GM Volt Generates Interest - Will Congressional Funding Follow?

Includes: F, GM, TM
by: Managing Money

With all the talk about high gas prices, the car companies are rushing to launch high mileage or alternative power vehicles. General Motors (NYSE:GM) has just announced the new Chevy Volt, a rechargeable electric car. The car is entirely powered by electricity from its lithium ion battery. It is initially charged from any 120 volt household electric outlet and can travel forty miles on a single charge.

Forty miles isn't a lot, but fortunately there's an extended range capability. A small gasoline engine kicks in when the battery runs low. However, the gasoline engine doesn't power the drive train like most hybrid cards. Instead it generates electricity for the electric motors which propel the car at all times.

When the car arrives at its destination, you just plug it in to recharge the battery for another forty miles. We can imagine that workplace parking lots all over the country will be sprouting electrical outlets if this type of car catches on.

General Motors is hoping to out-green the popular Toyota (NYSE:TM) Prius which features a hybrid gasoline/electric engine, assuming that Toyota doesn't improve on their hybrid before GM's expected launch of the Volt in 2010. GM's press release says that the launch is dependent upon receiving suitable incentives from the government.

Meanwhile, GM joined with Ford (NYSE:F) and privately held Chrysler in August to ask the US government for low interest loans in the amount of $50 billion to develop alternate energy cars like the Chevy Volt. That's almost enough to bail out another bank, and would double the amount authorized under last year's budget.

CNN reports that senior lawmakers are balking at the revised amount, and GM CEO Rick Wagoner seemed to back down from the requested increase in his testimony Friday when he told lawmakers that $25 billion was "sufficient." Because the issue of reducing dependence on foreign oil is high on everyone's list of campaign issues, appropriation of the original funding amount is likely to sail through Congress.

Sales results from the big three automakers have slumped dramatically with the rest of the economy in recent quarters as we discussed in our entry of August 6th, so government loans for these expensive development programs might actually be a good idea, especially in light of the tightening commercial credit markets. Wagoner also asked the Senate on Friday to loosen up the fuel efficiency goals needed for a car to qualify for this funding. The current rules call for a 25% increase in fuel efficiency.

Disclosure: None