Is GM Losing $50,000 per Volt?

Reuters and GM are in a something of a pissing match over how much the company is losing on the Volt.

Claims Reuters:

Nearly two years after the introduction of the path-breaking plug-in hybrid, GM is still losing as much as $49,000 on each Volt it builds, according to estimates provided to Reuters by industry analysts and manufacturing experts.

Cheap Volt lease offers meant to drive more customers to Chevy showrooms this summer 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.

And 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.

GM's basic problem is that "the Volt is over-engineered and over-priced," said Dennis Virag, president of the Michigan-based Automotive Consulting Group…

GM's quandary is how to increase sales volume so that it can spread its estimated $1.2-billion investment in the Volt over more vehicles while reducing manufacturing and component costs - which will be difficult to bring down until sales increase.

But the Volt's steep $39,995 base price and its complex technology -- the car uses expensive lithium-polymer batteries, sophisticated electronics and an electric motor combined with a gasoline engine -- have kept many prospective buyers away from Chevy showrooms.

Replies GM:

Reuters’ estimate of the current loss per unit for each Volt sold is grossly wrong, in part because 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. The Reuters’ numbers become more wrong with each Volt sold.

In addition, our core research into battery cells, battery packs, controls, electric motors, regenerative braking and other technologies has applications across multiple current and future products, which will help spread costs over a much higher volume, thereby reducing manufacturing and purchasing costs.  This will eventually lead to profitability for the Volt and future electrified vehicles.

My take:

GM has a point -- but its beside the point. The bottom-line is that the Volt is a massive money loser for the company and will likely remain so for the foreseeable future.

 What’s more, were it not for chronic green regulatory pressure and electric tax subsidies, few auto makers in their right mind would be investing in them except as futuristic, concept cars and even fewer would be trying to market them.

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  • AlmightyJB||

    Who's losing $50K per volt?

  • T||

    You, comrade.

  • ||

    You didn't lose that.

  • Tim||

    The Volt reminds me of the Space Shuttle, a marvel of unaffordable hardware and unrealistic expectations.

  • LTC(ret) John||

    At least the Shuttle could get a few satellites in orbit, or help fix the Hubble Telescope. I mean, do you know how hard it would be to get a Volt into geosychronous orbit?

  • BarryD||

    It could be a lot of fun, though.

  • sloopyinca||

    Not really. I doubt they Volt has the airtight properties or insulation required to enjoy orbit.

    Oh, that and anybody else out in space will laugh at you for being in a Volt.

  • BarryD||

    I never said I wanted to be IN the thing, just that I thought it could be fun to see if we can send it into orbit.

  • Brandybuck||

    But just think of the size of that trebuchet!

  • BarryD||

    That's the picture.

  • BakedPenguin||

    "Unexplained fires are a matter for the courts!"

  • Tim||

    Excellent

  • ||

    CANYONEROOO

  • SugarFree||

    "Instead of a cigarette lighter, it's got a lipstick!"

  • BarryD||

    Shouldn't there be a place to stick a D battery, so you can make it to the next charging station?

  • ||

    Whoa, Canyonero! Whoa!

  • Ptah-Hotep||

    Reuters’ estimate of the current loss per unit for each Volt sold is grossly wrong, in part because 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. The Reuters’ numbers become more wrong with each Volt sold.

    So what is the break-even point for the Volt? At the current sales rate, how many years will it take to reach that point? Since they have the numbers for the product development cost and the profit per Volt, when does the Volt progam pay for itself and start generating profits?

  • Tulpa Doom||

    Nail on head, you hit.

  • Bardas Phocas||

    When does break even?

    Fuck You, that's when.

  • SugarFree||

    How many must they sell to break even?

  • ||

    -3,000,000.

  • Tim||

    Pi

  • Drake||

    Isn't Volt production shut down until sometime next year (at least)? Not sure if that's good or bad. The RD for this boondoggle is never going to be recovered.

  • BarryD||

    It probably will be...

    By GM's competitors.

    I'm sure that Toyota bought at least one, took the check from the US taxpayer for doing it, and then proceeded to tear it down and reverse-engineer it.

    ...just to make sure that GM wasn't doing something that Toyota couldn't already do better, for half the price...

  • The Derider||

    The important metrics here are Average Total Cost and Marginal Cost. Marginal Cost refers to the cost of producing one more Volt, whereas Average Total Cost includes the factors of the Marginal Cost as well as fixed costs (like R+D costs to prototype the Volt)
    As long as GM is selling Volts above the marginal cost of making them, they're not losing money, even if that amount is below the average total cost. As the number of volts sold continues to grow, the Average Total Cost and the Marginal Cost will converge.

