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The Spectacle Blog
From Dan Mitchell at the Cato Institute:
http://danieljmitchell.wordpress.com/2012/09/10/government-motors-losing-49000-for-every-chevy-volt-sold/
GM says the Reuters report is “grossly wrong” and “becomes more
wrong with every Volt sold”:
http://media.gm.com/media/us/en/gm/news.detail.html/content/Pages/news/us/en/2012/Sep/0910_volt.html
View all comments (25) | Leave a comment
More Blog Posts by Ross Kaminsky
http://spectator.org/blog/2012/09/10/gm-losing-49k-on-each-chevy-vo
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Stan Redmond| 9.10.12 @ 2:05PM
Only $49,000
Don't worry. We can make it up for it in volume.
JD| 9.10.12 @ 2:36PM
I have to admit, Ross, GM's rebuttal is a good one. R&D is a long-term investment.
That said, this R&D was almost certainly politically-motivated, and seems outlandish for a company in GM's financial condition.
Bob Grant| 9.10.12 @ 6:25PM
What does R&D have to do with a car on the market that is in extremely poor demand?
All the R&D in the World wont make this lemon a more desirable vehicle, except for a few masochists who love wasting their money.
Not enough of those around, especially in this economy.
spike59| 9.11.12 @ 6:53AM
selling a vehicle at HALF it's cost, when there's next to no demand, isn't an 'investment'; it's financial suicide
but, hey, it's only taxpayer money that they're pissing away; at least the UAW will still get their goodies, right?
Oldefarte| 9.10.12 @ 3:07PM
If possible, forget the Volt etc and concentrate upon the fact that the Obama-Tarp monies [paid for by taxpayers] was totally a political gift to the labor union supporters from the Democrats. GM, Chrysler etc could have either been bankrupted into a managed restructuring or alternatively bee sold to Japan's Honda, Toyota, Nissan etc. If the latter would have occurred, the workers would have still had their car manufacturing jobs, only they would have no longer been union represented [their wages etc would have been lowered but they would still have their jobs]. The former would probably have resulted in similar situations also. No, the Obama TARP was simply a gift to the Richard Trumpkas of this nation, the one/same who invaded the state of Wisconsin from the other 49 to attempt to bully Scott Walker into vacating his governor's post. The same domestic terrorists that occuppy each/every classroom of your public school systems that indoctrinate you children 24-7 with Barackisms etc. WAKE UP AMERICA!!!!!!!!!
THKrupp| 9.10.12 @ 3:53PM
Asian car companies are also unionized.
Bob Grant| 9.10.12 @ 6:29PM
Workers who build Toyota vehicles in Texas are not unionized.
Fiscal| 9.10.12 @ 3:59PM
Geez, do you listen to Fox News for your business updates? GM did go through a bankruptcy -- I know as I owned some stock. Obama got it wrong in the beginning with the loans. However, when they couldn't get the right concessions out of BOTH management AND the unions, they brought in Rattner (a hedge fund buy) to force a managed bankruptcy. They tried to find private equity for the funding, but not even Bain would invest. The Japanese companies would not even invest because Japan is not in great shape. In fact, it was Fiat that bailed out Chrysler. The great majority of these jobs would have been lost and worse, it would have put a huge number of suppliers out of business who also served Ford (i.e., "trickle down"). Obama got it wrong in the beginning, but then when he brought in Rattner, they got it right. So far, it's turned out to be a great investment -- better than most of us would have imagined.
And Romney got it wrong on this one as a regular bankruptcy in the beginning would have been a job disaster. To be honest, I was against the bailout and never, in my wildest imagination, would have guessed it would turn out so well.
That said, it is just one of the very few things Obama has gotten right. The vast majority of things he mismanaged.
Stan Redmond| 9.10.12 @ 6:17PM
If no one wanted to buy the worthless GM then it should have folded. Shut the doors, close down. Gone.
We have managed to grow as an economy without Studebaker, Nash, Chalmers, Hudson, Kaiser, etc. Now we as taxpayers are stuck paying the operating expenses of a failed company. It truly is Government Moters. GMs response to the loss of $49000 per Volt is wrong. They completely ignored the market and assumed Obama would pump in more taxpayer money to buy millions of those overpriced useless cars.
spike59| 9.11.12 @ 6:56AM
no, fiscal, this is not anything ObaMao got right; he didn't, as the Party claims, 'save GM'; he saved the UAW...GM is going to collapse again. it is inevitable...only this time, it's going to take the Federal budget down with it
Fiscal| 9.11.12 @ 7:54AM
This board is filled with hate for everything Obama and lacks objectivity. This is what is wrong with both sides today. The only way this country survives is when we are objective in our analyses and are critical of BOTH sides.
Obama has done a few things that have worked out, but has failed us -- and especially our children -- in providing a strong country for the future. I can give him credit for the few things he got right -- even if it might be dumb luck -- while still saying overall that he is a poor leader that won't make decisions that are good for our future.
Fiscal| 9.10.12 @ 4:07PM
Both GM and Reuters are correct on this one from different perspectives. But Reuters didn't analyze this the way its done in business. If you bought a store for, let's say, half a million dollars and had profits of $100K per year, under the Reuters analysis after two years they'd say it was a disaster because you would have lost $300K. But after 10 years, you would have made half a million. So the GM analysis is the right way to do it, but there's a problem -- GM made many assumptions about the future in that analysis and they may be right, or wrong. In business, this is called an ROI analysis and normally the analysts include a "sensitivity" analysis that gives a range of outcomes.
