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Video: Bob Lutz Discusses the Business Case for the Chevy Volt
In this video segment, GM vice-chair Bob Lutz discusses the Volt’s business case. Assuming GM survives this very critical juncture, being able to make money on the Volt will become very important indeed.
He says the program is going “super smoothly,” and that GM will have lots of Volts in 2010 and they will be used on public roads and in test fleets prior to launch.
He addresses concerns about “Volt fatigue” seeing and hearing too much too early and indicates he believes GM will be able to build excitement right up to launch date.
He mentioned that there are still highly credible competitors like Honda who still say the Volt wont work.
You’ll hear me ask Mr. Lutz what the business plan is for the Volt, and how will it make money for GM.
He said it will be “very tough to get a return on investment” in generation one. He says he could forecast the day though when Volt technology will be no more expensive than a reasonably complex combustion vehicle. And then he predicts as CAFE gets more stringent, E-Flex will actually become cheaper to produce than combustion cars.
He says the short-term justification though is for billions of dollars of “favorable publicity.”
Lutz also said the initial business plan assumed a huge percentage of needed battery replacements. But now that GM is getting vehicles running, and things are going so well, that maybe that could be modified downwards. Doing so sufficiently, then the vehicle could actually “get into the black.”
He says for the first one to two thousand vehicles, if there is a battery problem, the plan will be for the dealer to ship the whole pack to GM for diagnosis. In time though he thinks dealers will be able to diagnose problems with the battery and remove individual modules, of which each pack contains 5 the size of a lead acid battery and each containing 60 or so cells. GM wont want dealers to swap out at the cell level though.
[flash http://www.youtube.com/watch?v=2wN-2hBCnlQ]
67 Responses to “Video: Bob Lutz Discusses the Business Case for the Chevy Volt”
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November 10th, 2008 at 7:31 am
For sure, I’m fully confident that GM can build an excellent Volt. They built an excellent EV1.
I drive 8 miles of potholed gravel roads 6 days a week. If GM would like a good vibration test for the battery pack, let me know, the road and I are available for testing.
Oh, so true.
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November 10th, 2008 at 7:38 am
If only they can survive long enough.
LyleL, You drive 8 miles of gravel roads 6 days a week? What country/State do you live in?
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November 10th, 2008 at 7:49 am
Why can’t they make a video that we can understand w/o straining our ears. It such a not brainer. I guess I’ll wait for the comments to come rather than trying to make it out.
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November 10th, 2008 at 7:55 am
Please save my \Volt !!!
Rashid, you don’t have to live far (from a city) to find “only” 8 miles of gravel… From where I’m from there is 200 km roads of it… And it is the only road around, that is not Volt territory anyways.
Only thing left is hope… that (with some help) could save the volt.
NPNS!
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November 10th, 2008 at 8:02 am
The whole success of this program relies on the battery pack. It sounds to me like GM is going the extra mile to provide a 10yr/150,000 mile warranty, and also look at providing quick service when necessary.
This is what will distinguish them from other electric vehicles. When consumers buy Brand X and find themselves faced with the decision to spend $10,000 at 60,000 miles for a battery pack replacement, that’s when they will begin to appreciate the work GM has done.
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November 10th, 2008 at 8:13 am
Maybe there will be lots of Volts, but;
1) Will they be affordable to the AVERAGE car buyer?
2) Will that buyer be able to obtain credit to purchase?
3) Will the rest of the world lend MORE money to the world’s largest deadbeat debtor nation so we can spend it on consumer crap, war and social(ist) programs like bailing out EVERY large corporation who puts out their hand because they are “too big to fail”? OR
4) Will the Fed have to print more fiat US $Dollars and if so, will the (I owe you nothing but another note) notes have any buying power left once the Fed adds more liquidity (print TRILLIONS more) to “jump start” the US economy which is failing because they PREVIOUSLY added too much liquidity (cheaper credit with low loan standards) causing malinvestment in the housing market?
5) Will adding even MORE “liquidity” to bail out EVERY big corporation who asks for “a taxpayer backed loan” or “bailout package” make the problem of the collapsing fiat currency worse?
Many nations around the world are already decoupling their economies from the US Dollar in favor of their OWN currency and realizing that we can’t pay our debts. This KILLS the Dollar as the world’s reserve. Will they call their loans and speed the collapse of the US Economy and thus the Volt program because of not enough buyers who can get financing?