  • ||

    You're still here, joe? Go fuck yourself, joe, you dishonest piece of shit.

  • ant1sthenes||

    He's got a point. RD is a sunk cost.

  • ant1sthenes||

    Fucking ampersands. R and D.

  • Sevo||

    ant1sthenes| 9.10.12 @ 1:49PM |#
    "He's got a point. RD is a sunk cost."

    Yep, and enough sunk costs like that and there'll be no company left.
    Sunk costs are still costs; Deidiot is playing games.

  • Bobarian||

    'Yep, and enough sunk costs like that and'...

    Barack will have to bail out the UAW again.

    FIFY

  • The Derider||

    You do not understand economics.

  • kbolino||

    Since you're talking about accounting, and not economics, that doesn't really matter, now does it? Not that it's true...

  • BarryD||

    Maybe he meant macroeconomics, which is the science that demonstrates that, while a small business that loses a buck on every widget it sells, goes bankrupt, but a government-owned really big company that loses 50 grand on every widget it sells, is a resounding success.

  • The Derider||

    No, MC = ATC in the long run is an econ 101 concept.

  • The Derider||

    We're talking about one firm, right?

    That can't be macroeconomics, by definition.

  • BarryD||

    RD is a sunk cost, but the benefits aren't necessarily going to go to GM.

  • Adam330||

    This is clearly not joe since it displays a sound understanding of business and economics.

  • ||

    Fuck off, joe, you midget fuck.

  • Emmerson Biggins||

    how do we know he is short?

  • SugarFree||

    Tall people don't have to troll boards for sexual satisfaction.

  • Tulpa Doom||

    It beats the bar scene, Sug.

  • ||

    Well, what NutraSweet said, and joe also stated how incredibly short he was once.

    Which makes him an absolute fucking moron. It's hilarious.

  • Red Rocks Rockin||

    Well, what NutraSweet said, and joe also stated how incredibly short he was once

    Joe is Robert Reich?

  • CampingInYourPark||

    "The important metrics here are Average Total Cost and Marginal Cost."

    No, the important metrics here are Piece of Shit and Quality. Unfortunately for GM the Volt is a Piece of Shit.

  • The Derider||

    That is apparently not what consumers think.

    http://reviews.cnet.com/8301-1.....ts-survey/

  • John||

    GM is making money on Volts. That is why they stopped producing them Joe.

  • ||

    Congress will mandate their purchase. Problem solved!

  • Pro Libertate||

    Don't laugh. That's apparently legal now.

  • ||

    It's a tax.

  • Red Rocks Rockin||

    Probably the only place GM is going to get their money back on this is through fleet sales. In the commercial world, the Volt's nothing more than a SWPL status marker; functionally speaking, it's perfect for places like southern California where the gas is expensive and the weather is warm year-round. It's not the kind of car you want to rely on during a harsh winter in Montana or Minnesota.

  • CampingInYourPark||

    "However, the product testing outlet issued a few caveats about the Volt's high marks. Consumer Reports noted that because the vehicle has been in showrooms for only a few months, they were able to survey only a small number of vehicle owners, who may not have owned the car for a long period of time. They also cautioned that early adopters of new technology tend to be more enthusiastic (although the same qualification is true for sports car aficionados), and that other new eco cars, such as the Smart ForTwo, debuted on the market with rave reviews from owners, only to see customer satisfaction scores fall once the honeymoon period was over."

    Don't bother to read the articles you cite or anything

  • ||

    That is apparently not what consumers think.

    Agreed. You simply cannot put a dollar figure on the sense of smugness and superiority the kind of person who would buy a Volt in the first place must be feeling.

  • Sevo||

    The Derider| 9.10.12 @ 1:49PM |#
    "That is apparently not what consumers think."

    Deidiot, you can find people who think the Falcon was a 'good car'.
    If consumers (that'd be the market, just so you know) thought they were good, GM wouldn't be losing money on them.

  • ||

    That is apparently not what consumers think.

    Fucking disclaimers, how do they work?

