Planning for the Chevy Volt Case
General Motors is a company in deep trouble. As car sales in North America collapsed in 2008, GM, which had already lost money in 2007, plunged deeply into the red. With losses estimated at $14 billion, the company was forced to go cap in hand to the government to beg for public finds to help it stave off bankruptcy. Fearing the economic consequences of a collapse of GM, the government agreed to loan funds to GM, but it insisted that the company have a clear plan charting its way back to profitability. Ironically, such a plan was already in place at GM. At the heart of it was a potentially huge gamble on a new type of car: the Chevy Volt. The Chevy Volt, which is scheduled for market introduction in 2010, is a compact, four-door electric car with a reserve gasoline-powered engine. The primary power source is a large lithium ion battery (lithium ion batteries are typically found in small electric appliances such as cell phones). The battery can be charged by plugging it into a wall socket for six hours; when fully charged, it will fuel the car for 40 miles, which is less than most people’s daily commute. After that, a gasoline engine kicks in, providing both drive power and recharging the lithium ion battery. GM estimates fuel economy will be over100 miles per gallon, and charging the car overnight from a power outlet would cost about 80% less than filling it with gas at $3 per gallon. The car will cost somewhere between $30,000 and $40,000; however, because it uses a battery-powered technology, buyers will be able to take $7,500 tax credit. The Volt was the brainchild of two men, Bob Lutz, GM’s vice chairman, and Larry Burns, the head of R&D and strategic planning at GM. Although Lutz in particular had always championed large gas-hungry muscle cars, GM’s planning told them that the market would probably move away from the SUVs that had been a profitable staple at GM foremost of the 1990s. A number of trends were...
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