By on September 10, 2012

GM loses around $49,000 on each Volt it builds says Reuters. GM sold a record 2,831 Volts in August, but that may “have pushed that loss even higher. There are some Americans paying just $5,050 to drive around for two years in a vehicle that cost as much as $89,000 to produce,” says Reuters after a deep data dive into the elusive profitability of GM’s green halo car.

Those August sales were goosed by a juicy lease deal at  “a low monthly payment of $279 a month for two years, with some high-volume dealers dropping the payment to $199 a month after receiving incentive money from GM, with down payments as low as $250. The company said about two-thirds of Volt customers in July and August leased their vehicles, compared with about 40 percent earlier this year. “

Those Hail Mary leases are guaranteed to come back and haunt  GM.  The $199 lease translates to a residual value of around $30,000 after two years. GM better starts saying several Hail Marys and a few Our Fathers. A new Volt costs $32,500 after tax credit. Good luck finding an off-lease buyer who pays $30,000 for a two year old car and no tax credit.

In a factbox, Reuters enumerates the estimated costs to build a Volt.

Fixed cost, Development: $18,650
Fixed cost, Tooling: $37,350
Standard Parts, Material and Labor: $12,000
Unique Parts, Material and Labor: $12,000
Total: $80,000

Fixed-cost figures are based on total Volt sales of 21,500 cars through August, and will drop in the future as sales and production volume increases.

“It’s true, we’re not making money yet” on the Volt, Doug Parks, GM’s vice president of global product programs told Reuters. The car “eventually will make money. As the volume comes up and we get into the Gen 2 car, we’re going to turn (the losses) around.”

Get the latest TTAC e-Newsletter!

113 Comments on “Your Tax Dollars At Work: GM Loses Its Shirts On Every Volt...”


  • avatar
    danio3834

    Not surprising in the least. Very expensive development and low volume. With the exception of a VERY few models, this type of green car technology offers little value for the customer and is unfprofitable on a per model/unit basis. It is written of as a halo/marketing expense.

    For realistic technological gains, I’m much more impressed with the refinement of more traditional IC powertrains in recent years.

    • 0 avatar
      bsquarewi

      Yes, it can absolutely be considered a marketing expense. Sales people have no idea how to sell these cars, they don’t understand it. GM is taking a hit and getting these out in the hands of the best marketing machine available, owners (or lessees). Media and reviewers may bash this platform at every opportunity, but I challenge you to find someone who actually owns one of these and dislikes it.

      • 0 avatar
        Dan

        It is a marketing expense.

        But not a marketing expense to paying customers.

        A marketing expense to paying creditors in Washington.

      • 0 avatar
        danio3834

        No challenge necessary. I’m sure there are many happy Volt lessees out there. My comments only reflect the realities of the development and marketing of the vehicle.

        Personally, I’m indifferent to the vehicle itself.

      • 0 avatar
        tuffjuff

        It most certainly is marketing, and very little more than that.

        That said – THIS is why the economy went to heck. I’m all for leases, but come on. $200 a month for a FORTY THOUSAND DOLLAR VEHICLE is stupid, and makes zero sense.

        For comparison’s sake, I may lease my next vehicle, a ~$30,000 SUV (Equinox LT2/LTZ, Santa Fe 2.0T or Edge, not sure yet) and lease calculators tell me I’m looking at $330-400 a month, depending on the vehicle. That’s with pristine credit, so for somebody in the “sub prime” mid 600′s (why it’s called sub prime when MOST of us are in that range, I don’t know) I’m probably going to have $50-100/month tacked on to that estimate, easily. So selling a vehicle that’s 30% more money for a payment that’s half as much… sigh. Just sigh.

    • 0 avatar
      savuporo

      Most of the $80K sits in fixed costs. The higher the volume, the lower the per-unit fixed costs get – the problem is the order of magnitude.

      • 0 avatar
        nikita

        If the variable costs are really $24k, crank up the factory and blow them out for $25k. Problem solved. Im sure the Prius had huge fixed costs when it started production as well. Now they are sold at a similar price and Toyota has long ago amortized development costs.

      • 0 avatar
        savuporo

        I doubt that they would get a necessary order of magnitude increase in the volume if they sold at $25K today. Its too early, it will take a few years before the drivetrain concept gains enough widespread acceptance.

    • 0 avatar
      Dr. Kenneth Noisewater

      So in other words, I got $80k worth of car for $40k net (-subsidy +salestax). Sounds like I got a pretty good deal.

      Plus, electric drivetrains are superior to reciprocating-engine drivetrains as far as smoothness, quietness, mechanical simplicity, efficiency and reliability are concerned. You will never get any reciprocating configuration to match a traction motor’s smoothness and silence. The problems with electric drivetrains are energy density and charge rate, and if we get hydrocarbon SOFCs developed at 50-80% efficiency then the combination of electric drivetrain, buffer battery (or bigger if li/zn-air and/or nanotech increase battery density significantly) and SOFC are unbeatable.

      • 0 avatar
        KixStart

        Doctor,

        What something is “worth” and what it “costs to manufacture” are two entirely different things. If the Volt was “worth” $80K, significant numbers of people would be willing to pay that.

        If they’re only able to move significant volume with subvented leases, then the Volt is “worth” about $2500/year to the broader market.

        I do not mean to imply you should not be happy with your Volt. You like it for what it is, the performance, the idea of driving electrically, whatever. However, the market at large isn’t quite as ready as you.

      • 0 avatar
        toadroller

        Be sure to thank your fellow taxpayers for the subsidy and sales tax incentives. Can we swing by to drive it now and again?

        • 0 avatar
          michaelmur

          sure, you can come over. Actually, I’ll come over and hang out in my portion of your house (mortgage tax deduction) get frisky with my part of your wife (dependent tax credit) and after you drive your 2 seconds in my car my portion of your kids (dependent tax credit) can wash my car.
          In reality, you had nothing to do with a so-called “subsidy” and there was no sales tax incentive. the tax credit can only be taken by me if I have a tax bill sufficiently large to have it offset, and it must be used in the year the car is purchased (can’t be carried over to subsequent years like many other credits and deductions may be)

  • avatar
    NormSV650

    Obummer!