    From Consumer Reports:

    However, the product testing outlet issued a few caveats about the Volt's high marks. Consumer Reports noted that because the vehicle has been in showrooms for only a few months, they were able to survey only a small number of vehicle owners, who may not have owned the car for a long period of time. They also cautioned that early adopters of new technology tend to be more enthusiastic (although the same qualification is true for sports car aficionados), and that other new eco cars, such as the Smart ForTwo, debuted on the market with rave reviews from owners, only to see customer satisfaction scores fall once the honeymoon period was over.
  • Hyperion||

    And if we only tax carbon at 11% of total energy company gross revenues, we will acheive a net reduction of .01 C by the year 2567, as long as the sun doesn't do any funny shit and cows stop farting... and oh, obstructionist Rethuglicans and Sarah Palin, and BOOOSSHHH!!!

  • kinnath||

    Give me the fucking ROI per car assuming a production run of 21,000 cars. Then, and only then, can you tell the ROI per car over a longer run if they ever start building the piece of shit again.

  • Enjoy Every Sandwich||

    Hey, that's great! It sounds like that $7500 tax break is no longer needed, and can be ended. Right?

  • OldMexican||

    Re: The Derider,

    The important metrics here are Average Total Cost and Marginal Cost.


    Yes, except when real sales keep underperforming the sales forecast. With no sales, you do not have the return on investment and MC becomes a meaningless metric.

  • The Derider||

    Ok, yes, but GM has sold 17,500 of these things so far this year. Clearly sales are far above zero.

  • ||

    I love it: "The Reuters’ numbers become more wrong with each Volt sold."

    Translation: "We're losing money with every sale, but we'll make it up in volume!"

  • Randian||

    Not quite. The first produced Viagara cost $200 million. The second cost 1c.

  • Bobarian||

    The trick is getting someone to pay $200M for the first one.

  • Tim||

    The second cost a penny but it sold for five bucks.

  • BarryD||

    Yeah, but a car is not an item that's expensive to design but nearly free to produce.

    It's hellishly expensive to design and tool up, in this case several Billion dollars by the best estimates. And even then, it STILL costs a lot of money to produce each one. That slows down the "make it up in volume" equation by a huge factor.

  • Killazontherun||

    and if that second pill didn't sell it's cost would have been $100 million. Sunk cost are not magical.

  • Killazontherun||

    er. You would still put the onerous of cost on the first pill given the 200 million was spent to produce it whether a second pill was created or not. Second pill would cost -1 cent in such a scenario.

  • Killazontherun||

    Towards shifting the balance of cost.

  • BarryD||

    Everything is magical in macroeconomics.

  • The Derider||

    Here's a quick way to determine if something is a micro or macro economic concept.

    Are you considering the actions or interactions of individuals, or single firms? If so, that's microeconomics. As this is.

    Are you considering the economy as a whole? Or the whole economy in some distinct geographic area? That's macro.

  • The Late P Brooks||

    few auto makers in their right mind would be investing in them except as futuristic, concept cars and even fewer would be trying to market them.

    Next you'll tell me GM should focus on the products they make which actually do not suck. So, pickup trucks and Corvettes.

  • yonemoto||

    This is a fascinating interview. I'd have rather Elon not take the federal loan (apparently he could have gotten by without it), but let not the good be the enemy of the perfect. I especially love his dig at Fisker, which only got its subsidizing loan since Al Gore is on the board.

    http://www.autoblog.com/2012/0.....k-q-and-a/

  • yonemoto||

    I wish liberals understood this - that baked into free markets, if they are done without cronyism and dumbassery, the wealthy subsidize the technological breakthroughs that eventually benefit everyone. Clearly the Tesla strategy (vice the GM strategy) understands this.

  • JW||

  • The Late P Brooks||

    Oh, look our angry little troll found an accounting wiki.

  • Hugh Akston||

    He's probably a CPA on weekends and evenings when he's off from his City Planning job. Or was he a layer?

  • The Derider||

    I've got an econ degree.

  • ||

    HAHAHAHAHAHAHAHAHAHAHAHAHA

    Oh joe, you are such a fucking joke.

  • Tulpa Doom||

    Which means nothing here since we have no means of verifying it. Nice to have another leftist bringing up his or her credentials from real life as if we're supposed to bow in obeisance.

  • ||

    Holy shit I never in one hundred gazillion gazillion years would have guessed that major for you, honestly.

  • Sevo||

    The Derider| 9.10.12 @ 1:50PM |#
    "I've got an econ degree."

    Amazing what they put in Cracker Jack boxes these days! I hear shithead got a PBK key, too.

  • ||

    Did your econ degree teach you about how there was "rule of law" in the Soviet Union, or did you pick that one up yourself?

  • The Derider||

    What.

  • ||

    The Derider|4.10.12 @ 8:31PM|#

    Every country is "prosperous" compared to Czarist Russia, you moron. And the USSR did provide education, health care, infrastructure, and the rule of law, so your nonsense isn't even internally consistent.
    Stop posting.

