GM goes slow on Chevrolet Volt factory

Even as Warren Buffett-backed BYD launched the first hybrid vehicle in China few days back, world No.1 automaker General Motors (GM) has decided to adopt a wait-and-watch policy regarding its own hybrid sedan, the Chevrolet Volt. (See: Buffett-backed BYD introduces first hybrid car in China)

The company, working to conserve cash as it pursues immediate financial aid from the US government, today said it has put on hold construction plans for a new plant at Flint, to build the engines for two of its most anticipated new cars: the Chevrolet Volt extended-range hybrid electric vehicle and the Chevrolet Cruze compact car.

''It's temporarily on hold as we assess our cash situation,'' said GM spokeswoman Sharon Basel. ''I don't think it's a surprise that we're studying and reviewing everything given the position we're in.'' Postponing project spending ''has no impact on the product programs,'' she said. ''We can put up plants pretty quickly.'' The plant is still scheduled to begin producing the 1.4-litre engines in 2010, she added. (See: General Motors to electrify car market in 2010 with the Chevrolet Volt / GM declares Volt ready for testing; additional electric cars in development)

The new engine is to be the heart of the Chevrolet Cruze small car and another version of the engine to provide backup power to the all-electric Chevrolet Volt. The Volt represents the centerpiece of GM's effort to break a costly association with gas-guzzling trucks and SUVs. (See: GM to invest $500 million for new small car, Cruze)

GM and union officials have said that the new engine plant would save jobs for 300 United Auto Workers-represented workers whose positions would otherwise have been eliminated. GM Chief Executive Rick Wagoner, who faced calls for his resignation during the debate on an auto bailout package in Congress, attended a ribbon-cutting event in late September to mark the start of construction on the new plant in Flint.

GM officials didn't specify how the project would continue absent government help. But two potential scenarios emerged. Under GM's worst-case scenario of being forced into Chapter 11 bankruptcy protection, the company would still have some funding available for new product development and the Volt would be a top-priority project, sources familiar with GM plans say.

If GM isn't able to build the Flint factory in time for the 2010 launch, the 1.4-litre engine to be used in the Volt could be sourced from overseas factories that are already building the engine. GM is looking to the much-hyped Chevy to do what the Prius hybrid did for Toyota - give the automaker a must-have technology while cultivating a green image.

GM's situation has deteriorated significantly in the two years since it rolled out the Volt concept to unprecedented hype at the 2007 Detroit auto show. The company is burning through billions each quarter and has said it needs at least $4 billion in government loans to maintain adequate funding levels to make it to 2009.

The US Senate last week rejected a request from GM and Chrysler for $14 billion in low-interest loans. President Bush has said he will consider granting the automakers' funding request. A decision could come as soon as this week.

In addition to bridge loans the automaker is seeking from the Bush administration, GM is seeking Energy Department grants earmarked for retooling auto plants to build more fuel-efficient vehicles. The department rejected initial funding requests from Detroit auto manufacturers, but said the decision wasn't final.