    • 0 avatar

      Mr. Tea Party-right-wing-drives-an-SUV-and-has-no-intention-of-ever-owning-an-electric-car here.

      Volt was coming to market no matter who was in the Oval Office. Skyrocketing gas prices and environmental concerns (real or imagined) saw to that. And Bob Lutz drove this train along.

      The only things that might have delayed Volt were continued low gas prices such as we saw Christmas 2008 after the economic collapse…or a complete Chapter 7 liquidation.

      Now GM needs to amortize its costs best it can and apply what they learn to make future generations of these cars better.

    • 0 avatar
      tuffjuff

      inb4 political posts and “oh ma gawud I wunt dis fer twenty thousand dollarz” posts.

      Oh, wait.

  • avatar
    BMWnut

    So, the more they sell the more money they lose. Ouch!

    • 0 avatar
      carve

      How do you figure that? It only costs $24k to make and they sell it for what….$45k? That $21k profit (HUGE) goes to paying for the development and tooling costs.

      The only problem is they aren’t selling enough of them, so it’ll take a long time to amortize the costs.

      • 0 avatar
        CJinSD

        Two thirds of them are subsidized leases for prices that correspond to about $20,000 transaction prices, so no. On top of that, all those off lease cars will take a huge depreciation hit since used customers won’t get the huge tax incentives to buy or lease.

        • 0 avatar
          michaelmur

          the leases are not subsidized: the leasing companies see these cars as retaining a large portion of their initial cost and price the leases accordingly. The leasing companies take the tax credit as the initial owner, and that lowers the initial cost so the residual is not a depreciation hit: it is factored in.

  • avatar
    hifi

    This isn’t unusual. With any new product, fix costs are amortized over three-to-five years. Why do you think that brands try to use the platforms for multiple vehicles? Currently, the Volt is the only car to use this new platform, until the ELR is introduced. I’d bet that no vehicle is profitable in the first couple years. Aside from badge engineered cars maybe.

    • 0 avatar
      icemilkcoffee

      It’s true. The Volt is the first plug-in hybrid on the market. Obviously they’ll have to do a lot of R&D and unique tooling for it. If GM stops making plug-in hybrids then it is true that they have lost money on the car. But if GM continues to produce plug-in hybrids, then the fixed costs were just downpayments on a new technology.

  • avatar
    stephenjmcn

    Toyota did not make money on the Prius until around 2007, 10 years after it was first released. Why are people surprised that the Volt’s cost/revenue will follow the same direction?

    • 0 avatar
      KixStart

      No kiddin’?

      Or… maybe not… http://articles.latimes.com/2001/dec/19/autos/hy-prius19

      • 0 avatar
        sunridge place

        Please read your own linked article before popping off…

        ‘Though the cars are no longer sold at a loss, profit from sales remains insufficient for Toyota to recoup its initial investment and development costs, General Manager Shigenobu Uchikawa said’

        The Reuters article builds assumptions based on the initial investment and development costs. The ‘profit’ in your linked article leaves those out.

      • 0 avatar
        stephenjmcn

        Bloomberg suggested 2007, and we don’t know his Toyota treat it in their accounts. The point stands: new cars, especially those with new tech, don’t pay their way for a long time.

        The Volt can’t be judged in isolation, it’s the hard yards of a whole new tech/platform stream for GM – future models will be far cheaper to develop because of it.

      • 0 avatar

        @Kix: Nice try linking to a 2001 article when a dollar bought 125 Yen or more. Do a google serach for Toyota needs the dollar to stay at or above 85 Yen for Toyota to profitably export from Japan(as quoted by the CEO or CFO himself).

        Prii are still made in Japan and the dollar hasn’t bought 85 Yen in nearly two years. The Yen stands at 78 to the dollar now. The bigger the difference from 85 to the dollar, the bigger the loss. Good thing Toyota has the Japanese Govt Sugar Daddy to restrict competition and spend trillions devaluing their currency.

        Its true when Toyota said exports are not profitable, they didn’t single out the Prius but considering that more then 70% of the exports to the US are Prii and most of the remaining 30% are high margin Lexii, 4Runner, and FJ Cruisers, we can safely assume that Toyota is losing their shirts on the Prius.

      • 0 avatar
        KixStart

        “@Kix: Nice try linking to a 2001 article when a dollar bought 125 Yen or more. Do a google serach for Toyota needs the dollar to stay at or above 85 Yen for Toyota to profitably export from Japan(as quoted by the CEO or CFO himself).”

        If Toyota was having that much difficulty matching the cost of their HSD drivetrain cars to the revenue opportunities of sales in dollars, they woud either not be selling a $19K Prius C full hybrid here or they would have moved production to the US.

        The article I linked says 50 to 100K vehicle/year to be “truly profitable.” Prius sales reached 125K in 2004.

      • 0 avatar
        KixStart

        “The Volt can’t be judged in isolation, it’s the hard yards of a whole new tech/platform stream for GM – future models will be far cheaper to develop because of it.”

        I don’t judget it in isolation. However, GM is a decade behind. The Volt is yet another car with a gas-electric drivetrain. It does have a bigger battery but you could jam a bigger battery into a Prius, too.

        It’s clear that, even after a decade of watching Toyota develop HSD and sell over two million units, GM is not ready to compete in gas-elctric drivetrains.

      • 0 avatar

        “It’s clear that, even after a decade of watching Toyota develop HSD and sell over two million units, GM is not ready to compete in gas-elctric drivetrains.”

        Actually, if you bother to read the Reuters piece you’ll find out that the number one non-GM trade-in on the Volt is the Prius. That speaks to just how competitive the Volt is. I think it says something that at least some Prius owners are trading up to the more expensive Volt.

        http://www.carsindepth.com/?p=10619

      • 0 avatar
        KixStart

        Ronnie,

        Yes, GM made that claim a year ago. How has this changed since? Was the first wave of Volts sold to people who had to have the latest and greatest step towards electric driving, people who were driving Priuses merely as a stop-gap, and since then it’s just run-of-the-mill Malibus coming in, etc?

