Feds: GM's Chevy Volt Is Safe After All

Much ado about nothing? Late last Friday, the National Highway Traffic Safety Administration let it be known that they had closed their safety probe into General Motors' (NYS: GM) Chevy Volt, saying that their concerns had been satisfied by a battery-pack fix being implemented by GM.

NHTSA said that, after extensive investigation, it does not believe that the Volt or other electric vehicles pose a greater risk of fire than conventional gas-powered cars. That's good news for GM and for fans of the company's landmark Volt, an innovative plug-in hybrid that has become something of a political football in recent months.

But for GM, now comes the hard part.

Harsh treatment for GM's crown jewel
Given the context - the ongoing debate around GM's bailout, the unpopularity of "green" initiatives in certain political quarters, the government loans and subsidies that contributed to the Volt's development -- it's no surprise that the incident that led to this probe acquired a media life of its own.

While that incident -- in which a wrecked Volt caught fire weeks after it was the victim of a government crash test -- had no victims, has yet to be replicated in the real world, and had largely been addressed by safety procedures put in place by GM before the episode became public, it nonetheless morphed into a story that tarnished the Volt's technology as an unproven approach that might be prone to fires.

That tarnish has become a big deal, raising broader safety questions about the lithium-ion battery packs used in most electric cars (questions that EV-maker Tesla Motors (NAS: TSLA) addressed head-on in a press conference last week). But it's a big deal for GM especially, because the Volt isn't just another Chevy. Since before its bankruptcy, long before the first Volt rolled off the assembly line, GM has been promoting the car as a symbol of its renaissance, making the Volt the centerpiece of Chevy ads and touting it as a "halo car" that attracted people who had never before set foot in a Chevy dealer.

With its gas-powered "range-extender" engine serving as an on-board recharger, the Volt has far greater real-world range than the all-electric Nissan Leaf, often seen as its key rival. And its technology has (rightly) been touted as more advanced than the popular hybrids from Toyota (NYS: TM) and Ford (NYS: F) -- though both are responding with all-electric cars and advanced "plug-in" hybrids of their own.

But for all that, the Volt missed its 2011 sales target: GM hoped to sell at least 10,000 Volts last year, but only moved 7,671.

A recent Bloomberg report noted that consumer interest in plug-in hybrids has fallen over the last couple of years, but safety concerns around the Volt almost certainly put a damper on its sales in recent months. GM's task now is to turn that around -- while making the larger case for an electrified automotive future.

Cleaning the tarnish off the Volt's halo
GM's rehab efforts will start later this week when CEO Dan Akerson testifies before a Congressional panel that is investigating NHTSA's investigation, or specifically, the months-long gap between the fire and the opening of said investigation.

Akerson is likely to promote the Volt as a safe and green product of American know-how, one that meets current regulatory requirements. Going forward, expect the bar to be raised by GM, as it recently noted that a new battery supplier, A123 Systems (NAS: AONE) , was selected to provide lithium-ion technology for the upcoming Chevy Spark vehicle. Akerson will likely push back aggressively on partisan efforts to paint the Volt as some sort of government boondoggle, and I expect he'll have some success. Akerson seems to have a knack for this sort of thing.

But it will take time and require some product revisions before the Volt is able to live up to all of the hopes and expectations the General has placed on it - if it ever does.

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At the time this article was published Fool contributor John Rosevear owns shares of Ford and General Motors. The Motley Fool owns shares of Ford Motor. Motley Fool newsletter services have recommended buying shares of Ford Motor, General Motors, and Tesla Motors. Motley Fool newsletter services have also recommended creating a synthetic long position in Ford Motor. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Fox News is going to be devastated

January 24 2012 at 11:50 AM Report abuse rate up rate down Reply

With over 250,000 gasoline car fires last year, it's amazing the fire of a single Chevy Volt 3 weeks AFTER a severe test crash caused so many misleading and sensational headlines. That the fire could not be replicated in subsequent test crashes of the car went unreported. They finally had to take the batteries out of the car and test crash them alone. No wonder one NY dealer said, “We did not have one customer that wanted to sell it back or felt concerned enough to get a loaner vehicle”. With over 11,000 miles of city/highway driving, my $32k Volt has delivered 120+ MPG. My electric bill increase $330/yr, my gasoline bill dropped by $2000/year. I have had zero problems with the car to date. Test drive this luxury car.

January 23 2012 at 7:02 PM Report abuse +1 rate up rate down Reply