  • BarryD||

    The USSR also provided a very lucrative market for Levi's. Don't forget that.

  • The Derider||

    Compared to Czarist Russia, the USSR were exemplars of the rule of law.

    And no we didn't discuss a lot of political science in that econ program.

    Thank you for remembering me!

  • Hyperion||

    What do you get when the government thinks it knows better than the private sector about what products should be produced?

    The Volt

    Solyndra

    Not a really good track record here.

    Leftist solution? We do know best!, we just didn't do enough yet, we need more time, MOAAARRR!!!

  • The Derider||

    "The actual cost to build the Volt is estimated to be an additional $20,000 to $32,000 per vehicle, according to Munro and the other industry consultants."

    So at a 40,000 dollar price point GM makes between 20,000 and 8,000 per Volt sold. At 1.2B invested, Gm would have to sell between 60,000 and 150,000 volts to pay back the R+D cost. They've sold 21,000 so far.

  • ||

    Hey joe, do you use a children's stool to reach the keyboard on your computer?

  • Tulpa Doom||

    So they're going to have to sell 3x - 7.5x the number they've sold already just to break even. If you have a dynamite new product that everyone wants, those numbers aren't particularly daunting... but for the Chevy flerking Volt, last seen being offered for ridiculously cheap lease payments just to get somebody to take them? That's a bleak picture.

  • CampingInYourPark||

    "So at a 40,000 dollar price point GM makes between 20,000 and 8,000 per Volt sold. At 1.2B invested, Gm would have to sell between 60,000 and 150,000 volts to pay back the R+D cost. They've sold 21,000 so far."

    Might be accurate if you didn't account for dealerships making any money.

  • Randian||

    Beat me to it.

    And shipping costs.

  • The Derider||

    All true.

    It's also true that the R+D costs for the volt will support the next generation plug-in that GM is developing, so assigning the full cost to the Volt isn't accurate.

    I've been looking for a more accurate number for the marginal cost and marginal profit for the volt, but no success yet.

  • The Derider||

    Oh, and dealerships make most of their money selling add-ons that are in addition to the MSRP.

    And GM also makes additional profit if you finance the car.

  • BarryD||

    Dealerships get to make money?

    I thought it was an "I've altered the deal. Pray I don't alter it any further."

  • Red Rocks Rockin||

    So at a 40,000 dollar price point GM makes between 20,000 and 8,000 per Volt sold.

    Uh, no--that's "an additional $20,000 to $32,000 per vehicle," not a $20,000 to $32,000 total cost. The $20-32K is ON TOP OF what it already costs to build the car.

    Fucking reading comprehension, how does it work?

  • Red Rocks Rockin||

    Here's the relevant passages:

    Nearly two years after the introduction of the path-breaking plug-in hybrid, GM is still losing as much as $49,000 on each Volt it builds, according to estimates provided to Reuters by industry analysts and manufacturing experts.

    Cheap Volt lease offers meant to drive more customers to Chevy showrooms this summer 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...

    It currently costs GM "at least" $75,000 to build the Volt, including development costs, Munro said. That's nearly twice the base price of the Volt before a $7,500 federal tax credit provided as part of President Barack Obama's green energy policy.

    Other estimates range from $76,000 to $88,000, according to four industry consultants contacted by Reuters. The consultants' companies all have performed work for GM and are familiar with the Volt's development and production. They requested anonymity because of the sensitive nature of their auto industry ties.

    For god's sake, read the article before you comment or attemtpt to do math.

  • The Derider||

    The passages you cite do not support your assertion. This is because your assertion is wrong. The relevant passage is here:

    "Spread out over the 21,500 Volts that GM has sold since the car's introduction in December 2010, the development and tooling costs average just under $56,000 per car. That figure will, of course, come down as more Volts are sold.

    The actual cost to build the Volt is estimated to be an additional $20,000 to $32,000 per vehicle, according to Munro and the other industry consultants."

    The marginal cost of producing a Chevy Volt is 20,000 - 32,000. This is independent from the R+D and factory tooling costs, which are known as fixed costs.

  • Red Rocks Rockin||

    The marginal cost of producing a Chevy Volt is 20,000 - 32,000. This is independent from the R+D and factory tooling costs, which are known as fixed costs.

    Nope, sorry--the passage is clear:

    The actual cost to build the Volt is estimated to be an additional $20,000 to $32,000 per vehicle,

    Additional.

