By on December 8, 2009

More pre-pro test drives for everyone! (courtesy:ABG)

“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.

The NYT explains:

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.

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32 Comments on “Volt Birth Watch 177: Can’t We Spend $100m On Something?...”

  • avatar

    The taxpayer is too blind, scared, and conceited anyhow. People need to well let of the $42billion go and focus on growing up. Processing what is happening and happened is part of growing up though.

    • 0 avatar

      So if I can decipher what you’re trying to say: we taxpayers should just suck it up and fuggedaboutit so GM can continue business as usual ?

      I think it’s someone else that needs to do some growing up and adapting. This was a wrong headed move by the government on so many levels it’s not funny. And all of it well documented right here on TTAC.

      Why don’t we all just grow up and turn over all our earning to the greedy hand of government and maybe they’ll let us have enough to keep the lights on. That’s a mature way to adapt to what is happening.

    • 0 avatar

      Is that you Nancy Pelosi?

    • 0 avatar

      What will posting an article on TTAC do?  Is this somehow going to change the gov’t decision?  I don’t think tomorrow the gov’t is going to decide to liquidate GM.  I am not saying forget about this, but what are you going to do?  The deal has been done, signed off and completed.
      My best suggestion is if you want to remember this, remember it on election day.  Cursing GM is going to get you nowhere.

  • avatar

    “We have already reduced the Volt’s development time by about seven months…”

    And we’ve also had one of the leaders of the program (two?) resign.    These things bode ill for the Volt.  

    $100M at this stage of the game is too much, too late. GM could have used the money during the design phases – more engineers on each aspect could have cut development time at that stage.  Now it’s too late for money.  You can’t just throw more cash and bodies at testing and refinement and accomplish anything – money does not equal time.

    I think it will be a sign that GM is on the right path when they announce that they are delaying the introduction of the Volt six months to sweat the details.  GM has a long-earned reputation of using the customers as development testers. They really do NOT need that to happen with the Volt. 

    • 0 avatar

      Lokki: “And we’ve also had one of the leaders of the program (two?) resign.    These things bode ill for the Volt.”

      Are you referring to Frank Weber?  He’s German and he took a better job in Europe.  I don’t think there’s a signal in that.

      The rest of your post may well be right on, though.

  • avatar

    The more I read here on TTAC, the more my conclusion becomes that GM should – while it still has the chance – focus on its neglected overseas operations, where their only chances for future profits seem to be. Forget the US market – small as it is compared to the rest of the world; forget that silly expensive PR stunt that is called Volt; try sell the world the very best Insignias, Astras, and Sparks you can make.

  • avatar

    Forget the Volt–I’m very happy to read that Reuss understands the important of excellent steering, at least in the alpha. Steering has long been a GM weakness, especially in performance-oriented cars.

  • avatar

    If they have $42 billion post bankruptcy, after removing $70 billion in liabilities, than $100 million for the volt to get it out on time, right is not a bad thing (the fact is that GM is using the volt to make CAFE and still be able to sell suburbans and such).  I think GM is going to let foriegn governments or foriegn partners (SAIC) fund the restructurings at Opel and and Daewoo (go to those governments and say you can pay or the big bad chinese will, they’ll pay with nice low interest loans). 

  • avatar

    Seems like they could stand to allocate a little of that money for some better proportioned mirrors on that electro-buggy. Yikes.

  • avatar

    The only way they’ll speed up the Volt is to ‘lavish’ upon it a Gen IV LS4.

    “reports like this make it sound like spending money is an end unto itself.”  See, they have learned something from the United States Congress.

  • avatar

    As Lokki noted, too much and too late.

    Here’s the interesting part to me: Lauckner turned down the money. Especially interesting at a ‘burn money because we can’ org like GM. Either Lauckner is some new form of prudence at GM (highly unlikely) or he knows the Volt is gonna be the death of him too. So he better stretch those paychecks while he tries to lateral himself into a new slot.

  • avatar

    It seems odd that when the previous administration showered it favorite energy companies and military contractors with billions of taxpayer dollars that there was very little public outrage (not a tea bagger to be seen). Yet when a democratic government hands similar cash to auto companies, its as if we’re under attach from the Russians.
    I am in no way defending the government wasting tax payer money on either automakers, energy companies or no-bid contracts but sometimes I can’t help thinking that different standards apply.