        A few hundred or maybe a couple thousand out of the million-plus Prius owners means that the Volt is serious competition? I don’t think so.

        Nor does GM like to think of the Volt as competition; they work very hard to distinguish it from the Prius and the extra D cells it carries, with the concomitant expense, is their argument that it’s different.

        Except, aside from the extra D cells, it IS just the same, only not as good.

        GM does not compete, head-on, with Toyota in that space and they do not even try.

  • avatar
    carve

    Why is it surprising that this car had high R&D and tooling costs? A car like that had never been built before. It’s the same reason the F-22 costs a quarter billion dollars even though the flyaway cost to build one is only $130M- about the same as a crappy F-35.

  • avatar
    philadlj

    It took four years and 75,000 global sales before the Prius turned a profit. I wouldn’t be surprised if it took far longer for the lower-volume Volt.

    Apropos of this, I’m not spotting at least one Volt a day on my commute to work. And they sold more Volts in August than any other month in its existence.

    It’s painfully slow going, but the Volt is finding its niche: drivers who benefit most from its extended electric range but aren’t hurt by its relatively poor fuel economy. The problem is that niche isn’t nearly large enough to turn a profit any time soon.

    Still, at least this research has been done and will be applied to other GM products in the future (i.e., ELR).

    Pulling the plug (no pun intended) on Volt development after the federal bailout may have been the politically wise choice. But it would not have been good business.

    If they’d stopped development, they’d be behind the PHEV game; instead, they at least have a player on the field to do battle with Toyota, Ford, etc.

    • 0 avatar
      michaelmur

      WHAT??? Relatively poor fuel economy??? I beg to differ: my Volt gets 38-42MPG on gasoline regardless of city or highway. there are very few cars on the road that can match that, and most of them are tiny little econoboxes

  • avatar
    mjz

    They should have introduced a Cadillac version first, until they could get volume up and costs down. A Cadillac version (like the ELR) will command a transaction price that is closer to to what the costs actually are. Then maybe as costs came down a Buick version could have been introduced, then finally a Chevy version when they could sell it profitably for about $30,000. Typical GM, they are doing it a$$-backwards.

  • avatar
    mjz

    Since most of the cost was in the technology, why not introduce some variations (other than the Cadillac ELR) like a Volt coupe, convertible, wagon or CUV? Not everyone wants a sedan. Oh wait, that might actually increase volume and lower costs. What was I thinking.

  • avatar
    mjz

    Bertel, the headline is missing an “l” in “dollars”.

  • avatar
    philadlj

    I’d love to find an online database of automotive production costs compared to their MSRP. I’d imagine full-size SUVs and trucks remain on the high end of of the profitability spectrum.

  • avatar
    mcs

    Ford did a much better job with it’s Energi series plug-in cars. They’ve implemented their plug-ins as what essentially is a power train option for a couple of volume models. Built on the same lines with mostly the same parts as the volume models. So, low volume doesn’t have nearly the impact on Ford as it does GM with the Volt. Same with everyone else building a plug-in.

    • 0 avatar
      jeoff

      Yeah, and they basically farmed out the development costs of their electric Focus,and still got most of the environmental halo (a strategy that this site deemed a loser, btw).

  • avatar
    axual

    The cost of the technology and tooling for any new vehicle makes it unprofitable initially. The question is, how long is the case and whether GM can ever get to enough volume to make a profit on the vehicle.

    I doubt this will occur with this vehicle … 4 seats is a problem (they could have engineered this to offer 5 seats for starters).

    But beyond this, they need to get this platform into other models like the Cruz or Malibu to make sense. Even the GMC Terrain might be an option.

    I’ve never been impressed with GM. Their management has a poor history of good decision making (i.e. Saturn should have been a product that was successful long term). They also compete with themselves too much, and should have been forced to file bankruptcy putting their executives on the hook (instead of taxpayers).

    • 0 avatar
      el scotto

      You might as well have stuck a fork in Saturn when they let the UAW in. They went from “a different kind of car company with a different kind of car” to yep, a GM brand built by the UAW. My 95 SL1 is still in the family and still chugging along.

      • 0 avatar
        bikegoesbaa

        The UAW was “in” at Saturn from the very beginning. That was one of the fundamental ideas of the project: dealing with the UAW as a true partner rather than just a source of able bodies.

        Your 95 SL1 was absolutely built by the UAW, just under a different contract than what was in effect at other GM plants.

        Reference:
        http://www.dol.gov/oasam/programs/history/herman/reports/futurework/conference/contract/saturn.htm

      • 0 avatar
        28-Cars-Later

        I was about to say something to that effect. IIRC the impetus for Saturn came about in the early 80s where UAW was looking to put laid off workers back on and GM was looking to build an ‘American’ Japanese car, very ‘different’ from what they were currently doing.

    • 0 avatar
      krhodes1

      I find it hard to believe that anyone really cares whether a car the size of the Volt has two seat belts in the back seat or three. There is only room for two people back there, even if those people are teenagers.

      The problem with the Volt is the price, full stop. It is a $20K car for $40K. If they could sell it for the price of the Cruze, they could just sell it in place of the Cruze. But it costs too much to build at this point. Never mind amortizing the development costs.

      • 0 avatar
        michaelmur

        Sorry, you have the Volt value all wrong. the BASE Volt is so far above the quality of the Cruze that they are not even in the same class. Drive them both, then eat your words.

  • avatar
    mx6er2587

    um…wow this a substandard reporting for ttac. Econ 101 says that if your marginal cost is less then or equal to the selling price then you keep making product. GM doesn’t lose money on every car they sell. They make ~20k give or take.

    Now, they haven’t been able to pay off the sunk costs for R&D and tooling yet, and maybe they never will, but the title and the article is very misleading. Two thumbs down here

  • avatar
    DC Bruce

    Fish in a barrel. This just shows what can be done by a group of English majors with no knowledge of, or experience in, cost allocation accounting — viz the comment “oh, that means the more they sell, the more they lose!”

    Actually, not, as someone else points out.