    Additional.

    Additional.

    Please let me know when you've figured that out.

  • Red Rocks Rockin||

    And by the way, GM should really avoid using the DoD-approved method of spending extrapolations. Just because you sink X amount of dollars into a project to get a few working prototypes doesn't necessarily mean you're going to get to X - Y on final costs down the line.

  • John||

    It is almost as if letting the union set whatever salary they want makes it hard to do business. Who would have thought such a thing?

  • The Derider||

    The Union took large pay and benefit cuts during the bailout.

  • WTF||

    Go jump up your own ass, munchkin.

  • John||

    So what? Apparently it wasn't large enough. As Sheika says, GM has a point in that it is the marginal cost that matter. But GM has stopped making the vehicle. Ford didn't suspend production of Mustangs in 1965.

    Here is another thing that matters, cost to the consumer. The Volt cannot compete at $40K a car. Only a nut would by a Volt for 40K when you can buy a Prius V for a little over $30K.

  • Tulpa Doom||

    Marginal cost is the only thing that matters when you're selling enough to make the overhead small in comparison to the volume. Not the case with the Volt.

    If it costs me $1M to develop a computer program, and 10 people buy it for $50 each, I can't claim I made a profit because it only cost me $10 to produce the DVD and ship it.

  • John||

    As I explain below, you have to make enough money to justify a return on your investment.

  • CampingInYourPark||

    After GM gets it's gov't welfare check the price is about $31k

  • John||

    You get the government welfare check for buying a plug in Prius.

  • CampingInYourPark||

    Yeah, looks like $2,500 and not $7,500 though.

  • CampingInYourPark||

    "MSRP as low as $31,465"

    Then they put this little gem in the fine print:

    "Price after tax savings. Net price shown includes the full $7,500 tax credit. $39,145 MSRP with federal tax savings from $0 up to $7,500."

  • Tulpa Doom||

    "as low as" == "more than"

    "up to" == "less than"

  • John||

    And of course, you have to actually pay $7,500 for the tax credit to matter. A lot of people don't pay that much in taxes. I don't believe it is a refundable tax credit.

  • CampingInYourPark||

    You are correct. It's not refundable. The MSRP they are advertising is disingenuous.

  • Gray Ghost||

    If you believe this guy, the Tax Credit from Form 8936 (The Chevy Volt Tax Credit) is indeed non-refundable, and non-carryover-able.

    I don't feel like going through the calcs, but how much would Joe Public have to make in order to normally have a tax bill of 7500, after all other credits and deductions?

  • Randian||

    It would be a lot given that your average Joe Public at that level probably receives the home mortgage deduction.

  • John||

    That would depend upon his deductions. It would help a lot to be single, have no children and not own a house. If you are a family with a couple of kids, a mortgage and anything under 60K in income, the credit is unlikely to do you any good.

    This is a credit for rich people and well off singles. But remember Obama cares about working people.

  • Gray Ghost||

    And you can't make so much that AMT squashes any gains you'd have from plenty of credits. I think you're right: this is a gift to urban, non-house owning, "socially conscious", moderately rich DINKs and yuppies. Who predominantly vote Dem. So it's yet another fucking handout to his voter pool.

  • kinnath||

    6 figures

  • Adam330||

    Future union members did, iirc, not current ones.

  • The Derider||

    They traded their pension liabilities for GM equity.

  • Sevo||

    The Derider| 9.10.12 @ 1:51PM |#
    "The Union took large pay and benefit cuts during the bailout."

    Oh, yes, deidiot! They took just enough to brag about it and not enough to make a damn bit of difference.

  • The Late P Brooks||

    As long as GM is selling Volts above the marginal cost of making them, they're not losing money

    Get back to us when that is actually happening.

  • The Derider||

    That is happening right now, doofus.

  • Tulpa Doom||

    Who is buying them? Govt agencies and wealthy liberals who have more $$ than they know what to do with?

    There's only a limited supply of those customers.

  • Tman||

    Not to mention the fact that without the $7500 federal tax credit NO ONE would be buying the Volt. And in California they tack on another $2500, bringing the tax payer subsidy to $10K for each car sold.

    Ford would sell one hell of a lot of Hybrid Fusions if they got a $10K break on the sticker price.

  • Tulpa Doom||

    bringing the tax payer subsidy to $10K for each car sold.

    Just so you know, a lot of H+Rers will be very angry at you for stating that a tax break is a subsidy. They think this means govt has a right to a certain pct of your income.

