High gas prices and a tightening of consumer credit just recently drove people away from the profitable SUVs and helped lead to Ford's current problems. The company is now trying to reinvent itself with the Flex, a crossover vehicle whose success or failure has yet to be determined.
The Volt might be a great car, but many people have doubts it can save GM.
President Obama's administration raised doubts about the Volt in its review of GM's viability plan. The report said that GM earns a large share of its profits from high-margin trucks and SUVs, which are vulnerable to a continuing shift in consumer preference to smaller vehicles.
"Additionally, while the Chevy Volt holds promise, it will likely be too expensive to be commercially successful in the short term," Obama's team wrote.
"GM is at least one generation behind Toyota on advanced, 'green' powertrain development. In an attempt to leapfrog Toyota, GM has devoted significant resources to the Chevy Volt," the report said. "While the Volt holds promise, it is currently projected to be much more expensive than its gasoline-fueled peers and will likely need substantial reductions in manufacturing cost in order to become commercially viable."
Nerad also said the cost would be a major issue for GM.
"It can certainly change perception about General Motors but there has to be some skepticism about whether or not it can sell in sufficient numbers profitably to markedly affect GM's bottom line," Nerad said. "It could be enough to help a company redefine itself. Beyond sales, look what Prius has done for Toyota."
Nerad said what GM really needs are some hit conventionally powered products.
Phillippi concurred, saying that "the Volt is obviously going to be expensive. It's going to entail a lot of new-applied technology. It's not going to be an economy car."