Maybe the answers can be found here…
http://www.justiceplus.org/bankers.htm
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November 10th, 2008 at 8:16 am
Just came from the Miami auto show. Why no volt??? You want to sell it then you better show it.
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November 10th, 2008 at 8:25 am
I see it as highly probable that any dealer who gets the Volt in at first will also get in a spare battery pack for every three or so cars, and have a plan with GM to immediately replace that spare pack if it is used, so they are ready for a possible emergency swap at all times.
They will also have a big empty battery pack case standing on end with lots of advertising stuff hung off of it, and some stupid kid will try to steal it, thinking “Wow, this pack weighs NOTHING!”
I get this from the local Wal-Mart who had some moron steal a fake plastic cell phone prop and a fake laptop from a display in the same week. I laugh when I hear people talk about taking a Volt from a dealer during a show for the same reason. I hope you can get a ways with a golf cart motor!
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November 10th, 2008 at 8:46 am
#6 Tim said “Many nations around the world are already decoupling their economies from the US Dollar in favor of their OWN currency and realizing that we can’t pay our debts. ”
========================================
Well, people speculated that would happen, but when the crunch came it was the reverse. In reality, when uncertain everybody wanted US Dollars or Japanese Yen instead of their own currency, which is why the $US rose against most every currency except the Yen.
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November 10th, 2008 at 8:47 am
It’s wonderful to hear Mr Lutz speaking so positively about the Volt in terms of its business model. It makes one think that if GM survives the Volt will survive, and maybe if GM does not, the Volt will anyway, in some phoenix-like fashion. Good news. Thanks Lyle.
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November 10th, 2008 at 8:50 am
I wonder what the mechanics are going to think about replacing modules and mudding around in a battery as lethal as the volts. I’m sure they’ll have safety precautions, but still.
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November 10th, 2008 at 8:52 am
He said it will be “very tough to get a return on investment” in generation one. He says he could forecast the day though when Volt technology will be no more expensive than a reasonably complex combustion vehicle. And then he predicts as CAFE gets more stringent, E-Flex will actually become cheaper to produce than combustion cars.
Could we see GM lobbying for “more stringent” CAFE standards in the future to make EFLEX profittable? Wow! talk about a complete turn around.
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November 10th, 2008 at 8:53 am
Good interview/post Lyle. Your question looks like it makes Bob ready to hurl…maybe his cheesesteak was just sitting the wrong way though, hehe.
I’m watching it thinking, he looks pretty releaxed sitting back, is he thinking, “Yeah a 2 pack warranty, like we are ever going to be around to replace them anyway”
I think the 2 battery packs ‘cooked’ into the price, is kind of what I was saying prreviously (about me making sure I got the second pack if I owned a Volt, lol). By their own admission, GM is double charging consumers just in case they need two packs. Now they continue to say things are going well….and they will make money if the packs hold up and they don’t have to replace a lot of them.
In other words, because there is a hole in the sector, they have the ability to gouge a certain extent…basically they are putting a $8,000ish premium on each car, and get to keep if they can stretch the car’s life to 10yr/150miles.
Moreso, (evident by Bob’s admission here), my point is that they do ‘bank’ a profit on each car from the moment you buy it, regardless if they replace the pack or not, because they have your battery ‘warranty money’ to do with as they please for at least 7-8 years and probably forever. Their profit is only slowly eroded many years later…especially considering a ever decreasing cost of pack replacement over time.
When we think about it on a personal level, it is easy to see what this premium means to GM…and how the tax credit is letting them pull this trick successfully on the public. Can you imagine if you sold your house and got to charge a extra 20K to ‘warranty’ the roof in case it needed to be ’swapped out’?
Let’s assume some cases:
A) GM has to swap out ALL packs, at the average year of 8, but plunks the 8K in the bank at day 1 (getting a historical return of 6%):
$8,000+3,348 interest-$5,000 pack in 2020=$6,348 profit per car
B) GM has to swap out 30% of packs late in the vehicles life, but plunks the 8K in the bank at day 1 (still getting 6%)
$8,000+5,800ish interest-$1,500 ($5,000*30%)=$12,300
So even if they experience failure in all cars, they bank a extra $3,400 in interest and sheer market dynamics certainly lowers the cost of a 16kW to $5,000 (if not lower). Assuming a ‘regular’ or more realistic failure rate at 30%, we find over $12,300.