  • ||

    Tax breaks are essentially the same thing as subsidies, since it's a special favor to certain groups. A lowered tax rate is not, since it's something that applies to everyone (within certain brackets).Functionally, the breaks are the same as subsides: they both mean the recipients have more money than they would have without special government favors. Reason has explained this before.

  • ||

    I'm assuming you know this, but it helps to mention it when the topic comes up.

  • aelhues||

    Hmm...nearly ccompletely loaded Fusion hybrid, with Sync touch, reverse camera, land departure, park assist, and a shit load of other options, comes to about $35k MSRP. Chop $10k off that, and not only would it stomp the Volt in looks, driving quality, features, you'd pay $15k less for it. Sure, you wouldn't be able to drive it around solely on the elecric charge, but you'd get about 10mpg better economy, when you weren't.

  • Hyperion||

    I've never seen one of them on the road here in Maryland. LOTS of Priuses, no Volts, not one. You know what car I see most of here in Green Libby Utopia? SUVs, lots of them. And it is greener than hell here. Must be all of that plant food from the SUVs.

  • R C Dean||

    One of our doctors has one. It huddles in one corner of the parking lot, scared and alone amongst the pickups, luxury sedans, and sports cars.

  • Pro Libertate||

    I just saw one for the first time in Tampa.

  • Hyperion||

    I am having a contest, and so far it goes like this:

    1 Romney/Ryan 2012 bumper sticker sighting

    0 Volt sightings

    So in Maryland, so far Romney bumper stickers are outselling Volts. That can't be a good sign for the Volt.

  • John||

    I have never seen one in Monkey County. And Monkey County is the land of the tear down million dollar McMansion with the Prius parked in front. Nothing says I love the environment like tearing town a perfectly good house so you can have your 5000+ square foot mcmansion.

  • Pro Libertate||

    The Prius, at least, seems to be a decent car. It's overpriced, sure, but that's to be expected with newer technologies.

    I don't object to car manufacturers dabbling in hybrid or even electric vehicles, which I do think will eventually displace pure IC cars, but your company has to be in a good financial position to take that risk. GM most assuredly was not in that position and should've taken a slower road or deferred altogether while trying to rebuild their operations.

    I'm fascinated with people defending a poorly run business solely because of politics. That's a significant part of the problem with our economy today--political decisions taking the place of what should be financial ones. Would GM have thrown so much into the Volt without government pressure to do so?

  • John||

    CAFE standards screw GM as much as anything. If GM could just produce luxury sedans, the odd sports car, SUVs and trucks, it would be profitable. But it can't do that because of CAFE standards. CAFE standards force it to produce a bunch of cheap high millage cars. Cheap, high mileage cars are also low profit margin cars. And you can't produce low profit margin cars and pay union wages.

  • ||

    While I hate the CAFE standards myself, they affect all manufacturers equally.

  • John||

    No they don't generic brand. Companies that are in low wage countries are not as affected by them since they can make money selling high millage low margin cars. They totally fuck American car makers.

  • Tulpa Doom||

    Low wage countries like North Carolina and Alabama?

  • BarryD||

    Bear in mind that electric vehicles (and hybrids) have been around for 100 years.

    Physics limits what you can do with a battery.

    So, while we may have electric motors and fuel cells, I don't know that we will get away from the idea of burning something. Energy storage, without combustion, is a bitch. Unless you go with fission or something... ;)

  • Pro Libertate||

    You're right. I'm going to start Atomic Roadster right now. The power of the nuclear reactor in the back will more than make up for the lead shielding. It'll also be great for the economy, as with each car will come an engineer who ensures no meltdowns or other radiation "events."

  • BarryD||

    Who is John Galt?

  • John||

    It is a tricky problem. People forget the incredible amount of energy in a gallon of gasoline. An average car ways over a ton. And a single gallon of gasoline can propel it at highway speeds for over 30 miles in most cases. That is an astounding amount of energy from a very small amount of fuel when you think about it.

  • BarryD||

    Lefties and greenies don't get this, but the reason we use gasoline is not that the evil oil companies make us. It's because gasoline is a really, really good fuel for cars, and it's made from pretty common stuff.

  • The Derider||

    And also because we don't have to clean up our pollution, which makes it even cheaper.

  • Tulpa Doom||

    An average car ways over a ton.

    Which is the problem. The vast majority of drivers do not need that heavy of a vehicle.

    It's not a safety thing, either. Yes, a scooter that gets hit by a Ford Explorer is going to have a corpse on it. But a Ford Explorer that got hit by an M1 Abrams would also have a dead driver. If everyone were in small vehicles, safety wouldn't be a problem.

