GM denies report of Chevy Volts rolling away with $49,000 loss on each

[Renegade]

A new report by Reuters finds that General Motors may have lost $49,000 on every Chevrolet Volt sold to date, thanks to the collision of high sticker prices and unrealistic expectations of demand for plug-in hybrids. The story touched off another wave of tut-tuting over the GM bailout -- and a stronger reply from GM this morning calling the story "grossly wrong." The truth: What matters more isn't how much GM might have lost on the Volt so far, but when it will be profitable -- if ever.
No car has ever been stuck in the kind of political miasma that surrounds the Chevy Volt, which has turned into the rolling representation of the Obama Administration's $50 billion rescue of GM. With that bailout now firmly at the heart of a presidential campaign following the Democratic National Convention and the bumper-sticker slogan of Vice President Joe Biden that "Bin Laden is dead and GM is alive," that cloud has spread to cover even routine business choices at GM. Last week, a few critics questioned whether GM had political motives for scheduling its third-quarter earnings release on Oct. 31 -- the same week as Ford and Chrysler.
Based on interviews with industry experts, Reuters estimated it costs GM between $75,000 and $88,000 today to build each Volt. Most of that -- $56,000 -- comes from the cost to develop the Volt's unique power system, a combination of gas engine, electric motors, massive lithium-ion battery pack and a complicated transmission, all powered by custom GM software that controls how the car starts, stops and recharges. The rest of the cost comes from the raw material, labor costs and other overhead.
"Reuters' numbers become more wrong with each Volt sold" says GM
While GM had expected to sell 60,000 Volts a year by now, it's only moved 21,000 over the past two years. Sales in August set a record at 2,831 -- but even at that rate, Volts remain far below target, incurring even higher costs from suppliers who were guaranteed business. And there's evidence GM may have gambled on future losses to move Volts now by offering lease deals of $199 a month for two years, raising the spectre that the Volt may never reach profitability.
After Reuters posted the story last night, GM responded forcefully this morning, calling the piece "grossly wrong," and that the calculations "become more wrong with each Volt sold." The reason: Automakers don't account for product development costs per unit sold, but over several years of expected production.
And GM has a point (one that Reuters acknowledges in its piece). By using Reuters' math, the first few vehicles of any new or updated model would also be sold at a massive loss, including the Toyota Prius and any other plug-in hybrid on the market. Exhibit A would be the Tesla Model S, developed using $465 million in federal loans and a $226 million IPO. Tesla has delivered fewer than 100 cars so far; by the same formula applied to the Volt, each of those cars could be considered to have lost $6 million apiece. Yet Tesla expects to turn cash-flow positive by the fourth quarter of this year and has a target of a 25 percent profit margin on every Model S sold, because the same technology and factory is expected to build thousands of cars in several different models.
The GM executives who conceived the Volt as a leap-frog over the Prius -- well before the Obama administration even took office -- always thought of it as a marketing tool as much as a regular car, and justified the additional costs as a way to burnish GM's image. The Volt works as advertised; some owners have reported driving 1,000 miles using only home charging between fill-ups, and the car most traded in for a Volt has been a Toyota Prius.
But GM's known plans for the technology beyond the Volt runs to a low-volume coupe edition for Cadillac launching next year; without a higher-volume application, the financial break-even point won't arrive for several years, if ever. If GM wants to escape its political smog, it has to show the Volt represents the best use of the taxpayer's money that saved the company -- and not a lingering reminder of how the old GM went broke in the first place.

[Captain Awesome]

What did you expect them to do, admit they screwed up?

[fielderLS3]

The loss per vehicle will come down as more are (slowly) produced, but by the time the production run is over, there will probably still be a considerable loss. A $40,000+ economy car is a damn tough sell, particularly in a bad economy.

[DGthe3]

Originally Posted by Captain Awesome

What did you expect them to do, admit they screwed up?

In order for them to admit they screwed up, they'd have to see the Volt as some sort of failure. There were 2 goals for the Volt. Reduce Americas dependance on foreign oil, an admittedly lofty (though noble) ambition. The 2nd, and ultimately more achievable, was to kick Toyota in the teeth. And regardless of the sales numbers, just about everyone in the industry will tell you that the Volt is a far more impressive car than the Prius. So I'd say they hit their secondary goal.

The higher ups at GM knew full well that the Volt would lose money at first. But to interpret that confirmation that the Volt was a mistake is missing 2 very important details. First, the project is part of a long term plan -something which is actually rather impressive considering how short sighted companies like GM tend to be. The 2nd generation Volt will cost far less to develop than the first, and the 3rd should cost less than the 2nd. On top of that the build cost per unit should also come down somewhat as formerly new processes become better refined. But none of that can happen until the first cars get built, its simply part of the learning curve when developing technology. And as expensive as it is to make that investment now, it costs the company a whole lot more down the road when they have to catch up to the industry.

The second is the role that the Volt plays as a halo car. People will come into Chevy showrooms to just to check out the Volt. Some will buy one, but chances are there will be more that balk at the price but get steered towards a Cruze or a Sonic instead. Those extra sales would at the very least reduce the loss incurred on the Volt, if not turn a net profit when looking at the big picture.

[truth411]

Originally Posted by Captain Awesome

What did you expect them to do, admit they screwed up?

The report was totally bogus and already has been debunked. Its nothing more than spreading mis-information for political purposes and creating hits. The ignorant is going to read this bogus article and swear by it like its the bible. I must say the lies and mis-information deliberately spreaded about the volt for political browny points is disgusting. The irony is if Toyota created the volt, those same people lieing and bashing it, would be instead praising the volt.... Sigh....