    • 0 avatar

      The outrage happened at the voting booth when the repubs lost the house in 06 and the senate and the WH in 08.  No one is happy when the government wastes money except the people getting it.  The order of magnitude just seems to keep going up from billions (clinton) to tens of billions (early bush 43) to hundreds of billions (late bush 43) to now trillions (obama).

  • avatar

    The big things that are wrong with the Volt can’t be fixed with $100 million before November 1:

    Too heavy.
    Too few seats.
    Too costly.
    Charge-sustaining fuel economy too poor.
    Engine too big.

    That last item is especially unfortunate.  GM’s current meme is, “It’s nothing like the Prius, it’s an electric vehicle.”  Really?  Then why is it carrying an engine big enough for a comparable compact car (which would have more seats).
    Still, it’s hard to leave money on the table…  maybe the $100 million could be spent adding fender vents.  That would certainly help.

    • 0 avatar

      It costs $1 billion or more to develop a completely new engine. To keep initial costs down it makes a lot of sense to use an existing powerplant.  As for the engine size, GM says that the normally aspirated 1.4L 4 cyl gets better brake-specific fuel consumption than the 1.0L turbo 3 cyl when used at a fixed rpm (as is done when driving a generator), and apparently adding a cylinder weighs less than adding a turbo with related hardware. GM also says that the transition to range extended mode is smoother with a four than a three – no doubt because a four runs smoother than a three.
      If GM survives, I’d expect that the second generation serial hybrid will have a more purpose designed ICE. There are a number of companies working on integrated ICE/Generator setups including Pempek’s Free Piston Power Pack:
      One thing to consider as the fleet moves to electricity is that a spinning shaft is a useful thing. Some  vehicles need a  power take off unit, a winch, or hydraulic power for ancillary equipment. I’m not sure that generating electricity and using motors, or even worse, generating electricity and using a motor to run a hydraulic pump is more efficient mechanically than  using a mechanically driven hydraulic unit.

  • avatar
    Bruce from DC

    I don’t get the case for the Volt.  This is, apparently, a $40,000 Prius-sized (or smaller!) car.  The one reason that a person should buy this instead of the Prius (at $15,000 less) is that, for people who drive less than 60 miles at a time, it doesn’t use any gasoline.  So, let’s assume a buyer who commutes to work daily with a 50-mile round trip and let’s assume that the electricity that runs the Volt is free.  The Prius will make this trip for, let’s say, 6.5 gallons of gasoline a week.  At $2.50 a gallon, that’s $16.00 a week.  Assuming a 50-week work week, that’s a fuel cost of $800/year for the Prius in commuter service.  That means, the owner of the Volt will experience a 19-year payback of the additional cost of the Volt over the Prius (and this doesn’t account for the time value of money, which would make the payback period even longer).
    In addition, with an 88 H.P. engine driving a generator (rather than the wheels) the Volt is likely to be a much inferior performer to the Prius in non-commuting service (like taking a trip with a couple of passengers and their luggage) outside of Kansas and Nebraska, where there are no hills to speak of.
    So, I don’t understand why anyone in the United States would buy this car.  Even with gasoline at $5.00, this is not an attractive deal.
    If GM couldn’t bring this car in at a retail price of under $30,000, they should have just given up the whole idea.

    • 0 avatar

      Bruce: “people who drive less than 60 miles at a time…”

      Actually, that’s 40 miles, tops.  Less under certain (read: nearly all) circumstances.

    • 0 avatar

      You are right, Volt 1.0 and Volt 2.0 probably don’t make a lot of fiscal sense, but 3.0 might. Electric cars are the future and all work that GM does on the Volt can be applied to these future vehicles. They have to start sometime.
      For all those that figured they should have just licensed Toyota’s Synergy drive, how much would that have cost them (don’t forget to include the license fee to be paid to the US patent holder), could they make a profit?
      In the end GM should be able to license their tech to other companies (assuming they have all the proper patents registered).

    • 0 avatar

      The $40k price was given b4 bankruptcy and before they cleared $70 billion in liabilities and before they were given $55 billion in cash, that price had to include covering a portion of the liabilities that were removed and had to be set at a price that wouldn’t eat into thier precarious cash position, I would not be surprised to see it released at a much lower price point (they will lose money on it, but so did toyota on the prius (they might still be)).

