Volt Birth Watch 177: Can't We Spend $100m On Something?
“A Flush GM to Lavish Cash On New Vehicles,” goes the NY Times headline, forshadowing the kind of profligacy that only happens when you have $42.6 billion of taxpayer money burning a hole in the corporate pockets. From the next generation of truck and SUV platforms to the Cadillac Alpha (known in-house as “BMW Fighter”), that money is going towards products…. at least it is when it’s not going to faltering overseas operations. And in most cases that’s a good thing. For example, Mark Reuss explains “ with the BMW fighter, the steering in that vehicle is going to be absolutely critical. In the past we would have gone to the lowest cost source, but not anymore.” Well, good on ya, mate. When it comes to the Volt though, the money doesn’t seem like it’s being quite as well spent.
At a meeting last month, directors offered to put another $100 million into the Chevrolet Volt if the company could get the battery-powered sedan into production sooner than its current start date in November, according to people with knowledge of the board’s move.
Dedicating more money for the Volt would not necessarily move up its timetable, said Jon Lauckner, G.M’s vice president for global product planning. But it could allow G.M. to build more vehicles for consumers to test-drive before full manufacturing begins.
“We have already reduced the Volt’s development time by about seven months,” Mr. Lauckner said in a recent interview. “Our date with destiny is November of 2010, but it could be useful for us to have the money to get some vehicles to consumers earlier than that.”
What’s the most worrying aspect of this situation? Is it that the Volt program is so rushed that $100m won’t speed it up any more? Or is it that GM felt it had to burn the cash on the program anyway, even if it only meant a few extra pre-production vehicles? Or is it the fact that the extra $100m raises yet another barrier to profitability for the Volt? There’s no argument that GM should spend cash on its future products, but reports like this make it sound like spending money is an end unto itself. For a firm that will never fully repay the American taxpayer, that’s a disturbing sign.
More by Edward Niedermeyer
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Coupla points: - when the Volt rolls out, it won't be priced at $40,000. The sticker will be much less, with the taxpayer making up the difference. - the cost to produce a Volt will likely be much higher than $40,000 a copy, but the extra will simply be capitalized, or allocated away to other cost centers so the Volt program doesn't appear to be such a boondoggle. - this NYT article is a calculated puff piece. It makes GM look strong and committed to top-quality, competitive products. It helps insulate the Obama administration from charges it is pouring tens of billions down a rathole. The Volt is dragged in because GM hopes it can provide political cover for profligacy. We're not wasting money, we're investing in a brilliant, Green future that will benefit generations of Americans to come. We'll get a second chance to invest if the government floats the IPO. I wonder how the US government will bribe China's government to buy the shares.