 1,300 days ago. The company has let countless reporters into its battery labs and given interviews with its engineers, all in a very credible attempt to show that GM has smart people with good ideas. And it has worked. GM has picked up some technological credibility and fostered goodwill with the environmental crowd.
Now that GM is finally, after three and a half years, getting close to selling one, the commentariat is taking shots at the Volt. In an editorial in the New York Times today, Truth About Cars Editor Edward Niedermeyer panned the car as "GM's Electric Lemon." He criticized the car for, among other things, having bland styling and because it will likely lose GM money. Before that, "Tonight Show" host Jay Leno, a well-known car buff, also took a shot at the Volt's styling, telling the Detroit news that, "if you didn't know, you might think it's a Cobalt or a Camry."
What gives? It could be a case of Volt fatigue. Sure, documenting the tale of the car's development gave GM a great story to tell. But in the past few months the company has amped up the noise on a car that has been hyped for years. I count 14 press releases on the Volt since June, including an announcement today that GM will boost 2012 production from 30,000 to 45,000. Some of those releases were absolutely necessary, like vital information on pricing, warranty and ordering options. Others were less weighty, such as a release saying that the car can get water under the hood without the electronics going haywire. Another details a test that proves dust won't get in the car or affect its vitals while driving. The Volt goes on sale in November. At this point, it's probably time to just market the car to consumers.
Posted by: David Welch on July 15, 2010
Here's a matchup I thought I'd never see: Toyota and Tesla Motors. Toyota is a conservative money maker that likes to develop technology in-house. It has quite a nice hybrid program that the company developed while making billions selling cars and trucks. The Japanese giant shuns controversy. Yet the company is teaming up with tiny Tesla, a company that has lost $246 million on $148 million in revenue since 2007. Tesla Chairman and CEO Elon Musk is very un-Toyota, finding controversy like a moth to a light bulb. In the past, he has been in litigation with a former Tesla CEO, a past design firm he hired and has a rather public divorce going on. So what does Toyota see in Tesla?
Toyota's brain trust thinks that maybe, just maybe, Tesla might be onto something. Tesla's lithium ion battery pack strings together 6,831 cylindrical cells that are typically used for laptops. Major carmakers like General Motors and Nissan use prismatic cells, which are usually flat, resembling a thick notebook. They are larger than Tesla's cells, therefore the battery pack doesn't need as many of them. There are fewer connectors and less chance of a breakdown, says Jim Hall, principal of consulting firm 2953 Analytics. Tesla's advantage is that there is an entire computer industry out there using those small cells, so the capital costs are lower. If Tesla's battery is durable in the long run, it could be an option for carmakers.
So Toyota wants to get Tesla's battery and electric drive technology, hook it up in to a couple of Rav4 SUVs and put it through some rigorous testing. The sports car buffs who drive Tesla roadsters may give the car a thrashing on the highway, but not many people drive a $109,000 two-seater in bad weather or every day. Toyota wants to test the battery pack out and see how durable it is and how simple it would be to produce, Chairman Akio Toyoda told reporters in a round table session last week. "Tesla's battery should fail, but it doesn't," Hall says. "Toyota wants to understand why it hasn't failed." Despite its troubles, Toyota has $43.3 billion in cash. Consider its $50 million investment in Tesla as a venture capital investment. Many of those don't pan out.
Posted by: David Welch on June 28, 2010
General Motors realizes it has a nagging little marketing problem as it prepares for an initial public stock offering. The analysts, portfolio managers and potential investors that they are hoping will like their stock aren't big customers of the company's cars. So GM is mulling over a plan to open up a GM salon in Manhattan, say three people who know about the discussions. The company would rent or buy a building, outfit it with imagery for its four brands and showcase the latest cars. The idea is to get GM's best models in a place where high-fashion New Yorkers, tourists and high-rolling investors might walk by. GM does poorly in the New York metro area. GM's market share in the New York area was just 9.6% in the first quarter, compared with 18.7% in the U.S. GM's share in the New York area was 10% last year, down from 13% in 2008, according to Experian Automotive, which tracks vehicle registrations.
GM thinks that the salon would show investors and car buyers that the company's newest models are competitive. Audi has a similar display called the Audi Forum at the corner of 47th Street and Park Avenue. Audi keeps five cars on hand, including a vintage Le Mans series race car. Audi has events at the Forum. They even kept it open so Audiphiles could watch the entire 24 Hours at Le Mans race last year.
For GM, this does create a bit of a dilemma. GM wants to get in front of the hip and the well-heeled. But is this the right way to do it? The Forum works for Audi because it's a house for just one brand. There is nary a Volkswagen in sight. GM would have four brands together at a time when the company is trying to give Buick, Cadillac, Chevrolet and GMC some individuality.
That isn't what's stopping GM. Executives say they like the idea of a company showroom in the Big Apple. But Manhattan real estate is really pricey. For a company perceived by some to be on the dole--and that took some heat for giving a Corvette to near-perfect Detroit Tigers pitcher Armando Galarraga--a Manhattan marketing scheme could draw heat. GM should pay no mind. The bigger question is whether GM could differentiate its brands with this, and any other companywide marketing strategy.