Obviously, in GM’s situation, they will NOT be baking any money, lol. They will be spending it…which is actually worse as the consumer, because that action ‘jeopardizes’ your warranty…and also incentivitizes them to ’screw’ you when you attempt to get it replaced, which leads me to this question:
What do you think your odds are at getting a new pack our of your local dealer? Do you think you will just be able to drive down to the dealer get them to say, “Yupe your only getting 30 miles range on that battery now, your supposed to get 40…here is your free pack?” It is probably like trying to get GM to replace brakes in the warranty period …only 10 times harder.
Side note: I don’t begrudge GM for doing this, I would do it too if I was them…I would want to get every nickel I could out of this product, in fact I applaud them. However, in this transaction I am the potential consumer, so it is annoying to me at the same time and I get to vent about it here…and also plot on how I will sucking battery #2 out of them under warranty kicking in screaming
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November 10th, 2008 at 9:10 am
Ugh, more fodder, Lutz says, “billions of dollars of “favorable publicity.” I find myself screaming, “no people, don’t fall for it…no more ICE cars from GM.” I will only buy a NEW vehicle if it has PLUG.
On another note, I guess GM has to sell gassers to survive. So the ultimate fix here is to accelerate the Volt program. In the words of the new leader, “yes we can.”
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November 10th, 2008 at 9:20 am
Other random news: Plug-In Vue died as well over the weekend…in more ways than one.
Officially, ‘delayed until 2011.’ Now launches after the Volt (maybe)…and now WITHOUT the ability to drive on electric power exclusivcely, sorry Nasaman.
Although, officially ‘just delayed’ to 2011, we all know what a move from ‘09 to 2011 means-basically everything is at a dead stop/halt on the project…or more directly, the project is totally scrapped as of right now…but avoids the bad PR of saying it is toast.
http://money.cnn.com/galleries/2008/autos/0811/gallery.gm__product_plans/7.html
If anyone bought the nonsense about ‘other Volt/E-Rev type platform vehicles’ in development now…here is your wake-up call.
Side note: Deutsche Bank lowered GM from a hold to a sell, (timely). But does get to say they are the first to put GM’s share price target at…$0. Expect a ‘knee-jerk’ reaction of all the other firms to follow suit (only about a little over a year too late).
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November 10th, 2008 at 9:28 am
Statik, #15.
That is very disappointing news, Statik
Edit: But didn’t GM says a few days ago that “no future technology” will be held up? (or something like that).
I think a plug-in Vue would be considered such a technology, IMO. But GM doesn’t have enough money. They still have to pay Wagoner and the rest of his buddies.
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November 10th, 2008 at 9:35 am
#16 Rashiid
That is very disappointing news, Statik
Edit: But didn’t GM says a few days ago that “no future technology” will be held up? (or something like that).
I think a plug-in Vue would be considered such a technology, IMO. But GM doesn’t have enough money. They still have to pay Wagoner and the rest of his buddies.
—————————————————-
They did say future tech…but they went out of their way to exclusively mention the Volt, nothing about the Vue.
I think it is really nature of the beast at this point…I think they have tried to hold onto as many things as they can, as long as they can. I am personally a little bummed about the Plug-In Vue myself…I was considering it as a secondary vehicle for the family.
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November 10th, 2008 at 9:47 am
When was this interview done?
Was it very recent, or was it before all the “hat in hand we need a few hunderd billion” talks in Washington D.C.?
It would make a difference in how you interpret some of his responses, don’t you think???
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November 10th, 2008 at 10:05 am
#13 statik says
“I think the 2 battery packs ‘cooked’ into the price, is kind of what I was saying prreviously (about me making sure I got the second pack if I owned a Volt, lol). By their own admission, GM is double charging consumers just in case they need two packs. Now they continue to say things are going well….and they will make money if the packs hold up and they don’t have to replace a lot of them.
In other words, because there is a hole in the sector, they have the ability to gouge a certain extent…basically they are putting a $8,000ish premium on each car, and get to keep if they can stretch the car’s life to 10yr/150miles.”
=======================================
With greatest respect, I disagree with your conclusion,, even as I largely agree with your calculations.
Consider: legal requirements in CA are for the battery warranty to last 10 years. In effect, CA (not GM) is requiring that GM sell you a 10-year battery warranty along with the car.