  • ubercynic||

    If nobody ever ran into anything, safety really wouldn't be a problem. And nobody ever running into anything is only a slightly more unrealistic assumption than "if everyone were in small vehicles".

  • The Derider||

    Market failure.

    People buy cars based on their safety, not the safety of everyone on the road. They prefer heavier cars for their personal protection, and ignore the increased risk those cars pose to everyone else on the road.

  • ubercynic||

    I forget the exact number, but the power (i.e. time rate of energy transfer) equivalent of fueling your car with an ordinary gas pump is something on the order of 30 megawatts.

  • BarryD||

    I have seen one in use around here. I think the owner is a car dealer, though.

  • Gray Ghost||

    I see one or two at the Gucci Whole Foods in Houston, from time to time. Great beer, served by the glass, in there by the way. Makes shopping much more tolerable for the two to three things not outrageously marked up.

  • Hyperion||

    Whole Foods ... Most stuff is way over priced. I buy all of my produce at the local Asian market. Compare .79 a pound for nice looking sun ripened tomatoes to 3.99 a pound for tomatoes that look like they have anemia at Whole Foods.

    But oddly, milk is cheaper at Whole Foods than anywhere else I shop, by about $1. Whole foods also have some stuff that I don't find anywhere else. I wish they served beer in our whole foods just in case the wife decides to stay for an hour. Come to think of it, all retail stores should serve beer. It is just a humanitarian thing to do for us guys.

  • ||

    Hey joe, do you wear platform shoes to go on the rides at Riverside?

  • nicole||

    I'm not sure if I should give you points for the Riverside reference, or take them away.

  • ||

    He could've said Whalom.

  • ||

    Come on, nicole! The Cyclone!

  • nicole||

    I have probably worn platform shoes to go on rides there.

    I have no points.

  • Ptah-Hotep||

    GM acknowledges the Volt continues to lose money, and suggests it might not reach break even until the next-generation model is launched in about three years.

    GM disagrees with you.

  • T||

    Funny, that. Maybe GM understands their cost structure better than random trolls on message boards.

  • Adam330||

    How do you know the marginal cost?

  • John||

    No it is not you have wit.

    http://www.freep.com/article/2.....slow-sales

    GM has suspended production because they can't sell enough of them. They can only make money at $40K a car. And few will pay that. So the car is a dead loser.

    And even if they were making some money on each car, they will have to sell millions of them to make up for the development cost.

    Let me give you a basic lesson in economics. There is something called return rate on investment. GM spent $1.2 billion developing the Volt. That money could have been invested elsewhere and is expected to produce a return. In order to even produce a 5% return on the investment, GM will have to make $60 million a year selling Volts. If they make say $2,000 a car in marginal profit, that means they will have to sell 30,000 Volts a year, just to get a 5% return. That is not happening.

  • Tulpa Doom||

    The approval of the federal govt is worth more to them than a 5% ROI.

  • Pro Libertate||

    Especially when they gave you billions.

    Best thing that could've happened was to let GM file bankruptcy. Instead, we poured insane amounts of money into it just to watch it slowly fail again.

  • ||

    Look, John, joe says he has an econ degree, which is why he became a city planner. Yeah, I don't get it either. Maybe it's some kind of really, really short econ degree?

  • John||

    The skipped over opportunity cost and rates of return so they could concentrate on important things like the marginal cost of gay and transgendered Indian rights.

    And I was actually being too kind to GM. They have to make money not just on the investment in the Volt Technology, but also in the physical plant it takes to make the things. So $60 million a year is too conservative of an estimate of what GM would actually have to make off of the VOLT.

  • Hyperion||

    But, but... Volts make people feel good, they are like rainbow colored sunshine. So we have to keep making them. What's a few more trillion in bailouts among comrades?

  • The Derider||

    If GM makes 6,000 per volt, and they sell 10,000, that's 60,000,000 a year.

    They've already sold 17,500 units this year. (including the Euro Ampera version) So they've reached that rate of return assuming that they make a little over 3,000 on each volt.

  • John||

    But are they making $3K a Volt? And even then they still lose because they also have the return on the plant to produce the thing.

    It is difficult to see how they make a return on this. And even if they are, they are only doing so because of a $7,500 per car federal welfare subsidy.

  • BarryD||

    $60M/year would mean it would take about 60 years to pay off the real RD costs. 25 years if you accept ridiculously optimistic numbers.

