‘Go Early, Go Ugly, Fail Fast’ Strategy with Chevy Volt

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The news out of Detroit had all the feel of a wake.  GM announced that it was suspending production of the Chevy Volt idling its Hamtramck factory where the electric car is made from March 19 to April 23 is “to match production with demand”.  The 1300 workers get laid off, but because of contract terms most still get paid.

It may seem like a wake but the patient is not yet declared officially dead—-but with sales at a miserable 7,671 vehicles in 2011 against a target of 10,000.  With Volt sales of 1,626 cars in the first two months of 2012 against a target for the year of 45,000 even with the Federal and State subsidies—the market has spoken.  In this case, matching production to demand is code for we’re waiting until after the 2012 election to kill this turkey and we’re betting that despite whoever occupies the White House – it will be easier to get forgiveness than permission to kill the turkey officially by then.

Why did this happen?   Well are you prepared to spend $40,000 on a car that only has a range of 35 miles?  I rest my case.

The concept of an all-electric vehicle is game changing and Volt will—eventually—prove a useful R&D experiment if it results in stimulating the production of better battery technology to help solve of the most vexing problems of the energy business—electric power is a real-time pure play.  Everything we put onto the power grid and everything we suck out of it must match every time, all the time.

The problem with Volt has never been the R&D experimentation.  It was the ‘government motors’ attitude we can make a market for Volt by building it despite the inconvenient truths about it flaws and high costs.  But with GM in bankruptcy, then bailed-out, and still on supervised probation by its Federal masters it had no choice but to play along.

But then there is this—-maybe the GM management team is wiser than we given them credit.  The Chevy Volt may be a classic example of the ‘go early, go ugly’ strategy of venture capital investments.  Yes, it only goes 35 miles before you have to switch over to the emergency gas tank. But the ‘big shot investors’ loved the sustainability bragging rights it gave them.  Yes, we had a few minor problems with the batteries, but it sure did draw crowds at those auto shows—-and it was a symbol that Detroit was back from near death building cars of the future.  So government motors tried and failed with the Chevy Volt because the public did not buy it.  But it got bailed out, turned around and is digging its way back to profitability because it agreed to ‘go early, go ugly’ when the investors wanted it most.

Come to think of it, the corollary of ‘go early, go ugly’ is fail fast so you cut your losses while still getting credit for trying.  For GM that may end up being both good politics and good economics—a two-fer!

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