The lumbering, money-losing giant finally sees that gas engines are a losing bet. But is it too late?

By David Welch

May 16, BusinessWeek

In April of 2005, General Motors (GM) Chairman and Chief Executive G. Richard Wagoner Jr. convened his management team for a monthly strategy session. Held in the boardroom at GM's Detroit headquarters, these meetings can last a day as 20 or so executives mull plans for new cars and product strategies. Meetings often kick off with a roundtable format, and attendees are encouraged to pose new ideas and stray from the agenda. That's when Vice-Chairman Robert A. Lutz spoke up. Lutz, whose gravelly pronouncements routinely enliven auto shows and generate headlines, has a certain genius for challenging conventional wisdom. Maybe, he told GM's brain trust, it was time to build another electric car—one that would use a giant version of the lithium ion batteries that power cell phones and laptops.

It was a provocative suggestion—and Lutz knew it. Two years earlier, General Motors had killed its experimental EV1 electric car and set off a public relations furor. The environmental lobby was deaf to GM's assertions that the EV1, leased to a limited number of people but not sold, would never have earned its maker any money. And the greens accused GM of pulling the plug to show policymakers that such techno wonders were bad business.

By the time Lutz revisited the issue in 2005, Toyota Motor's (TM) quirky Prius hybrid had turned the Japanese automaker into a poster boy for the environmental movement and cast a greenish halo over the entire company. By contrast, GM, at least in the popular imagination, had tunnel vision; it was still making gasoline hogs like the Hummer and fighting congressional efforts to boost fuel economy. GM executives were furious Toyota was winning green cred despite making its own fuel suckers. But no one at the meeting wanted to hear about electric cars. "We lost $1 billion on the last one. Do you want to lose $1 billion on the next one?'" Lutz recalls one executive saying. "It died right there."

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photo: "It's the biggest challenge...since the start of the industry," says Wagoner (By Bill Cramer)