How the Chevy Volt Became a BMW

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( TheStreet) -- GM ( GM) has been plenty maligned for its revolutionary Chevrolet Volt overthe last year, but fear not, GM -- help is on the way!

From BMW.

Let me explain. BMW as a brand started becoming an "in" car 30 yearsago and has continued to make progress with only a couple of minorhiccups along the way. In terms of overall prestige and respect, veryfew -- if any -- car companies today command the admiration of BMW,and for good reason. The kidney-shaped-grill car company from Munichcould have continued to ride this 30-year wave for years to come.

Meanwhile, back in Detroit, a small team at GM decided in January 2006to create a car that would best combine the benefits of an electriccar with a car that also could take gasoline for traveling longerdistances. This team was started by Bob Lutz and Jon Lauckner, andsome of the top engineers on the Volt project included Andrew Farah,Micky Bly and Pamela Fletcher. The project manager overall was FrankWeber.
Chevy Volt
Chevrolet Volt

After almost three years of development, the GM team showed theproduction version of the Chevy Volt on Sept. 16, 2008 -- beforethe bailout and the 2009 bankruptcy. Two years of durability testingand preparing the factory in Detroit followed, and when the productioncar was finally put into the hands of experienced automotivejournalists in October 2010, the Volt soon won more awards for "car ofthe year" than any other car I can recall.

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But it wasn't only the independent and experienced automotivejournalists who were impressed by how well the Chevrolet Voltperformed -- the competition was, too. BMW in particular.

The top brass at BMW got their hands on a Volt and after test-drivingit, they concluded that if they were unable to match the superiorperformance of the Chevy Volt, over time they would be creamed in themarket. So what to do? BMW needed access to GM's secret sauce forthis revolutionary powertrain.

Migration

On April 11, 2011, the automotive press reported that the Chevy Voltproject manager, Frank Weber, had left GM in favor of moving to Munichand become head of BMW's efforts to match the engineering of the ChevyVolt. If you search YouTube, you will find a very long list of videosof Frank Weber describing the details of, and singing the praises of,the Chevy Volt. That trail stops in early 2011. I can't find asingle video of Frank Weber following BMW's high-profile hire of himApril 11, 2011.

Now we know why former Volt-boss Weber has been in hiding for the lastyear. BMW has released preliminary information about its i8 model,anticipated to hit showrooms by the first half of 2014.

And guess what? BMW's bet on the future looks a lot like theChevrolet Volt. Surprise!

Before you spit up that hot coffee and start writing me a nastyresponse, let me clarify: The BMW i8 is not a perfect copy of theVolt. There are some differences. I am not suggesting certain patentinfringement. Let me point out the two major differences between theChevy Volt drivetrain architecture and that of the BMW i8:

1. BMW has moved the Volt's generator from the front of the car, to the back.

2. BMW has added an electric traction motor in order to enableall-wheel drive, similar to the Tesla ( TSLA) Model X prototype unveiled onFeb. 9.

But really, when you consider all the alternative architectures BMWcould have chosen, the BMW i8 is very similar to the Volt. Justconsider the Volt's revolutionary on-axis placement of the gasolinegenerator with the generator-motor and the main traction motor. Onthe Volt, that package sits up front. On the BMW i8, it sits in therear. BMW has not released information about whether the on-axisdesign is substantially identical to the Volt's -- or not. In GM'scase, it didn't release this information either, until just beforeproduction started, so that it could file all the patents.

It is the power-combining of that on-axis placement on the Volt thatyielded GM supposedly over 200 patents. How would BMW get aroundthose patents?

For a more detailed description of the patented genius of the Voltpowertrain, see this 36 minute video featuring Volt chief powertrainengineer Pamela Fletcher taken in October 2010, shortly after GM filedits patents.

Once you have watched that video, just imagine moving that powertrainfrom the front wheels to the rear wheels, and then adding an electrictraction motor between the front wheels, and you have . . . a BMW i8!It's a distinction without a difference, as we say.

Furthermore, the BMW i8's battery looks to be almost the same shape asin the Volt -- and for that matter the Fisker Karma. It's placed inthe center tunnel, which is where it is best protected from a crashperspective. By the way, that Henrik Fisker guy -- he was a top BMWdesigner, but long before he founded his own car company.