    • 0 avatar

      I wonder if they could take the voltec system and retrofit it into a cruze using just enough lighter smaller lithium polymers (Hyundai’s battery tech of choice) in (or under) the trunk to give it a 15 mile range? Using a volume platform and less of a battery pack could cut the price a bit.  

    • 0 avatar

      Take the same accouting with a Prius compared to a Corolla and you will find the 7k premium in the Prius will take you a very long time to over come, especially since the Corolla is pretty close to 30 combined.

    • 0 avatar

      It’s useless to calculate the payback on cars of this efficiency.  It is easier to figure how they compare to “normal” cars, but without any fuel consumption.  Then it’s even more clear that the Volt has no reasonable payback.

      The fact that the Volt will “own” its owners – requiring a nightly plug-in – will only serve to annoy them.

      GM won’t advance the launch date with the $100 million – most development projects can’t be accelerated this late in the game.  But you can be sure they’ll lavish taxpayer-funded rebates all over the Volt, which will be crushed by its sibling the Cruze.

  • avatar

    At $30k there is probably a limited market for the Volt, at $40k I don’t think there is any market to speak of. I hope they can bring the Volt to market at $30k.

  • avatar
    Bruce from DC

    rnc: I rather d0ubt that the bail-out and bankruptcy of GM is going to allow the company to take a 25% haircut on the price of its products.  There’s certainly no indication of that.  At most, what’s been reported is that the improved balance sheet will allow GM to make some needed investment in improving its now-diminished line of products.
    skid66:  Only the software business has managed to get away with putting half-baked products into the marketplace.  The Volt may be “fully-baked” but just way too expensive.   In the computer world, that would be analogous to Apple’s “Lisa” computer which came in between the highly successful Apple II and the highly successful MacIntosh.  But, unlike personal computers in the early 1980s, automobiles are a mature industry, characterized by low growth (or even decline) in unit volumes.  So, what worked for Apple 25+ years ago is unlike to work for any car manufacturer.   Finally, I have to take issue with the statement that “electric cars are the way of the future.”   Battery technology is such that there is no battery of any kind that even approaches the energy density of gasoline, diesel oil or compressed natural gas.  Moreover, in much of the U.S. (e.g. metro Washington, DC), a battery-powered car runs on coal . . . because coal is what generates our electricity here.  Not a clean or attractive technology.  So, it seems that the smart money is betting on ways to improve the efficiency of fuel-powered cars, not in re-adopting a technology abandoned nearly 100 years ago.
    A hybrid is not an “electric car”; it is simply a way of recapturing some of the energy dumped into the air when the driver uses the brakes or engine braking and of avoiding running the gasoline engine when it is not needed (i.e. when the car is stopped).  There are certainly other, non-electrical ways to do this, such as using compressed air or a flywheel spinning in a vacuum chamber as an energy storage mechanism.

  • avatar

    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?
    Actually, that’s the best news I’ve heard all day. I work in the land of software development, but manufacturing has several parallels. One of them is the insistence of management that all it takes to move up a deadline is more money/more people, but this is seldom true (see “mythical man-month”.) Hearing that the product development team has basically said “we can’t speed things up more, but we can leverage that money to improve our testing efforts” is the best news I’ve heard out of General Motors ever.

  • avatar

    They need $60,000 Cadillac “Converg” and $50,000 Buick “Electra” versions to make this work…

  • avatar

    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.

  • avatar

    The outrage happened at the voting booth when the repubs lost the house in 06 and the senate and the WH in 08.  No one is happy when the government wastes money except the people getting it.  The order of magnitude just seems to keep going up from billions (clinton) to tens of billions (early bush 43) to hundreds of billions (late bush 43) to now trillions (obama).

     You probably aren’t old enough to remember when we changed from the world’s largest creditor nation on the way to the world’s larget debtor, where we are now. Pivot point was about 1976.
    Carter Billions.
    Reagan Hundreds of Billions.
    Bush Sr. Hundreds of Billions but not as many as Reagan
    Clinton some up, some down. Net, net few hundred Billion. About the same as Bush I.
    Bush II – Trillions.
    Obama- Same as Bush II. Just more Trillions. Will become less of a problem as we bring back 70’s style inflation to pay back what we borrowed.

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