GM’s Volt Battery Fires Threaten ‘Moon Shot’

When General Motors Co. (GM) announced plans in June 2008 to build the Chevrolet Volt plug-in hybrid, executives called it a “moon shot” intended to rocket past Toyota Motor Corp. (7203) in technology leadership. Now the car is a flash-point for concern.

The automaker’s image car is the subject of a U.S. probe following fires that occurred in its lithium-ion batteries at least a week after three crash tests. GM yesterday offered loaner cars to concerned buyers and said its engineers will help the National Highway Traffic Safety Administration determine the cause and a way to fix it.

While engineers work on safety issues, the largest U.S. automaker is racing to ensure that the Volt doesn’t become a public relations fiasco. The car was dreamed up under now- retired Vice Chairman Bob Lutz to combat the environmental and technology praise Toyota received for its Prius hybrid.

“They didn’t introduce the Volt because of its commercial success,” said Jeremy Anwyl, chief executive officer of Edmunds.com, an auto research website based in Santa Monica, California. “It’s their ’can-do’ statement, their counter to the Prius. They will do everything they can to make sure people don’t draw negative conclusions.”

The Volt investigation has the potential to harm the reputation of electrified vehicles. Lithium-ion batteries, such as those used in the Volt, are also installed in all-electric cars. Automakers and U.S. and California regulators are looking to increased use of electric power to meet tightening U.S. fuel- efficiency standards.

Volt Range

Early in the development of the Volt, Lutz said it would use less gasoline than a hybrid-electric car like the Prius. At the same time, its gasoline engine would let motorists continue to drive without stopping to recharge for hours.

Volt can go about 40 miles on electricity before its gasoline engine kicks in and powers a generator, which recharges the battery. It has a range of 379 miles with electric and gasoline power combined. The U.S. Environmental Protection Agency last year estimated the Volt would average 60 miles per gallon in combined gasoline-electric driving, compared with 50 mpg for the Prius. Volt’s range is about four times what Nissan Motor Co. (7201)’s Leaf electric car travels on a single charge.

If safety concerns overtake the Volt, none of that will matter.

“They’ve got to demonstrate that they’re putting their customers’ safety first,” said Jon Harmon, a former spokesman for Ford Motor Co. and author of “Feeding Frenzy,” a book about the Ford-Firestone crisis of the early 2000s. “The focus needs to be on getting to the bottom of this, not trying to prove that they’re right.”

‘Unique Set of Circumstances’

GM may get a break because there have been no Volt fires on the road, only after lab testing, Anwyl said.

“They are saying that it takes a unique set of circumstances to cause a fire,” he said. “It will depend on whether this is a one-time thing or it becomes a regular occurrence.”

Toyota shows what can happen with a company’s safety image is hurt. The company, which has sold more than 1 million Prius hybrids in the U.S. since 2000, saw its U.S. sales plunge for months in 2010 after recalling millions of vehicles for flaws linked to gas-pedal interference. Toyota paid $48.8 million in federal fines for the way some of the recalls were conducted, the largest ever by an automaker in the U.S., and continues to work to reassure drivers of the safety and quality of its vehicles.

Quick Defense

GM has moved quickly to defend the Volt and assuage any concerns customers may have. NHTSA announced its investigation late Nov. 25, the day after the U.S. Thanksgiving holiday.

Yesterday, the first work day after that announcement, GM North America President Mark Reuss sent a letter to current Volt owners saying that if they have concerns about their safety, GM will provide them with another model as a loaner until the investigation concludes.

Reuss and Mary Barra, senior vice president for global product development, and Chief Marketing Officer Joel Ewanick, held a call with reporters to explain their plans to deal with the Volt. They maintained that the car is safe and that it has NHTSA’s top five-star crash rating.

“My daughter drives a Volt every day with two kids,” Reuss said. “I drive a Volt. We don’t believe there is a fire risk.”

Not Backing Off

GM also said the Volt is still safe enough to promote its image as a technology leader. Chevrolet features the Volt as a centerpiece in its advertising and has no plans to back off, Ewanick said.

“We have been advertising the Volt heavily and we’re not going to change anything with regard to spending,” he said on the conference call.

The Volt has been on the market for a year and went on sale in all 50 states last month. In January, GM plans to boost production to 60,000 a year from a rate of 10,000 annually. GM sold 5,003 Volts this year through October, according to Autodata Corp., a research firm in Woodcliff Lake, New Jersey.

The Detroit-based automaker has engineers working with NHTSA to establish the cause of the fires and no conclusions have been reached, Barra said on the call.

“Chevy Volt owners whose vehicles have not been in a serious crash do not have reason for concern,” NHTSA said in its Nov. 25 statement. The agency also said there are no investigations into other cars that have lithium-ion batteries.

‘Larger Than the Volt’

No Leafs have caught fire, said Brian Brockman, a Nissan spokesman. Ricardo Reyes, a Tesla Motors Inc. (TSLA) spokesman, said that 10 of the company’s cars have been in accidents and no fires have been reported. The Leaf and Tesla’s models use lithium-ion batteries.

The Volt’s fires may scare consumers away from lithium-ion batteries, said Harmon, the “Feeding Frenzy” author.

“This issue is really larger than the Volt,” Harmon said. “This could cast a pall over whether customers will trust one of their vehicles to be electric. A crisis like this can have a big impact on eroding confidence in the new technology.”

GM slid 2.1 percent to $20.31 at the close in New York. They have fallen 45 percent this year.

To help prevent fires, GM is developing a procedure for drawing down the power in the battery after an accident, Barra said.

New Process

“We developed a process to depower the battery after a crash,” Barra said. “The battery assemblies were not depowered. We believe that if they were depowered the fire would not have occurred.”

A Volt caught fire three weeks after a side-impact crash test May 12 while parked at a NHTSA testing center in Wisconsin, leading regulators to conduct more tests. Volt battery packs were damaged in three more tests last week, causing two fires, NHTSA said in a statement on its website.

NHTSA, which said it’s working with the U.S. Defense and Energy departments to analyze the fires, conducted its first new test on Nov. 16 without a fire. The second test on Nov. 17 resulted in an initial temporary increase in battery temperature after the crash, and the battery pack caught fire at the test facility on Nov. 24. In a third test on Nov. 18, the battery was rotated hours after the crash and “began to smoke and emit sparks shortly after,” NHTSA said.

To contact the reporter on this story: David Welch in Detroit at dwelch12@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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