    While I’m no fan of the Volt (mostly because it comes close to making economic sense for a very small sliver of the market . . . unlike, say the Prius, or even the Fusion Hybrid which come close to making economic sense for a much larger portion of the market), it’s not fair — or intelligent — to criticize it on this basis.

    It’s only in hindsight (after the product is no longer sold) that it is possible to make a good/bad judgment about it in these terms. Consider that, in the salad days of Detroit, Chrysler made a fairly substantial investment in developing a turbine powered car. Since none of these were ever sold and since it’s unlikely that the technology developed was ever used in some other product, THAT was a big loss.

    • 0 avatar
      danio3834

      The reality is they lose less on each one sold until they eventually make a profit if they sell enough.

      They may never, but who knows, sales may take off.

      • 0 avatar
        Mark MacInnis

        “But who knows, sales may take off.”

        “And who knows, pigs may eventually learn to fly.”

        “And who knows, live monkeys may eventually emerge from my butt.”

        “And who knows, people on welfare may eventually get jobs and become productive citizens.”

        “And who knows, borrowing billions from the Chinese daily may eventually lead our economy to prosperity.”

        “And who knows, eating diets of nothing but pizza, sodas, hamburgers and nachos may make Americans the healthiest people in the world.”

        Lies we continually tell ourselves.

        You know better than that.

      • 0 avatar
        danio3834

        Those are nicely obtuse comparisons. I was only making a supposition. No crystal ball here.

        Sales of the car are definitely up but of course nowhere near profit generating for the company. I’m indifferent to the car itself, I can see you most definitely are not.

      • 0 avatar
        jkross22

        Danio,

        I”m not a fan of GM, but hate isn’t directed at the car itself… just the decision making process that led to the Volt’s creation and the mind numbing stupidity and insular thinking being continued by a company that supposedly got ‘cleaned up’ in bk.

        The Volt’s poor acceptance, scatter brained launch and ridiculous claims are all proof this company has not learned from its own mistakes.

        That is the issue. The Volt is yet another symptom of a sick company made to look better by wiping out debt on the taxpayer nickel.

  • avatar
    Conslaw

    I agree, this is poor reporting. Not only does Gm make money over the variable costs, each marginal unit contributes to the “experience curve” effect, where the cost of production of new units goes down as a factor of cumulative units produced.

  • avatar
    1000songs

    Bunch of whingers – if they offered a Volt in Canada for $199 a month with $250 down, I’d be driving one.

  • avatar
    Mark MacInnis

    It is one thing to invest $ billions in a revolutionary technology which will pay off down the road by fundamentally changing the personal transportation paradigm for decades.

    It is a horse of an entirely different hue to bet $ billions on a technology likely to be short-lived in a “me-too” effort to try to buy instant green cred.

    The Volt’s technology, and thus much of its market appeal, has already been bypassed by Toyota’ relentless Kai-zen of the hybrid.

    The problem with “Halo” technology is, once it has been bypassed, it is very, very difficult to find plates large enough for the servings of crow necessary to allow the ship to tack to the winds of the market and the technological environment. If I may grossly mix metaphors.

    GM and Toyota played the hybrid game much like their countries respectively play baseball. In Japan, they play, and love, the nuanced game of the hit-and-run, the sacrifice bunt, the stolen base….station-to-station, fundamental small-ball. A little splash is OK, as long as it is part of a long line of profitable and successful little splashes, and as long as smaller splashes and misses are learned from.

    GM and the US, however, (try to) play the Grand Game at Ruthian levels. GM went for the media and fan favorite, big contract free agent, the “Grand Slam”: swung hard and missed (the EV-1), then connected (Volt), only to see the ball falling at the warning track of economic and political history.

    The market recognizes the failure, but neither national political grandstanding on the part of economic and energy policy makers, nor corporate hubris at The General,will allow GM to admit defeat and gracefully alter their plans. Too much skin is in the game.

    So, GM chooses to do what they did in the Oughts, that which led to the bailout and the fair-to-the-unions but screw-everyone-else quasi-half-arsed,let’s-stretch-the-fabric-of-jurisprudence psuedo- bankruptcy: “Hey, I know: Let’s drop the price and try to make it up on volume!….low payment leases for the masses! Huzzah! Let’s have drinks.”

    The problem is that the write-off of the Fixed cost investment at this magnitude becomes an elephant choking the python for years to come….Peter will have to be robbed to pay Paul…not boding well for GM future product development and competitiveness. The $30K residuals on the Volt leases will need to be redeemed somehow, most likely with large write-downs down the line. Unless, in fact, the corporate auditors keep some sort of “mark to market” principles and force GM to take their financial medicine…and lumps….sooner.

    The Volt is a failure….not enough lipstick and ear-rings on the PLANET to make this pig look anything other than porcine. The sooner GM owns up to it internally, and convinces their masters in D.C. of it, the sooner the company can get past it, hopefully learning from their expensive mistakes and dedicating themselves to trying to learn to play catch-up with Toyota. Again.

    If GM is LUCKY (Pay attention, union voters)a Romney win, with subsequent embrace of a more hydro-carbon-friendly economic and energy policy, will allow GM to sell many more Silverados, Sierras, Camaros and Malibus, giving them money to offset the Volt writeoffs, and allowing them time to find their Plan E to meet the amazingly reckless CAFE standards looming a decade or so hence (an eye-blink in engineering time) be it a shift to Toyota-esque hybrids or VW-like super-clean diesel technology.

    If GM is not-so-lucky, the Dark Greenness prevalent in the EPA of a second Obama administration will force them to “Stay the course, dammit…Americans will eventually figure it out and come FLOCKING to buy Volts. We’re sure of it. Any…..minute…..now!”

    GM’s future, and much, much, more hangs in the balance of the coming election. I have a feeling the country’s voters and the people propping up our tottering economy by loaning us money at the rate of $3.3 billion per day won’t have the stomach for a second governmental GM “too big to fail” bailout moment, which will make the first one look like so much bloody wasted time and effort.

    Sigh. Farago was right. The Old GM truly died years ago.

    The NEW GM has the same problem Lazarus did: It SUCKS to be brought back from the dead, if all you are going to do is just die all over again.