Now the battery is a new item with an uncertain lifetime in the field. GM is doing what any prudent insurance company would do —> looking at some estimate of the warranty costs and pricing it in up front, which is the only time they can legally collect the money. I see nothing wrong with that. CA may have passed the law expecting a free lunch, but there ain’t no such thing, especially from a corporation in financial pain.
I think it would have been better if CA had allowed a normal 3-year or 5-year warranty, and if CA wanted to go beyond that required some disclosure of expected battery performance over time. But that is not what CA did, so now GM responds to reality. They have no choice.
It is not some kind of rip-off, as you imply, to have incorporated a best estimate of warranty costs. The car still will sell at the market rate, whatever that turns out to be. If a purchaser, knowing the financial situation of GM (which is public knowledge), chooses to buy the car, the customer takes the risk that the corporation may not be there to pay off warranty costs and will have to take whatever recourse the law allows, at that time.
There is not a thing under-handed or improper about any of this.
/..even if it makes you angry
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November 10th, 2008 at 10:12 am
#13 statik further says “In other words, because there is a hole in the sector, they have the ability to gouge a certain extent…”
=====================================
OK, so I’m jumping on you today, but keep in mind that on most days I agree with you, and that you don’t mind disagreeing with me or whomever.
It is not gouging to charge the market rate for a product. That is what the product is worth to the buyer. It is the very same thing that you do all the time in your life as a financial analyst, buying and selling at the prices of the day.
Further, it is common for highly innovative products such as the Volt to have a price premium when they first come to market. That is good, as it compensates for the risks of taking a chance.
There is nothing bad happening here. I hope GM survives, brings the Volt to market, gets a high income from the first group, and can use that as encouragement to build more.
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November 10th, 2008 at 10:13 am
Hmm, no plug in vue. That was near the top of my short list. Looks like if the bus dies I’ll just be getting a 4 year old minivan. NPNS. I plan on getting an EREV or EV new when they become reasonably affordable (I’d consider under 40 with 7500 back reasonable). but it seems like the financial mess is taking a baseball bat to those plans, so I guess it’s another used beater for me. NPNS
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November 10th, 2008 at 10:15 am
#13 Statik
I don’t agree with your battery numbers. To begin with the battery costs are more like $4K or $5K rather than $8K. Second, I saw Waggoner in DC talking about a Volt priced in the mid-30s. That may be the result of the need to push the Volt when begging for a bailout but, regardless of motivation, I think that’s the price. My guess is that they got there from the over $40K price by taking additional costs of the warranty out of the equation.
This means that after the $7.5K rebate we’re talking about a Volt being in the high-20s which is a great price. From the way the release is being talked about — the need for people to be able to buy it once it’s showrooms (and to remove selling prices over sticker) — parts of CA will have plenty of Volts.
Also many thanks for your cite to the GM production plans on MSMBC. Nice.
On the political front the Obama team is going to bail out GM. That’s a given if for no other reason than they’ve said it’s a cornerstone of their rescue plan for the middle class.The approach of using the financial bailout was brilliant, and it seems unlikely to be resisted given the unexpected and latest round of AIG funding announced this morning which has dealt Paulson’s credibility a hit. My guess is that the Dems lay off AIG and Paulson gets the money to the auto companies.
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November 10th, 2008 at 10:17 am
No VOLT at this years SEMA show in Las Vegas.
One of the highlights of SEMA is the GM exhibit where GM representatives are available to vist with attendees. I asked “where’s the Volt?” The GM rep says “you know everybody has been asking that question” He pointed to a display showing the principle of how it works. I said “gee thats the same display you had last year but with a picture of the production model in place of the concept model” They did have a lot of high performance engines on display and a concept gasoline/ hydrogen hybrid that generated its own hydrogen and stored it the same way the gasoline/electric hybrid does.No indication at SEMA of GM’s direction other than emphesis on high performance this year.
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November 10th, 2008 at 10:20 am
#16 Rashiid Amul said “Edit: But didn’t GM says a few days ago that “no future technology” will be held up? (or something like that).”
=============================================
Please keep in mind that there is an accounting issue here, as well as GM’s ability to finance anything at the moment.
They have to contend that “future technology” still is being created for GM to be able to argue that present Volt expenditures are creating an asset that is to be sold later on. That is much easier if the technology is projected to be used on more than one vehicle. They still have the Vue scheduled even if for a year or two later; therefore, today’s E-REV development costs are (arguably) still creating a financial asset, not just spending money.