JD| 9.10.12 @ 4:24PM
It is unmistakeably true that GM made and published sales projections for the Volt which have been very, very wrong, and it's thus likely that Volt is not meeting the financial projections used to justify the project initially. However, external analysts are unlikely to obtain damning numbers.
Fiscal| 9.10.12 @ 4:52PM
You are probably right about the volume estimates. but I suspect there are internal and external numbers. The finance guys probably have different numbers than the sales/marketing people. I certainly don't know their internal projections -- and they're really the only ones that count.
That said, gas prices are not high enough yet to make the Volt a really good consumer alternative. I also imagine that Toyota is losing money on the Prius. The thing the Obama administration doesn't really want you to know, however, is that battery production and disposal is very harmful to the environment.
JD| 9.10.12 @ 5:02PM
The forces which make gasoline expensive should make electricity expensive as well. I'm guessing it'll be quite a while before electric is cost-effective (especially unsubsidized electric). The Volt won't be around by then.
Fiscal| 9.10.12 @ 5:29PM
Actually, on a cost per mile of energy basis, electric vehicles are far less costly. The issue is amortizing the initial higher cost. It is not an easy analysis since electric vehicles perform much better at short commutes and gas is better at longer distances. The big issue is the cost and life of batteries. Battery technology is still improving dramatically while the technology behind gas combustion engines is quite mature. IF there is some breakthrough on battery technology, then all bets are off. I think this is what GM is hoping for and why they are investing so much in battery technology.
I have a neighbor who put up solar panels and bought a Prius. He showed me a spreadsheet with a 4 year payback on the cost of the Prius. I can't predict where the technology will go, but if there are breakthroughs, we may both be surprised.
As to the longevity of the "Volt" -- it is only a "name". "Dart" and "Fiesta" have returned -- haven't they? LOL
CJW| 9.10.12 @ 5:45PM
Is that a payback on the full price of the Prius or the premium you pay for the Prius? A friend told me the same 4 year payback but said it was for the $10,000 extra he paid for the Prius, he could have have bought a regular, similar car for less.
c. j. acworth| 9.11.12 @ 9:01AM
And, is that 4 years to pay back the actual cost of the solar panels and Prius, or his cost after being subsidized with our tax dollars? Remember that subsidies don't lower the cost of anything, ever. They shift (some of) the cost onto someone else, usually someone who gets no benefit from the thing subsidized.
JD| 9.10.12 @ 6:12PM
Fiscal,
My point is that electricity rates are rising and should be rising even more quickly, if not for manipulation.
Consider all of the federal interventions in play here. Not just the massive subsidies for electric cars. Also gas taxes, which nominally fund roads and have no equivalent for electric cars. And the subsidies for electric power, which dwarf those for oil. Taken altogether, the real price of electric cars is much worse than it appears.
I'm all for technology, but as you say, the battery is the holy grail, and most of the policymakers aren't focusing our tax dollars on it.
Based on the reputation of GM and the government behind it, I don't think it will be reasonably possible to tie any future battery breakthrough to the Volt program at GM, which gets back the original conversation about the cost-effectiveness of GM's "investment".
Bob Grant| 9.10.12 @ 6:39PM
We will soon hit peak lithium, and are decades - if not centuries - from hitting peak oil.
It seems insane for the government to invest in Lithium battery technology.
Fiscal| 9.11.12 @ 7:58AM
Ironically, most of the great advances in this country have included some form of government investment in development or infrastructure followed by commercialization by private companies. That model has worked in the past. Whether it works here or not remains to be seen. Personally, I'd like to see more government investment in research and less government in picking winners and losers.
JD| 9.10.12 @ 6:15PM
RE: internal vs external numbers:
Internal numbers become external numbers when politics is in play and the politicians think they can score PR points by publishing numbers. I suspect the advertised sales projections for the Volt made over the past few years were the internal numbers, and the politicians pushing the program used them to win the internal debates approving the program.
Stan Redmond| 9.10.12 @ 6:20PM
GM wouldn't care if they lost 1,000,000 dollars per Volt. It's not their money. As long as they keep the democrats and unions happy the money will come again when, not if, they find themselves back in bankruptcy.
Thom| 9.10.12 @ 7:20PM
Taking Government Motor’s statement at face value, the current selling price of the $17,000 Cruze at MSRP coupled with the electric part, another $24,000 or enough to buy a Prius alone makes the possibility of the Volt ever paying for itself or any other like it moot. Assuming $4.00 a gallon over the life of a Prius’s and Volt’s battery, say 12 years at 12,000 miles a year, the Volt only using gasoline over 6,000 of those miles and getting an average of 30 mpg outside of that and the Prius getting 45 mpg average, the Volt saves about $300 year in gas cost if you exclude the 6,000 miles on battery charging cost and the property tax different on a $24,000 Prius vs. the $41,000 Volt. After 12 years of use the Volt saves $3600 in “gas” cost but cost $17,000 more to purchase up front. When you add in the annual charge and property tax cost the Volt saves nothing at all over the Prius and the life of their batteries. The Prius won’t pay for its premium over something like the Honda Fit over the same mileage and the Fit will go 2-300,000 miles while the Prius and Volt won’t without sinking thousands into replacement batteries and labor. Nothing is going to make the battery technology affordable for the masses and all the technology in the Prius and Volt are mature.
Fiscal| 9.11.12 @ 7:49AM
Your analysis completely misses maintenance costs of combustion engines -- especially in later years -- and also residual value as well as an overstatement of gasoline usage for commuting use (you wouldn't use the Volt for long distance travel). Once you factor those things in, the numbers aren't that bad. However, in the near term (read next five years or so), I agree totally with your final conclusion that battery technology will not be affordable for the masses especially as the middle class gets squeezed and the bill comes due for government debt.