“The estimate of the current loss per unit for each Volt sold is grossly wrong,” GM says as a retort to the Reuters story that GM loses around $49,000 on every Volt. GM says that “it allocates Volt development costs across lifetime volume, not across the current number of Volts sold.” TTAC commenters that rushed to the aid of the beleaguered company suggested the same. Oddly enough, GM passed on a much stronger argument that would have turned the Volt into a money machine. If not immediately, then much earlier than suggested by Reuters.
After the usual lame back and forth that in its first years, the Prius wasn’t a money machine either, long time commenter Pch101 came up with a hard-hitting argument that should fit right into GM’s creative accounting:
“Most of the development of the Volt was paid for by a company that is now called Motors Liquidation. Motors Liquidation is a bankrupt entity that used to be called General Motors.
The new General Motors essentially got that R&D from Motors Liquidation for free. In terms of accounting, it would have acquired it at a steep discount through the bankruptcy sale, as the Volt was only one of many assets that would have been acquired through the court sale.”
As painful as it may be, GM should read TTAC more. Among the chaff of amateur spinmeistery, there are some masterful gems, such as this one. Instead, GM decided to write the full development and tooling costs off over the lifetime of the platform, even if it means many more years of non-profitability. Let’s hope that platform will live long. Says Reuters:
“The average per-car costs for development and tooling will drop as sales volume rises. But GM will need to sell 120,000 Volts before the per-vehicle cost reaches $10,000 — and that may not occur during the projected five-year life cycle of the first-generation Volt.”
If that is true, then the Volt will need to stay on the government drip for many years until it can be made at a price that is competitive in the market. At $7,500 a pop, that intravenous infusion will cost the tax payer close to a billion dollars to prop up a car that can’t make it on its own in the market place.
The meek denial that ignored Pch101’s creative reasoning already had its Streisand effect. Fox picked up the story, along with the denial, only to say that the consulting firm that did the analysis “stands behind the number,” adding that “it was calculated based on industry standards without any specific inside information about the Volt program.”