That is, I actually think they are right that they are creating long-lasting technical knowledge and accounting for it correctly. In any event they need to say it this way so that they don’t have to show their E-REV expenditures as current expenses, on the books.
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November 10th, 2008 at 10:41 am
To Gsned57:
I wouldn’t worry, believe it or not, handling that massive of a charge isn’t a big issue. It’s just the same way you deal with massive capacitors, the first thing you do is put little plastic tabbys on the contacts. From there, it’s just an issue of dragging the thing around. Admittedly, I have slipped up myself with a NORMAL car battery and knocked myself flat on my rear once, now I ALWAYS use the caps, but I’m sure with the Volt battery it will merit some more attention.
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November 10th, 2008 at 10:55 am
Wagner was probably factoring in the rebate when he said thirtys.
By his own admission, Lutz is saying it doesn’t look like they will need to replace all the batteries, but they are still going to charge for them. That sounds like a gouge to me.
I hope Obama wises up and realizes that the money the car companies are asking for will just get them through another year, not make them competitive or survive long term.
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November 10th, 2008 at 10:58 am
statik,
I always appreciate your detailed analysis of the financial side of things.
The seriousness of the situation and the debate always reminds me of a few scenes from the movie….”Kelly’s Heroes”.
http://www.youtube.com/watch?v=KuStsFW4EmQ
I don’t mind. People need to wake up for what is headed down the track.
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November 10th, 2008 at 11:02 am
#19 RB
Howdee RB. I hear what you are saying. We have had this discussion a couple times here I think. I understand your point completely. And as I said, if I was GM, if I could get away with it, I would build in a full failure scenario too and charge for it. I agree that GM has to cover their butts in this situation…there is a premium they need to charge…100% is not close to that number, especially given their lab results so far.
I don’t think using 100% (or huge percentage as it has been changed slightly today…I think Lutz knew his 100% quote was a bad idea in hindsight), is a best estimate warranty expense…it is a full replacement bought and paid for at time of sale by the consumer, but GM holds onto that second pack and are the holder of ‘the keys’ to get access to it. By his own admission here, they are doing everything they can to make sure the car survives to a point where you will not utilize that second pack, and GM banks that $8,000.
In a perfect world, it should be like buying a new house in a subdivision. You pay for the house then you pay another $1,000-$2,000 deposit retainer, in case of unforseen issues with the grade/city. If that money is not used…you get it back, although several years later.
If GM is going to charge for a full pack replacement during the first 10 years, you should receive that pack during the first 10 years…and if you don’t get it, you should get your 8K back, or at the very least, be entitled to a fresh pack swap out at the 10 year mark.
I realize that is thinking about things in a vacuum, or in a ‘perfect world’ scenario, that is never going to happen. The only people who are going to get that pack are the ‘total failure’ clients and the very ’squeeky wheels’
I’m not saying anything is specifically under-handed or improper, GM is entitled to get whatever they can for the Volt, the market will pay what is fair. However, I do recognize that GM is playing a little game here with us when they jumped the price from 30K to ‘just below 40′ as used this as the reason. Another issue in the file of, ‘we just didn’t realize this problem when we set out to build the Volt…’
/not angry at all about it, I can be pretty detached, hehe
(I think my original post demonstrates I would consider doing the same thing in their position…it is actually quite a smart plan)
…but as I’ve said before, any Volt that sits in my driveway will get a pack replacement before 10 years, and GM can count on me to get full benefit of their ‘warranty’ — 100%. Nothing wrong with me as a consumer quick charging and discharging that pack 4-5 times a day in year 8-9-10, provided I do so in a manner that is consistant with normal usage.
I would say, it would not be unsual to see me drive that to work in the AM, then charge it…take it out for a big spin for lunch, then charge it…take it out to get a coffee in the afternoon (to the neighbouring town), then charge it…drive it home from work, then charge it…take it out for a evening drive, then charge it…or maybe just listen to some sweet tunes on my front lawn during the day.
/nothing under-handed or improper about driving/using my car right?
Anywhoo, thats just my thoughts. I think we are both are assessing the situation the same way…but are drawing different conclusions on GM’s ‘intent’ in the process, which is something I know both can agree we will never know.