    • 0 avatar
      rnc

      “If GM is LUCKY (Pay attention, union voters)a Romney win, with subsequent embrace of a more hydro-carbon-friendly economic and energy policy, will allow GM to sell many more Silverados, Sierras, Camaros and Malibus, giving them money to offset the Volt writeoffs, and allowing them time to find their Plan E to meet the amazingly reckless CAFE standards looming a decade or so hence (an eye-blink in engineering time) be it a shift to Toyota-esque hybrids or VW-like super-clean diesel technology.

      If GM is not-so-lucky, the Dark Greenness prevalent in the EPA of a second Obama administration will force them to “Stay the course, dammit…Americans will eventually figure it out and come FLOCKING to buy Volts. We’re sure of it. Any…..minute…..now!””

      The Volt was built (GM was told to develop) as part of the BUSH loans, the evil president Obama’s task force wanted GM to use the toyota/ford type hybrid, but GM being GM (remember fritz and lutz were still around at this point) they were going to leapfrog the competition at any loss (just ask R. Smith).

    • 0 avatar
      E46M3_333

      When I see a post as long as yours, I don’t even bother to start reading it.

    • 0 avatar
      KixStart

      Hahaha. As if Romney can do anything about gas prices.

      Right now, oil drilling is going on at a frantic pace all over the world and new non-OPEC sources have become available. This has kept fuel prices moderate. If we keep extracting at this mad pace without difficulty, prices will probably remain moderatae for some time (although this depends, to some extent, on how Chinese and Indian demand bids up the market).

      Now, if these new sources are fairly marginal and are quickly exhausted and/or there’s a war that disrupts oil flow out of The Gulf, then oil prices will go up, no matter who is in office.

      The choice between Romney and Obama is between gambling on the future and planning for it.

      • 0 avatar
        krhodes1

        Except in the grand scheme of things, gas is still dirt cheap. IMHO, as long as CUVs, SUVs, and pickups are still selling like hotcakes, and they are, then obviously the price of gas is something that people like to whine about, but is not really affecting them much.

        I have a Chevy Craptiva rental this week. Loaded, AWD, in Dallas. I am getting <18(!!!!) mpg in this turd. Not even stop-and-go driving, just suburban go with the flow and 65mph interstate running. And this is the type of vehicle that is FLYING off the lots. I doubt any of them do much better in the real world. So obviously, fuel economy is a lip-service thing at best. But people LOVE to whine.

        The most magical property of oil that everyone seems to forget is that the higher the price, the more there is of it.

      • 0 avatar
        Mark MacInnis

        “Right now, oil drilling is going on at a frantic pace all over the world and new non-OPEC sources have become available.”

        Yeah…and most of THOSE non-opec sources are even less friendly to the US than the OPEC nations…

        The only answer is to drill at HOME, where we can develop secure energy….and just so you don’t think I am a total neanderthal, we should be exploiting our MASSIVE reserves in Natural Gas by converting as much of our transportation devices to NG as quickly as possible. And also approving and building nuclear plants at a faster pace. As well as REBUILDING clean coal plants, to which the Obama EPA has been NEEDLESSLY hostile. I also believe we should develop Solar and Wind power, but the MARKET should pick the winners and losers, NOT political bedfellows.

        My point, which seems to have eluded you entirely, is that GM is set up to be profitable in the short- and mid-term by continuing to sell ICE vehicles. An energy policy and administration which are more friendly to those (Hint: NOT THIS ADMINISTRATION) will be more likely to keep GM afloat and generating cash while it continues to search for its coherent next-generation non-ICE vehicle strategy.

        If the goal is (and it should be) to allow our market economy and its players BREATHING ROOM (read: time and money) to develop the next-generation of vehicles for the future, we should just shut up and let them DO it, not force them with artificial and punitive deadline policies like CAFE, and not with loopy Gyro Gearloose grand subsidy policies like Solynda and Volt. Recreate the environment that once existed in this country, where genuis, innovation and hard work are naturally rewarded by the market in the field of transportation science, and it WILL happen AGAIN in this country. Keep trying to force-feed subsidies and picking winners by government fiat and you will continue to get what we are now getting in this country: failure, hack science…and economic stagnation.

        How many jobs are there at Solyndra now? How many jobs are there at the Volt plant now, compared to what was promised?

        ‘Nuff freakin’ said, already….

      • 0 avatar
        28-Cars-Later

        The choice of Barry is definitely gambling on our future…

  • avatar
    Carlson Fan

    “Shhhh, don’t dare suggest that actual math and econ 101 should get in the way of TTAC’s GM bashing.”

    +1 – Only TTAC could spin last months Volt sales of close to 3K units and make it look like a bad thing.

    I doubt the Volt itself will be around that much longer in it’s present form. It’s really the Voltec platform that needs to succeed. And that’s what GM is betting on. It’s called strategic planning and it’s what any company playing in one of the most competitive industries in the world does if they want to survive. As somoene who bailed out GM I can’t think of a better way for GM to spend my money than investing in a car like the Volt.

  • avatar
    86SN2001

    Could someone show me the TTAC article that was written on the first couple generation of Prius that Toyota lost money on?

  • avatar

    worse yet is the lost opportunity cost as Poletown is producing duds rather than Big Ol’ Buicks that generated sales and profit. it’s well past time to pull the plug on this disgraceful waste of taxpayer money. it’s bad enough that failed management went belly up as a result of their incompetence, but now they are burning through billions of dollars confiscated from the public and irrationally invested by a socialist, banker controlled government.

    who is John Galt?

    • 0 avatar
      el scotto

      So GM should have kept doing the same ole, same ole that was a smashing success for them? The hatred of the bankruptcy is blurring analysis of GM designs and technology. Hybrids were slices of the automotive pie mostly made by Toyota before GM got in the market.

  • avatar
    Volts On Fire

    I’d hate the Volt and its owners a lot less if GM were a healthy, viable company, using its OWN money to invest in the technology and bring it to market… as Toyota did with the Prius. Instead, GM exists solely thanks to government largess, backed with taxpayer dollars and Chinese money, and it’s using that money to sell what amounts to an overly complicated, less practical Prius clone.