[fielderLS3]

Originally Posted by DGthe3

The 2nd, and ultimately more achievable, was to kick Toyota in the teeth. And regardless of the sales numbers, just about everyone in the industry will tell you that the Volt is a far more impressive car than the Prius.

I have to respectfully disagree with that. Yeah, the basic idea of the Volt is a good one, but the execution of it has been piss poor in multiple levels, and as a result, the current generation Volt has been a total marketplace failure.

Prius sales are at a completely different order of magnitude to Volt sales. The plug-in version of the Prius also undercuts the Volt on price by about $8000....and it's still profitable for Toyota, while GM is losing money on the Volt. If the point was to "kick Toyota in the teeth," one could argue that they not only missed, but ended up kicking themselves in the face in the process.

I also disagree with the idea of the Volt as a halo car. The Corvette is a halo car. To some extent, the Camaro is a halo car. The Volt, not so much. I personally don't know anyone who has gone to a Chevy showroom just to get a closer look at the Volt, although I do know a few who have been repelled over it.

And even if it does attract a few in who end up leaving with a Cruze instead...that math still ignores how many more Cruzes they could have sold had they spent the money they used (and lost) developing a "halo" car to just make the Cruze a better car.

[motorhead]

Every new car ever built losses money with the first cars built. The main thing is how quickly can a car turn profitable. I remember a thread on here about the camaro and how many had to be sold before it turned profitable. The difference was that it didn't need to sell near as many cars as the volt and it sells a lot more units. That's a win in my book when your talking making money in business. I think the volt it a great car ,and I wouldn't mind owning one. However, I also believe that GM got ahead of themselves with it. I don't see this car ever being profitable with the steep hill it has to climb and in the end making money is what it's all about. If the Volt doesn't do that then it's a fail in my mind.

[Richy_Rich]

http://www.greencarreports.com/news/...rong-heres-why

more data to muttle over.

[AKA-22]

Originally Posted by fielderLS3

The loss per vehicle will come down as more are (slowly) produced, but by the time the production run is over, there will probably still be a considerable loss. A $40,000+ economy car is a damn tough sell, particularly in a bad economy.

agree!! no one is buying a 40,000 car like this.....

[toesuf94]

I will state that I did purposely go to a dealership to experience the Chevrolet Volt and found it to be quite an interesting car. I loved the interior, the features, and the technology. I really liked the build quality, and spent a good 30 minutes going over the car with a salesperson. I was, however, not offered a drive, a ride - nothing. So I left and have not been back. My severe disdain for front wheel drive cars is also a negative for me on the Volt but if it drove as well as it looks, I might be willing to forget about which wheels are driven by it's motor. (For instance: I loved the styling of the New Beetle and the HHR and have owned two of one and still would like the latter as a run around car...so I can handle front wheel drive if I have to.) So the dealer, who had seven Volts on the lot, never even attempted to sell me the car or have me drive it to experience the technology...and lost GM the sale.

[derklug]

The $1-1.2 billion production start costs are where the loss is coming from, if they just pitched the car, that money would be lost. IF they can sell 60,000 Volts over the next three years, the loss will be much less. I still think that it is way over priced for the general market.

[truth411]

Originally Posted by fielderLS3

I have to respectfully disagree with that. Yeah, the basic idea of the Volt is a good one, but the execution of it has been piss poor in multiple levels, and as a result, the current generation Volt has been a total marketplace failure.

Prius sales are at a completely different order of magnitude to Volt sales. The plug-in version of the Prius also undercuts the Volt on price by about $8000....and it's still profitable for Toyota, while GM is losing money on the Volt. If the point was to "kick Toyota in the teeth," one could argue that they not only missed, but ended up kicking themselves in the face in the process.

I also disagree with the idea of the Volt as a halo car. The Corvette is a halo car. To some extent, the Camaro is a halo car. The Volt, not so much. I personally don't know anyone who has gone to a Chevy showroom just to get a closer look at the Volt, although I do know a few who have been repelled over it.

And even if it does attract a few in who end up leaving with a Cruze instead...that math still ignores how many more Cruzes they could have sold had they spent the money they used (and lost) developing a "halo" car to just make the Cruze a better car.

Your being very selective. Toyota didnt make adime on the first prius when considering all the R&D money they put into creating the prius. Also you menchion the plug in prius being cheaper but completely DISMISS the fact that the volt is outselling the plugin prius by a wwide margin. Yes toyota is makeing money on the prius but Not initially, the same will be for voltec. Also remeber the volt is profitable right now according to that article, but the article lies and implys that the more volts are sold the more money gm looses. Actually its the other way around, the more volts are sold as well volts exports (which the article conveniently forgot the ampera) as well as cars based on the volt like the higher price point ELR, voltec becoming a part of other high volume vehicles, you eventually hit a break even point and then your in the black. It may not happen with the first gen volt, but using that type of thinking toyota should have never made the prius. Heck useing the same type of bogus accounting for political browny points, the first chevy cruze that was sold was sold at a loss of about $1,000,000,000. Ridiculous...

[rez333]

They marketed this car all wrong. They should have made it a Cadillac. That way the price is justified and it makes electric vehicles "high end" and thus by nature "more desirable". Marketing 101 folks.

[PAUL SS]

And how much was invested in the 5th gen Camaro, how many units have to be produced to make a profit? Manufactureres today weather it be automobiles or dish washers do a lot of R and D and invest a lot of cash into their production lines.