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November 10th, 2008 at 11:12 am
#20 RB said,
OK, so I’m jumping on you today, but keep in mind that on most days I agree with you, and that you don’t mind disagreeing with me or whomever.
It is not gouging to charge the market rate for a product. That is what the product is worth to the buyer. It is the very same thing that you do all the time in your life as a financial analyst, buying and selling at the prices of the day.
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Yes, I agree with you here. ‘Gouging’ was a bad choice of words, I think I referenced that what they were doing was actually pretty smart…so that wording my bad.
I accept full responsibility, my bad.
Please disagree with me as often as you like. Especially when I am overstepping like that. We get more information ’sussed out when we are having a discussion. Besides, isn’t that the entertaining part? This would be a pretty boring place if every post just said, “I agree” or “+1″
/have a good one
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November 10th, 2008 at 11:18 am
If you want a business case for the Volt and other EV’s, one need look no further than the projections for the price of oil… see
http://tinyurl.com/6fdml6
for an article on the International Energy Agency’s assessments released last week.
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November 10th, 2008 at 11:24 am
#22 DonC
#13 Statik, I don’t agree with your battery numbers. To begin with the battery costs are more like $4K or $5K rather than $8K. Second, I saw Waggoner in DC talking about a Volt priced in the mid-30s. That may be the result of the need to push the Volt when begging for a bailout but, regardless of motivation, I think that’s the price. My guess is that they got there from the over $40K price by taking additional costs of the warranty out of the equation.
This means that after the $7.5K rebate we’re talking about a Volt being in the high-20s which is a great price. From the way the release is being talked about — the need for people to be able to buy it once it’s showrooms (and to remove selling prices over sticker) — parts of CA will have plenty of Volts.
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Yeah, the actual cost of the packs is always up for debate, that is for sure. I’ve only see $8,000 as a number floating around so far, and extrapolating the cost of a pack the same size out of the iMiev, although I realize/conceed that is pack cost today, in production…versus in 2011, which is huge. (I also have to factor in that Mitsu owns half of the pack company that produces them, so they have some reverse pricing advantages and certainly big advantages on replacement out of warranty)…hard to see it all clearly.
It very well could be $5,000, hopefully we get some kind of contract volume/value out of LG and we can do some ‘back of the napkin’ math on it, everything is a WAG until then.
Just my own personal opinion/experience, I think Volt pricing in the ‘high 20s’ (post rebate) is just way too optimistic. Like alot of things we discuss here, and one of my favoUrite expressions–”time will tell”
I would love, love, love to get a Volt at 29K, I’d love to be wrong…I just can’t make the numbers work in my head. End of the day, I always go with my head and not my heart.
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November 10th, 2008 at 11:29 am
For RB Post #9,
The US Dollar has strengthened lately but is still lower against the Euro by around 40% and also lower VS the Yen over the past two years. There was a bit of the rush to quality in the recent strengthening but it had more to do with the unwinding of the “carry trade”. Basically, it was cheaper to borrow Yen and convert to US Dollars in order to raise capital than to borrow directly in dollars (this is a favorite of Hedge Funds). This is no longer the case with our interest rates so low and the Federal Reserve throwing funds at anything that moves. These “carry trades” are being unwound and this is temporarily strengthening the US Dollar. Some of this was also done by hedge funds based in Europe and using the Yen/Euro, but less so and thus the US Dollar moved up against the Euro as well. The strength in the US Dollar is temporary. Most Central Banks are using several currencies as reserves. Our good friends in Kuwait (whom we fought a war over to keep independent) no longer accept US Dollars in payment for oil. That’s how far we have fallen.
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November 10th, 2008 at 11:36 am
If you want a business case for the Volt and other EV’s, one need look no further than the projections for the price of oil… see http://www.ft.com/cms/s/0/e3d96436-aba4-11dd-b9e1-000077b07658.html?nclick_check=1
for an article on the International Energy Agency’s assessments released last week.
Note: for some reason my 1st attempt to post with a short url went into moderation
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November 10th, 2008 at 11:46 am
Here’s another case for the Volt… it made Time magazine’s list of the top 50 inventions of 2008 weighing in at #7…. http://www.time.com/time/specials/packages/0,28757,1852747,00.html?xid=newsletter-weekly
The Tesla Roadster did made #2 (different category of course)
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November 10th, 2008 at 11:47 am
#32 Jeff M,
If you want a business case for the Volt and other EV’s, one need look no further than the projections for the price of oil…
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I think that would be a case not for the Volt or other EVs. The articles main point/projection is, “…oil prices rise to $200 a barrel by 2030″
A high of $200/barrel by 2030 is only about a 30 percent increase over its current high.