    Every time you see a Volt on the road, consider how its driver is basically stealing money out of your wallet through the billions wasted on the bailout, and still more good money thrown after bad to subsidize the tax rebate and gimme lease deals.

    Seems more people should be outraged by that, and doing more to make their feelings emphatically known, and demonstrated…

    • 0 avatar
      Dr. Kenneth Noisewater

      Feels darned good. I got an $80k car for $40k, and I don’t have to pay for foreign devil piss for my commutes. Plus, cheaper insurance and ‘reserved’ parking spaces with ‘free’ juice. And plenty of torque at 0rpm.

      • 0 avatar
        Volts On Fire

        As CJ says below, the entitlement hordes are fortunate those on the other side tend to be rational, reserved and respectful individuals… but we have limits, and I sense a great many of us are near the edge.

        Like it or not – justified or not – the Volt is one easily-identified symbol of wasteful spending, and the bailout as a whole. It’s not hard to imagine how that could become a liability for you down the line.

    • 0 avatar
      CJinSD

      Fortunately for the entitlement abusers, the folks smart enough to be outraged are good people, quite unlike the ones that keyed H2s and torched Excursions on dealer lots. Desperate times can test people’s character though.

    • 0 avatar
      28-Cars-Later

      Ask yourself this question: How much are they really afraid of peak oil?

      Ethanol obsessions, 80K electric cars, a sudden push for hybrids, and 54MPG CAFE, it is really to just save a few hundred bucks a year per unit on gas and obtain green cred? Sure there are a litany of other nefarious reasons for the above actions (corn ethanol = taking food off the world market for instance) but is it as simple as their projections for oil production/consumption are much more dire than they let on and they are rapidly trying to prepare the transportation industry?

      • 0 avatar
        Mark MacInnis

        Depends on how you define Peak Oil.

        If you define it as “Peak oil easily extracted from countries outside the USA in ways approved by Liberal earth tree huggers.”, then, yes, I suppose they are afraid of Peak Oil.

        If you define it as “Peak oil safely extractable from United States and territorial waters but in ways that might offend a lover of snail darters.”, then, no, we are not near peak oil.

        Drill, baby, drill.

      • 0 avatar
        28-Cars-Later

        Well since it takes balls on the part of gov’t to stand up to the eco-communists, I would say we are approaching peak oil.

        On another more serious note having read Simmons’ Twilight in the Desert, I’m quite concerned for the future of ‘cheap’ oil, economic growth is predicated in the availability of cheap[er] natural resources.

      • 0 avatar
        Dr. Kenneth Noisewater

        Meh, I just prefer the superiority of the electric drivetrain, and not having to be beholden to foreign dictatorships and the hypocritical kowtowing of the American populace for their oil.

        And yes, electric drivetrains are superior in nearly every way to reciprocating-engine drivetrains except for charge capacity and fill rates. Electric motors are quieter, smoother, simpler, more compact, more reliable, and more efficient than reciprocating engines, and common accessories running off their own motors and power are more efficient than having to hang off of a serpentine belt on a gas engine that needs to be kept running constantly to keep powering them (and each accessory must be engineered to behave properly with dynamic engine RPMs). Once providing power to an electric drivetrain is improved in both range and fill rate (with nanotech/li-air/zn-air/borate batteries and hydrocarbon SOFCs, capacitors and fast DC charging at retail charging stations, or turboshaft gensets) the reciprocating engine will end up deprecated.

  • avatar
    Pch101

    Er, I hate to be the one to do the math for you, but Reuters really blew it, and so did you by faithfully restating their case.

    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.

    The new GM had to pay for the tooling, marketing and some development, but certainly not all of it. Motors Liquidation had been working on the car for at least three years prior to the bankruptcy, so a lot of the R&D cost would have already been incurred at the time of the bankruptcy.

    Next time that Reuters does a “deep data dive”, you might suggest that they not leap in at the shallow end of the pool.

    • 0 avatar
      CJinSD

      Remember when GM wrote down its 7 billion dollar ‘investment’ in getting Saturn up and running one quarter so they could start claiming to make tens of millions of dollars from their new brand? How did that work out?

      • 0 avatar
        Pch101

        Thanks for making yet another entirely irrelevant point.

        Let’s deal with the article, shall we? It’s wrong. If Company A pays X dollars for a project, and Company B buys the largely completed project from A for, let’s say, 0.1X, then Company B’s basis in the deal is only 0.1X.

        It doesn’t matter to the second guy’s accountant what the first guy spent. If you bought a house at a short sale, you wouldn’t factor in the seller’s loss in determining your basis. It might be fun to talk about at a cocktail party, but from a financial management standpoint, it’s completely irrelevant.

    • 0 avatar
      Volts On Fire

      “Er, I hate to be the one to do the math for you…”

      Admit it, that’s the only reason you’re here!!!

    • 0 avatar
      Mark MacInnis

      PCH101…then what exactly is GM;s basis for all the fixed costs cited? If the R&D was FREE, they wouldn’t have to depreciate it, (nor would they be able to…but you see what I mean.) So, if they aren’t factoring the costs incurred by Old GM, they are amortizing a SHYTELOAD of cost? What makes it up? Any ideas?

      Or are you saying the numbers in the article are fraudulent, BECAUSE they would have gotten all the R&D for free?

      • 0 avatar
        Pch101

        My point is that the price that the new General Motors paid to Motors Liquidation was not impacted by the Volt. The new GM didn’t pay anything more to Liquidation Motors than it would have otherwise had there been no Volt.

        An accountant would naturally allocate some of the cost of the purchase to the Volt, but the Volt was a relative blip on the balance sheet, so they wouldn’t have paid much.

        In any case, the point that Reuters doesn’t address is whether this platform will ever generate enough market share to have been worth the cost of production. I personally have my doubts that it will, but I wouldn’t use this article to prove my point, since it pretty much misses the boat.

      • 0 avatar
        KixStart

        PCH101,

        This car is not going to sell in any significant quantity until battery prices drop significantly or fuel prices rise so dramatically that nobody will have money for it, anyway. And it’s a mediocre car as far as utility goes; it has mediocre RE-MPG, only seats 4 and has limited cargo capacity.

