Will Detroit's cash crisis kill the electric car?

Kevin Krolicki and Nichola Groom, Reuters 18 Nov 08;

LOS ANGELES (Reuters) - Call it an economic and environmental murder mystery in the making: Will a cash-strapped Detroit kill the electric car -- again?

Stung by an association with gas-guzzling SUVs and pushed to the brink of failure by plunging sales, U.S. automakers have been touting efforts to roll out more fuel-efficient small cars, gas-saving technology and gas-free electric vehicles.

The star of that marketing show has been the Chevy Volt, a rechargeable car that General Motors Corp is designing to run 40 miles on battery power, meaning some commuters would never need to fill up with gas.

But with its cash dwindling and U.S. auto sales crashing to 25-year lows, GM has joined Ford Motor Co and Chrysler LLC in seeking $25 billion in federal handouts, which are under consideration this week by the U.S. Congress.

That has critics concerned that a meltdown for Detroit could delay the rollout of green cars like the Volt. Others see a chance to prod GM and rivals to move faster as a condition of providing funding the industry says it needs to survive.

Because plug-ins like the Volt can be recharged from a cleaner-burning electric grid, proponents see them as the best way in the near term to reduce oil consumption and greenhouse gas emissions from traffic on America's roads.

GM has said it is protecting its investment in the Volt ahead of the vehicle's planned 2010 launch even as it scrambles to slash $15 billion in costs elsewhere.

EV1

"I think right now we're in what I call a serious Act Two moment with oil prices down and money tight," said Chris Paine, whose 2006 documentary "Who Killed the Electric Car?" chronicled GM's controversial decision to scrap an earlier electric car marketed in California as the Saturn EV1.

Paine, who has been working on a Volt-centered sequel, said U.S. automakers would have been better able to weather the current crisis if they had listened to critics who blasted them for turning away from electric cars earlier this decade.

"This may turn out to be the biggest blunder ever for these companies," he said.

GM Chief Executive Rick Wagoner showcased the automaker's commitment to return to making a mass-market electric car at the Los Angeles auto show two years ago.

That reversal by GM combined with an open approach to the Volt's development won over many of the automaker's harshest critics. GM has built on that good will by featuring the Volt in full-page newspaper and TV advertisements, two years before the vehicle will go on sale in limited numbers.

"I think it's somewhat ironic but also encouraging that GM was the first back into the fray," said Chelsea Sexton, who helped market the EV1 in California and has become an advocate for plug-in cars. "There's a humility there that people respond to. Detroit has been knocked down but it's not out."

But with Wagoner due in Washington this week to testify on the proposed bailout for U.S. automakers, GM dropped plans to make an announcement on the Volt's battery supplier at the Los Angeles auto show this week, people briefed on the automaker's plans have said.

Jacob Grose, an analyst with Lux Research who follows the alternative power and energy storage industry, said projects like the Volt could risk delays in the current economic climate.

"GM has pretty much bet the farm on the Chevy Volt and plug-in hybrids and certainly any major economic disruption to the company -- any kind of bankruptcy filing or anything like that -- for even the most high priority launch as this is would clearly be, would push it back a couple of years," he said.

SHOW STEALERS

Nissan-Renault chief Carlos Ghosn is expected to use his keynote speech at the L.A. auto show to highlight Nissan's push toward more environmentally friendly cars, including plug-ins.

Hyundai Motor Co, meanwhile, will be showing off a prototype of its first hybrid for the U.S. market, using lithium-ion batteries from the same LG Chem factory sources have said has been selected to supply the Volt.

Ron Cogan, editor of Green Car Journal, said Detroit automakers realize they have no alternative to pressing ahead with investment that promises to drive gains in fuel economy.

"The industry understands where the market is headed and that the greatest interest is in the vehicles with the best fuel efficiency," said Cogan, who presented the Green Car of the year award to GM's hybrid Chevy Tahoe last year.

Others are less certain Detroit can stay the course without a bailout tied directly to saving initiatives like the Volt.

Lyle Dennis, a New York neurologist who has emerged as the Volt's unofficial first fan and runs the GM-Volt.com Web site (http://gm-volt.com/), has organized a letter-writing campaign to urge lawmakers to help save GM -- and by extension the Volt.

"It just seems to me this could easily be the end of the Volt. There are certainly no guarantees," said Dennis. "I'm no fan of bailouts in general. But I don't see another way."

Environmental groups like the Sierra Club, meanwhile, are urging Congress to tie any aid to the automakers to requirements that they make cleaner vehicles and drop a legal challenge to California's new vehicle emissions standards.

"I think the temptation may be for the auto industry to say we can't accept any new requirements," said Eli Hopson of the Union of Concerned Scientists. "While that may get them through the next few months, I don't think it will get them through the next couple of years."

Paine said he remains uncertain of how his film will end, or even what it will be titled. He has tentatively called his follow-up "Revenge of the Electric Car" but realizes there may be a darker ending by 2010, when the film and the Volt are due.

"That's when will find out if it's really the revenge or the curse of the electric car," he said.

(Reporting by Kevin Krolicki and Nichola Groom; Editing by Eddie Evans)