  • Sevo||

    The Derider| 9.10.12 @ 2:34PM |#
    "If"

    Stop right there, deidiot.

  • ||

    In order to even produce a 5% return on the investment, GM will have to make $60 million a year selling Volts. If they make say $2,000 a car in marginal profit, that means they will have to sell 30,000 Volts a year, just to get a 5% return. That is not happening.

    Why would this matter to GM? I think the mistake here is that everyone is assuming that GM is in the business of making cars for a profit. That is not the case. They are now a government institution in the business of paying Union dues and pensions that in turn can be donated to union-friendly politicians in order to perpetuate the cycle.

  • BarryD||

    Ding ding ding ding

    Once you reconsider what their real business model is, and where their real profit center is, it all makes sense...

  • Killazontherun||

    There is really no other reason a lefty troll or the lefty press would be defending GM except for the fact they are now on the vanguard of industrial policy and union subsidy.

  • BarryD||

    True. They weren't exactly defending GM a few years back. Or at any time during the past 50 years.

  • The Derider||

    They're defending government intervention in the economy in general. Before this bailout, GM benefited from Laize Faire policies like NAFTA, and much of the left (not Clinton's wing) wanted government intervention like tariffs. Michael Moore cut his teeth talking about GM closing auto plants in Flint. They used to be a leftist boogeyman for corporate greed. Now they're a conservative boogeyman for socialism.

  • The Late P Brooks||

    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.

    Just for fun, we'll assume marginal cost is *really* ~40k. They're not exactly raking it in on these things.

    (Don't mention the WAR subsidies.)

  • R C Dean||

    instead of allocating across the lifetime volume of the program,

    And they know the lifetime volume of the program (or, in joespeak, the "Average Total Cost"), how, exactly? This isn't a vehicle that you can just apply your experience with gas-powered mid-sized sedans to, you know.

    There are, of course, layers of cost. There's marginal cost, of course, and there are layers of fixed cost. One of those layers are the fixed costs of the plant, equipment, etc. Another is the R D. I don't know what is included in the $20 - 32,000/unit cost quoted above (and isn't that just a hell of a range, BTW). If that's marginal cost, then you've got more in fixed costs to cover than just the R D (which may, or may not, get applied to and recovered from, other programs).

  • The Late P Brooks||

    And they know the lifetime volume of the program

    That's easy; you use a historical example. They have sold millions of "Impalas". From this we can easily presume there will be millions of VOLTS built and sold. The development costs, amortized into infinity, approximate zero.

  • BarryD||

    Just like the Edsel!

  • Killazontherun||

    The Edsel was a success compared to the Volt.

  • Killazontherun||

    Hell, the Edsel was Mustang compared to the Volt. Yet we still have a lefty troll defending GM developing it.

  • BarryD||

    True. The Edsel sold 65,000 units in its first year, when the whole car market was smaller, and Ford only lost millions on it, not billions.

    It's not an exaggeration that it was the Mustang compared to the Volt.

  • kinnath||

    Whatever GM says, the ROS as of today is about $-50,000 per car on a car that is now out of production.

  • BarryD||

    So by not producing the Volt, GM is really giving a big shot in the arm to its bottom line!

  • db||

    Now that's sound business decisionmaking.

  • BarryD||

    The ultra-short-term thinking that has pervaded publicly traded companies and the Federal Government, is now testing the waters of its logical conclusion!

  • db||

    Lets just say for the sake of argument that someone was working on a project that was goint to cost $70 million in capital before it made widget 1. If the projected selling price for a widget was $1 and one expected to spend $.50 making a widget, how many widgets would need to be sold per year to meet an internal payback of 3 years and and IRR of 13%?

    If GM is deciding to produce products at a loss on operating costs alone, how much does their gross margin have to be on future products beyong the Volt to make up for not only the loss per vehicle, but to amortize the development costs and tooling/infrastructure investment?

  • BarryD||

    For those who remember history, what ever did happen to the EV1, and why didn't it lead to future products?

    GM has done this before, but at least at the time it was acknowledged as a tech pilot project. It went nowhere.

    For those who don't remember: http://en.wikipedia.org/wiki/General_Motors_EV1

  • Paleo-ConAvenger||

    I saw one of these yesterday, Obama stickers and all.

  • BarryD||

    Both the car and the stickers say either...

    "I'm a government-teat-sucking SOB" or "I'm an idiot who can't do math."

    Maybe both.

  • db||

    The most recent one I saw was driven by a guy who was shooting a "tacticool" Century Arms AK with a shitty coke-can-sized red dot sight on it.

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