        So, let us not look at this in terms of income statement accounting but, better, in terms of evaluating design, development, planning and decision making performance.

        In that case, we DO need to look at the development costs, whether they were written down or not. Who proposed this car? Who engineered it? Who did the marketing? Who did the financial analysis? Were their judgements, calculations and decisions good ones? Did they go through a process that led to a “profitable” car?

        GM is not going to develop the Volt again but they are going to develop other vehicles. They must have some basis for determining who makes good and bad investment decisions.

        As far as that kind of analysis goes, pretty much everyone who touched any of GM’s hybrid projects over the past 12 years should be let go.

        Or maybe it was just all Maximum Bob’s fault for ignoring cautionary feedback from his underlings and ramming the project through in spite of its low sales potential.

      • 0 avatar
        Pch101

        “Who proposed this car?”

        Bob Lutz, of the Old GM.

        “Who engineered it?”

        As I mentioned, for the most part, the Old GM.

        “Who did the marketing?”

        Largely, the new GM.

        “Who did the financial analysis? Were their judgements, calculations and decisions good ones? Did they go through a process that led to a “profitable” car?”

        The design parameters, which drove the resulting costs, came from Bob Lutz. (And yes, I think that he screwed up when he lowballed the cost of the size of battery needed to hit his EV range target. People who shoot from the hip often miss.)

        However, you’re missing the point. The New GM, circa 2009, was at a sort of crossroads. The new company (which came under new management, despite much whining to the contrary in the comments section of this website) is planning to have fewer channels and fewer brands. It is also going to need to revamp its image if it is going to be relevant in a changing market.

        Meanwhile, it has this already-mostly-developed-and-paid-for Volt project. The New GM can either punt on it, or else complete it at a relative discount.

        The concept has its flaws, to be sure. (Note the battery comment above.) But it is what it is. So do you run with it or not?

        It strikes me that at that point in time, moving forward was a no-brainer. It’s largely paid for, and it’s almost done. Even if it isn’t profitable, it could be a brand builder, and the lessons learned from developing and refining it should benefit other projects. The auto industry is a marathon, not a sprint, and decisions need to be made for the long run good of the business.

        If the Volt has been a casual thought in somebody’s sketchbook at the time of the bankruptcy, then I personally would have voted to kill it and to not look back. But given how far along it was and the relatively low marginal cost of finishing it, it made complete sense to move ahead with it.

        Steven Rattner wanted the Volt program to survive in order to serve as a halo. That was absolutely the right decision. That was a good call, even if it doesn’t turn a penny in profit.

  • avatar

    General Motors lacks any rational sense of selling cars, they are however the world’s leading expert at giving them away.

  • avatar
    Rday

    This sounds more like the old GM thinking. “We lose money on every car but intend on making it up in volume”. LOL. Same old song and same old way of thinking. Alot depends on what happens with the volt over the next several years. If it proves as trouble free and reliable as the Prius, there will be a used car market. But if it is problematic, not so good. And I would bet that GM’s used car prices are no where near as good as let’s say Toyota’s or Honda’s. I will bet against the Volt just based upon GM’s history and their management.

  • avatar

    Subsidized leases are not what GM should be doing when they are losing money in Europe. I have a problem with GM allocating capital to prime volt sales in an election year while the more important 2013 Malibu is ranked dead last in all car-camparos.

    The Volt by itself is probably the most advanced car ever made, so even if GM loses money, it is a big win for whoever bought the car. The tax payers may end up losing $25B in stock purchases and $14B in unpaid taxes. This is probably GM’s way of paying “US” back?

  • avatar
    carguy

    Much like the first generation Prius made a loss for each unit Toyota sold. I can’t remember Toyota shareholders being that upset about it – I think they recognized it to be a long term investment.

  • avatar
    APaGttH

    It only took Toyota, oh, about a decade to start turning a profit on the Prius, and the Japanese government basically paid for development.

    File this under, “no kidding,” and in other news the sky is blue. The Volt is sold for a loss? SAY IT ISN’T SO!!!

    On the other hand, just like at the Toyota dealer of your choice in circa 2005. Customer comes in to look at Prius, leaves in profit making Camry or Corolla? WIN.

    Customer comes into GM dealer to look at Volt – drives off in a Cruze Eco. GM makes money on every Cruze – sounds like a win to me.

    Funny thing is, customers are buying them – or can we run a story on the $99 a month lease deals being advertised in Puget Sound for Nissan Leaf? Or does that somehow – help – Nissan???

    • 0 avatar
      Pch101

      “It only took Toyota, oh, about a decade to start turning a profit on the Prius, and the Japanese government basically paid for development.”

      That really doesn’t make any sense at all.

      Step back and look at how nonsensical your point is. You want to claim that the Japanese government paid for the development, yet it took a decade to make a profit, at the same time.

      If the Japanese government had paid for the Prius’s development, then Toyota should have been able to create a cash machine out of it in just a few years time, since there were no development costs to hurdle.

      On the other hand, if it took TMC a decade to create a profit, them that would suggest enormous development costs. Which is funny, because you’ve just said out of the other side of your mouth that TMC didn’t pay for those development costs.

      If you’re going to be a spin machine, then at least try to spin in one direction. Sandwiching two contradictory statements into a single sentence is bluntly lame, even for you.

      • 0 avatar
        APaGttH

        …yet it took a decade to make a profit, at the same time…

        Nothing nonsensical about it.

        If it costs you X to build something, and you sell it for Y, and Y is less than X, you’re not making profit.

        Any questions yet?

        Do some searching yourself, because honestly I’m kind of weary of your endless carping, and I’m not going to spoon feed it to you, but it’s pretty easy to find Prii “deconstructions” to figure out the cost to build one versus sold, and it is estimated that Toyota didn’t start selling the Prius for profit until around late 2006, early 2007.

        Sales prior were at a loss because it cost X to build, they sold them for Y, and Y was less than X.

        But now that economy of scale has been achieved (years ago on the Nickel based Prii batteries) and the manufacturing cost was brought down, Toyota makes a profit.

