Your Tax Dollars At Work: GM Loses Its Shirts On Every Volt
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:$18,650Fixed cost, Tooling:$37,350Standard Parts, Material and Labor:$12,000Unique Parts, Material and Labor:$12,000Total:$80,000Fixed-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.”
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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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.
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."