Gresch - hybrid Tahoe article

[rebound]

Not too much here, and certainly no mention of price. Outside of "willing to pay a premium," that is!

21 M.P.G. IN CITY, 22 M.P.G. ON HIGHWAY

Here come GM's hybrid SUVs
With some new technology, company takes a run at Toyota. But will buyers go for it?
October 30, 2007

BY JUSTIN HYDE

FREE PRESS WASHINGTON STAFF

WHITE MARSH, Md. -- It's just a transmission -- a chunk of cast metal and plastic found in every car and truck that most owners never think about unless it breaks.

But for General Motors Corp., the first transmission off the line Monday for its new hybrid system marks its most aggressive attempt to fight Toyota Motor Corp.'s hybrid juggernaut.

The parts built at a plant outside of Baltimore will be bolted into GM's full-size SUVs hitting dealerships in the next several weeks and into some pickups next year. The SUVs will match the city fuel economy figures of a gasoline-powered Toyota Camry sedan.

The test for GM will be whether enough buyers are willing to pay a premium for fuel-efficient SUVs and pickups -- a goal that has eluded Detroit's automakers so far.

"It's a very competitive technology," said Erich Merkle, an industry analyst with IRN Inc. "But it's expensive technology. ... The real question is will GM get benefit from it because they're using it for big pickups and SUVs."

There are a few hurdles to clear first. GM declined to say how many two-mode transmissions it would build or how much it would charge for the hybrid SUVs. Most experts say the final price won't cover GM's costs for designing and building the hybrids, because no Detroit automaker has turned a profit on its hybrid models so far.

GM will use the 350-pound transmissions first in the two-mode hybrid versions of its Chevrolet Tahoe and GMC Yukon SUVs.

Next year, GM will add the system as an option in its full-size pickups and Cadillac Escalade, and the plant will supply a slightly different version for Chrysler's hybrid SUVs.

The two-mode system, developed by GM, Daimler, Chrysler and BMW, uses two electric motors embedded in the transmission, along with a battery pack, to power a vehicle on a combination of gas and electricity. The design draws on GM's experience in building hybrid city buses, and GM has said it wanted to use the technology in SUVs and trucks first to save more fuel.

GM says the 2008 Tahoe two-wheel-drive hybrid will get 21 miles per gallon in city driving under federal tests and 22 m.p.g. on the highway, compared with 14 m.p.g. and 20 m.p.g. for the regular model -- a savings of 227 gallons of gas a year for typical drivers.

GM executives noted the two-mode design allows GM to build a Tahoe that will carry eight people and sport a 332-horsepower V8 engine, while offering the same city fuel economy as a four-cylinder Camry.

"We think it's going to be a home run," said Larry Nitz, GM's executive director of hybrid powertrains. Toyota "doesn't have one, simple as that. Putting a Toyota system in a larger vehicle is a huge challenge."

The launch event Monday at a $118-million addition to GM's Baltimore Transmission Plant showed the new transmission could also generate ample amounts of hype.

Maryland Gov. Martin O'Malley called it a "transformational day" that's "ushering in a whole new era of American manufacturing." U.S. Sen. Barbara Mikulski, D-Md., told a crowd of workers and politicians that the plant would help the United States fight "petro-jihadists" who threaten the nation's energy security.

Detroit automakers have been cautious in unveiling hybrids. GM previously offered hybrid versions of its Saturn Vue and Aura and full-size pickups built around a less-advanced hybrid design. The company will offer hybrid versions of the Aura sedan, Vue SUV and Chevrolet Malibu for 2008.

Ford Motor Co. sells hybrid Escape and Mercury Mariner SUVs and plans to add a hybrid Ford Fusion sedan next year.

All of those models have been swamped by Toyota, whose success with the Prius has given it a sizable head start in the hybrid market. The Japanese automaker's U.S. arm sold 18,130 hybrids in September, more than GM's total hybrid production to date.

Some analysts project the Prius will outsell all non-Toyota hybrids combined through at least 2010.

Merkle said he estimates GM eventually will build 30,000 to 40,000 hybrid SUVs and trucks a year, good for about 5% of those models, with a benefit that's as much about politics as profits.

"I look at this as being more of an insurance policy against higher gas prices or stronger government fuel mandates," he said. "It generates a good amount of political capital."

Contact JUSTIN HYDE at 202-906-8204 or [email protected].

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