        Hmmmm…what’s the single most expensive component in the Volt? Oh ya, the Lithium-Ion battery. And as production costs go down with economy of scale and improvement in…oh never mind, you wouldn’t understand anyway.

      • 0 avatar
        Pch101

        “Any questions yet?”

        Ya. Why do you keep spinning, and spinning, and spinning, and spinning?

        TMC spent about $1 billion to develop the Prius. Not significantly more than was the cost at the time for developing a new model.

        The car is largely made up of parts similar to what can be found in other cars, except for a rather large battery.

        Remember that “hybrid price premium” that everyone likes to yelp about? Well, guess what — that covered the cost of that rather large battery. That extra money paid by the customer allowed TMC to at least break even on that battery. The rest of the cost is going to pay for the otherwise ordinary parts and labor that went into the rest of the car, along with a margin for profit.

        It’s easy to surmise that the car hit profitability when it could maintain annual sales of about 50,000-100,000 units. That happened in the US several years ago. Since then, versions of that drivetrain have been installed in other TMC models, which has provided more units across which those costs have been amortized.

        Your point was bogus, and it remains completely bogus. You’re so busy spinning that you don’t even see when your points directly contradict each other. More reading, less typing.

    • 0 avatar
      jkross22

      AP,

      You have some odd assertions going on. You must not understand much about marketing or branding if you think people ready to buy a Prius will buy a Corrolla or Camry instead.

      Same goes for the Volt/Cruze comp.

      Any data to back up what you’re guessing at?

      • 0 avatar
        APaGttH

        Ugh, you want proof…OK… here you go:

        http://blogs.cars.com/kickingtires/2011/10/chevy-volt-helps-cruze-sales.html

        http://content.usatoday.com/communities/driveon/post/2011/10/chevrolet-volts-magic-rubs-off-on-sales-of-cheaper-cruze/1#.UE5TilFQPyA

        Seven to ten years ago there were similar stories about the Prius driving Corolla/Camry sales. They would come in and look at the Prius, conclude to expensive, and leave in a Corolla. Or they would look at the Prius and conclude to small, and leave in a Camry. Toyota didn’t care either way, kept them in the fold, and made money on the Corolla or Camry sale.

        Don’t understand marketing and branding — yaaaaaaaaaaaaaaaaaaa…OK. I mean the cross shopping of the Cruze by Volt customers was only in USA Today and quoting GM directly at a public meeting but hey – I don’t understand marketing and branding. However I can read, and tend to have a good memory of what I read.

        I would suggest it is you that does not understand marketing and branding. You really think cars like the Viper, GT-R, Corvette, Volt, and say 10 years ago the Prius existed to sell on their own merits – and people didn’t go to showrooms to just, “look,” with no real intent to buy for practical, economic, or other reasons? They’re called halo cars for a reason.

      • 0 avatar
        KixStart

        Oh. Mark Reuss said it has a halo effect. Well, that’s good enough for me.

        As in, b*llsh!t. If I were among the people responsible for the Cruze, I’d be p!ssed with Reuss. The Cruze is selling decently on its merits. People are not flocking to Chevy dealers to try out a Volt and then somehow get swept up in Cruze-mania.

        People to go Chevy to try a Volt because they want a Volt, a car with a gas-electric drivetrain and decent battery range (and, often enough, an HOV sticker). They aren’t going to decide a Cruze is “good enough” or, God forbid, buy a Malibu Eco instead.

        I know plenty of people interested in car, interested in EVs, even, and the Volt is not dragging people into showrooms to try it out and magically get reacquainted with GM.

        In fact, a significant number of Volt early adoopters owned Priuses and they were willing to swallow their dislike of GM just long enough to get to the next level of electrification. They certainly weren’t going to take a Cruze off GM’s hands.

        The Toyota situation was different; gas spiked up (as it is wont to do) and people flocked to Toyota for that new 50mpg car. Once there, they found that they could get on a waiting list of uncertain length (and maybe pay well over MSRP for that privilege) or they could have a Corolla right away and it would get “good enough” fuel economy that it would be a big win over the Suburbaplorerango that they brought in.

  • avatar
    Lynn E.

    When the Volt first came out there was a big discussion here about whether or not it should have been a Buick or even a Cadillac because of the price. Actually the Volt should have been sold as a GMC. The technology of this type hybrid is being used extensively in mid-size trucks.

    Having electric drive with an ICE motor that kicks in after 40 or 60 miles to keep the batteries charged for around town deliveries is ideal for furniture stores and food delivery trucks.

    This type of hybrid was used for decades in submarines and is now being used by South American drug dealers in their submarines making deliveries to LA and Atlanta. The subs run underwater during the day and surface just enough to exchange air for the diesel motor to charge the batteries at night.

    If the Volt was a station wagon I would own one. I would also like it to be radically different in appearance like my old Citroen ID 19 or my new Prius. 4 door sedans are just so damn boring looking.

  • avatar
    Jimmy7

    So, in the last months of a model year with the 2013s already shipping GM offers great lease deals on the leftover 2012s. I’m shocked at this unprecedented situation which is a sure indication that the Volt is a failure.

  • avatar
    Mike Kelley

    The Ford Edsel, while averaging close to 40,000 sales per year, was an epic failure. How is the Volt anything less than a disaster selling only 2800 units a month in a country with several times the population?

    “The Edsel Division was in a death spiral. The more cars that failed to sell, the more dealers dropped their Edsel franchise. The more dealers that folded, the more the public was afraid to buy the car.

    After three model years and just 110,847 Edsels later, Ford Motor Company threw in the towel, and went about trying to forget about the whole ordeal.”


Back to TopLeave a Reply

You must be logged in to post a comment.

Subscribe without commenting

Recent Comments

New Car Research

Get a Free Dealer Quote

Staff

  • Authors

  • Brendan McAleer, Canada
  • Marcelo De Vasconcellos, Brazil
  • Matthias Gasnier, Australia
  • Tycho de Feyter, China
  • W. Christian 'Mental' Ward, Abu Dhabi
  • Mark Stevenson, Canada
  • Faisal Ali Khan, India