Plugging Into the Future: GM Banks on Chevy Volt

Aug. 1, 2008— -- For years, the sale of gas-guzzling power vehicles drove General Motors to the top of the industry.

But today GM reported second quarter losses of $15.5 billion. Last year the company not only lost more than $40 billion, it also lost its place at the top, getting beaten out by the smaller, more fuel-efficient cars made by Toyota.

"I think the basic economics are changing people's view on what they really want to have in their driveway. As oil becomes more expensive, people are putting a much higher premium on cost efficiency," said Rick Wagoner, the chairman and CEO of General Motors. "It's clear to us that large numbers of people used to buy large SUVs and pick-ups, and I don't think they're going to come back to that category given the high cost of energy."

As the relationship between the automobile industry and the oil business evolves, Wagoner said this "marriage of convenience" may not last.

"We're not saying we won't continue to produce vehicles that run on oil, but I think we won't, five and 10 years from today, have 98 percent of the power for vehicles supplied from oil," he said.

In fact, GM said that in just two years the company will introduce a fully electric vehicle called the Volt -- a battery-powered car that only uses gas to recharge the battery, not to drive the engine. In road tests, the car travels about 40 miles on a fully charged battery before the gasoline-powered battery generator kicks in. From that point onward, the car can travel up to 400 miles using only six or seven gallons of gas.

'We Are at a Tipping Point'

It has been said that this may be the miracle to save GM.

"This is an important part of the future of General Motors, no question about it," said Larry Burns, vice president of GM research and development.

The Volt won't hit streets until 2010 and its final design is under wraps.

"I think we are really at a tipping point for our industry. We've been [for] almost 100 years pretty much fully reliant on petroleum," said Wagoner. "And I think it's clear, both the way things are today and the ways they're going to go in the future, that we're going to have to develop alternative sources of power for vehicles, and we think electricity is going to be a winner long term."

Last week, GM partnered with the nation's top utility companies to start working on a plan to cheaply and efficiently power up electric cars.

"[The utilities] will have to add capacity," said Wagoner. "Whether it's nuclear, whether it's solar, there is no question that they are thinking about the best way to add capacity that we might generate through this sort of vehicle."

'We Are Going to Lead the World'

This isn't the first time GM has tried to electrify the market. Back in 1996, the company introduced the EV1, the first battery-powered car with zero emissions.

But GM said consumers weren't ready to be plugged in. So it scrapped the EV1 and went back to making trucks. Some said it's a sign that GM's commitment is to its bottom line, not the environment.

During a closed-door meeting in January, GM vice chairman Bob Lutz told journalists that global warming is a "total crock of s***," describing the need to replace oil as a greater concern than carbon dioxide levels.

"For sure climate is changing," Wagoner said. "And so our job ... is to offer a future vision for our industry where we can help address the issue and take concerns off the table rather than contribute to them."

Current fuel economy regulation laws state that by 2015 cars should be able to run 31.6 miles per gallon. By 2020, they need to hit 35 mpg. That's not an easy proposition for GM's SUVs and trucks.

"We are not only working on new technologies that will break through and lead us in the future, but we have to improve our current product portfolio quite a bit," Wagoner said. "I think with this technology, we are going to lead the world, and our desire is to lead the whole industry to the next plateau."

There are some skeptics out there, such as George McGregor, president of the United Auto Workers Local 22 labor union in Detroit, Mich., who believes it will take a revolution for the majority of Americans to accept a plug-in car like the Volt.

"I think it's true to say that some consumers will adapt more slowly than others, but from the reaction I've seen … I don't think we will have any problem," Wagoner said. "I think people will be lined up to get into this kind of vehicle."

The Hydrogen Debate

General Motors may be hoping electric cars will energize the industry. But there is another way: hydrogen.

"It's phenomenally clean," said Tom Baloga, vice president of engineering at BMW. By 2012, just two years after Volt hits the market, BMW plans to introduce the Hydrogen 7, a hybrid that can run on ultra-clean liquid hydrogen. The company is testing 22 of these vehicles in the United States.

BMW's hydrogen-powered car runs on both gasoline and hydrogen fuel, and can go about 125 miles per tank of hydrogen, compared to the Volt's 40 miles on its initial electrical charge. Hydrogen burns clean and emits only water, but the fuel used by BMW for its test vehicles is extracted from natural gas, a fossil fuel. Hydrogen can also be made from water in a process powered by electricity, but the technology still has a long way to go before it is efficient.

"Today, using a battery is more efficient than using hydrogen, but we have to think about the future," Baloga said. "We have to think about the big picture. Where do we need to be in the year 2050? 2060? 2070?"

In addition to fuel, there is the problem of infrastructure. Hydrogen fueling stations will need to be built across the country. BMW says they are coming up with the technology to make a hydrogen-powered car possible, and it will be up to Congress, business and the public to develop the rest.

And of course, there's the cost. The projected sticker price of the BMW Hydrogen 7 is more than $100,000. The Chevy Volt will be about $30,000.

"The combination of battery electric vehicles and hydrogen powered vehicles is probably what the future holds," said Baloga.

So for now, the fastest route to a greener future seems to be electric.

ABC News' Carrie McGourty contributed to this report.