GM Reacts To Reuters Volt Story
Talk about a loss leader! A Reuters analysis of “the ugly math” of the costs to develop the Chevy Volt versus what General Motors makes for each sale (its base price is $39,995) puts the automaker in the hole for $49Gs every time a customer quietly and fume-lessly drives away from the lot.
GM, which “rarely responds to specific media reports,” according to Motor Trends’ Erick Ayapana, quickly disputed the “ugly” math as “grossly wrong,” however.
Among other things, “the reporters allocated product development costs across the number of Volts sold instead of allocating across the lifetime volume of the program, which is how business operates,” a press release states. “The Reuters numbers become more wrong with each Volt sold.”
All the research done in developing the technology for the Volt will be applied to future vehicles, GM also says, concluding that “every investment in technology that GM makes is designed to have a payoff for our customers, to meet future regulatory requirements and add to the bottom line.”
Reuters’ Bernie Woodall, Paul Lienert and Ben Klayman, who based their story on estimates provided by industry analysts and manufacturing experts, point out high in their story that “while the loss per vehicle will shrink as more are built and sold, GM is still years away from making money on the Volt, which will soon face new competitors from Ford, Honda and others.”
And further down in the piece, they quote Doug Parks, GM's vp of global product programs and the former Volt development chief: “As the volume comes up and we get into the Gen 2 car, we're going to turn [the losses] around.”
That being said, the car is “is over-engineered and over-priced," Dennis Virag, president of Automotive Consulting Group, tells the reporters. And they suggest that the problem may not be endemic to this particular vehicle, highlighting the problems that most other automakers (except Toyota with the Prius) have had in selling electric and hybrid offerings.
“The car, which can travel up to 38 miles on a battery charge before a gasoline-powered generator kicks in, has missed GM's original sales targets for 2012, but sales are increasing modestly each month,” Nathan Bomey points out in the Detroit Free Press.
Through July, in fact, it had sold 10,666 Volts in the U.S., according to Autodata Corp. figures cited by Bloomberg’s Tim Higgins in an Aug. 28 story reporting that GM planned to stop production for about four weeks in September and October to catch up with demand.
August sales, however, were expected to top 2,500, the best month by far since its December 2010 launch, a spokesman reported a couple of days later. "The buzz is starting to build," Jim Cain told CNNMoney’s Chris Isidore, as the car nears its third year in the market.
Yes, it’s true that Chevy sold more Volts in August, a commenter to an anonymous analysis of the Volt and “the future of electronic cars” on Seeking Alpha writes, but he points out that August sales of the Volt were “distorted by the offer of a two-year lease for $199 a month –- the normal rate for a vehicle of about $20,000.”
The commenter thought that was an attractive deal, pointing out that the expensive lithium-polymer batteries need to be replaced after about five years of use. The lease “makes it GM's problem, along with the warranty maintenance,” he writes.
“No car has ever been stuck in the kind of political miasma that surrounds the Chevy Volt, which has turned into the rolling representation of the Obama administration's $50 billion rescue of GM,’ blogs Justin Hyde in Yahoo Auto’s “Motormic.”
But, Hyde tells us, “the GM executives who conceived the Volt as a leap-frog over the Prius -- well before the Obama administration even took office -- always thought of it as a marketing tool as much as a regular car, and justified the additional costs as a way to burnish GM's image.”
The challenge, as Hyde sees it, is that GM “has to show the Volt represents the best use of the taxpayers’ money that saved the company -- and not a lingering reminder of how the old GM went broke in the first place.”
In order to do that, it’s going to have to attract more “wusses and tofu lovers” like our old buddy David Kiley, who wrote in Huffington Post a year ago about his delight in taking the Volt to and from work.
“I feel as if I have just ordered ‘just a salad’ in a steakhouse after my friends have all ordered T-bones,” Kiley said. If GM can keep the price of the salad cheaper than a steak, as it did with its recent lease deal, it just might do so.