The benefits of the Volt architecture would then also apply to the BMWi8: All-electric range for some distance, in the Volt's case 25 to 50miles, followed by "extended range" where the battery is charged bythe gasoline generator for another perhaps 300 miles or more. If youassume 40 MPG and a 9-gallon tank, that's another 360 miles followingthe first 25 to 50 all-electric miles.

Marketing Bonanza

It looks from the early information about the BMW i8 that it will be amuch more expensive car than the Volt because it will be built withmuch more expensive, aka lightweight, materials. Using theseexpensive materials, the BMW i8 will obviously weigh a lot less, andtherefore yield faster acceleration and perhaps longer range.

Media speculation about the BMW i8 has suggested that the price may be as high as $100,000 to $120,000, or many times above a fullyloaded Chevy Volt, which sells for $44,575 before tax credits. Theprice of the i8 is of course pure speculation at this point.

Here is where the fun starts for GM: Marketing. When the i8 hits themarket, what will BMW call it? "BMW's answer to the Volt"? "How BMWcopied the Volt but tripled the price"?

Somehow I doubt it. BMW is likely to stay away from admitting thatits new flagship car is essentially a re-jumbled Chevrolet Volt builtby more expensive, light-weight, materials.

But from GM's side? I'm expecting a field-day! The mood at the GMmarketing department surely will resemble a late-night comedian'sshow-prep following a major presidential gaffe.

Some ideas for GM's marketing department: "BMW's version of the Volt:Only triple the price!"

"BMW's new flagship copycat car: Only three years behind the Volt."

I predict that as the BMW i8 hits the market in early 2014, either oftwo things will happen:

1. Now that BMW has validated the Volt design by pulling out all thestops to copy it, it will finally bring the Volt the kind of respectit earned right away by those who have actually driven the car --whether automotive journalists or, of course, the owners themselves.

2. On the downside potential, will the fact that Frank Weber led theVolt project and then transferred it to BMW, transfer the Volt poxonto BMW's door? In other words, will this new car from BMW mean thatthe BMW image would turn negative because a key BMW engineer led theChevy Volt project? Will the people who criticize the Volt todaystart dumping on BMW to the same degree?

I think that the former will be more likely. With BMW betting thecompany on the Chevy Volt drivetrain architecture, it is likely thatthis will bring the ultimate vindication for GM. It will be time forthe Volt critics to cut their losses at that time.

It is worth reminding Volt watchers that the Chevy Volt has thehighest customer satisfaction rating of any car in the U.S. market,according to Consumer Reports -- even higher than the Porsche 911. A record 93% of Volt owners would recommend the car, compared to 91% for the Porsche 911. Conversely, close to 99% of all people criticizingthe Volt have never driven it.

And what would be the only car company with even higher respect andcustomer esteem than BMW? Yes, that would be Porsche.

Volt 2.0

But wait, there's more!

The BMW i8 will hit the market no later than the first half of 2014,which would be at least three years after the Chevy Volt hit thestreets, in late 2010. What has GM done in the meantime? Been busydeveloping the Volt 2.0, that's what!

GM will be in a position to launch the Chevy Volt 2.0 and the CadillacELR, which is the two-door version with a more plush interior, also byearly 2014. By the time the BMW i8 hits the market, the market leader-- GM -- should also hit the market with two improved Volt models: OneChevy version focused on cost reduction, and one Cadillac versionfocused on the luxury market.

Think iPad here. By the time competition arrived for the iPad, Apple ( AAPL)launched the iPad 2. And we all know how that went. The early leadermaintained its grip. GM most likely also has additional cars based onsome tangent of the Volt platform in store for late 2013 or 2014. Canyou imagine a Chevy Suburban, Cadillac Escalade and a minivan based onthe Volt? All would be obvious hits in their respective segments.

What's the bottom line here? BMW's best engineers examined the ChevyVolt and concluded that it was going to be the car to beat. They wereso desperate to copy it that they hired the chief project manager ofthe Volt to make it happen as quickly as possible. I think BMW'sfinest engineers know a little more about what makes the best car,than some U.S. pundit who has never even driven the Volt.

Imitation is the sincerest form of flattery. And that's what willbring GM its ultimate form of Volt vindication, in 2014, just likeeveryone have been trying to imitate Apple's iPad for two years now.

At the time of publication, the author was long AAPL and TSLA, although positions may change at any time.

Anton Wahlman was a sell-side equity research analyst covering the communications technology industries from 1996 to 2008: UBS 1996-2002, Needham & Company 2002-2006, and ThinkEquity 2006-2008.

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