Allowing for a more historical rate of inflation…say 3%, $200 barrel oil in 2030 is equivalent to $105ish today.
However, I do agree with your conclusion that electric vehicles make more and more sense going forward. I would put oil at closer to $400 barrel by 2030. People only want more and they keep pulling out less. We have seen that demand ramp the price up this decade…the draw down now is largely a side effect of the overall economic condition, one has to assume a resumption of the curve whenever the economy rights itself (which is a great issue unto itself…5-6 years?).
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November 10th, 2008 at 12:19 pm
GM is approaching the stock market delisting threshhold.
Maybe Tata will snap them up.
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November 10th, 2008 at 12:22 pm
crap, no plug-in vue? GM just took a major PR hit. Here we go, EV-1 round 13.
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November 10th, 2008 at 12:25 pm
#30 Statik – “I would love, love, love to get a Volt at 29K”
There is such a thing as a proxy.
Is it a problem importing?
I’m thinking the pricing of the Volt has ceased being economic and is now equal parts political and economic. As WS is finding out, it’s hard to take government handouts and then pay big bonuses. I suspect GM understands it’s hard to take government money and then price the cars which provided the reason for the money out of the reach of the average American.
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November 10th, 2008 at 12:29 pm
I should have gone through the full list of Time magazine’s list of the top 50 inventions of 2008… #47 was the Aptera EV… so 3 (Tesla, Volt, Aptera) of the top 50 are BEVs, or 6%, that’s pretty impressive.
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November 10th, 2008 at 12:56 pm
Wondering in all this economic / restricted credit bad news how many Chevy (or other GM brand) dealers will still be around if / when Volt comes to market…
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November 10th, 2008 at 12:59 pm
Statik
“Moreso, (evident by Bob’s admission here), my point is that they do ‘bank’ a profit on each car from the moment you buy it, regardless if they replace the pack or not, because they have your battery ‘warranty money’ to do with as they please for at least 7-8 years and probably forever. Their profit is only slowly eroded many years later…especially considering a ever decreasing cost of pack replacement over time.”
Lets say I spend $3,500,000,000.00 for a revolutionary vehicle that is a huge risky technological leap beyond all other vehicles. Then after spending $3,500,000,000.000 to develop that vehicle you (Statik) buy the first production vehicle for $36,000.00. Assuming your check clears, have I banked a profit? It took Toyota years of tinkering with the formula to wring a profit from the Prius – with virtually no reasonably similar competition.
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November 10th, 2008 at 12:59 pm
Hey, GM touts the range of the Volt as 400miles with the ICE running. I’m going to ask a totally ingorant honest question as a consumer. Will the Volt be able to get me up over the “Grape Vine” (I-5 freeway in CA through the hills/mountains) to get to Disneyland.
Seriously, for $30K plus, it should.
Will the 2010 release be for consumers or fleet? Or both?
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November 10th, 2008 at 1:11 pm
I checked the GM news at 2 A.M. this morning and heard that the plug-in Vue and Camaro would be delayed six months.
This was followed by an announcement that GM wound NOT be delaying the Cruze after all.
The report continued to state that the Volt has been raised to an even higher priority level.
So from all of this, I would think they will all hit the market at the same time. This being late summer of 2010.
=D~
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November 10th, 2008 at 1:11 pm
Auto purchase financing…
Have noticed of late (last week or so) that GM TV commercials are mentioning availability of credit through a network of “hundreds of banks” to help put our behinds in one of their vehicles.
Would be interesting to learn what the credit score requirements are for such loans…and what GM had to pay these banks to get on board.
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November 10th, 2008 at 1:14 pm
CaptJack @41
You will be near the truck lane along with all the other 150 HP econo-boxes. My 57 Chevy could fly over the grape vine at way more than the speed limit 50 years ago, getting about 17 MPG.
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November 10th, 2008 at 1:17 pm
@Van
Damn, it’s going to be a tough sell to the wife then.
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November 10th, 2008 at 2:08 pm
#28 statik says “However, I do recognize that GM is playing a little game here with us when they jumped the price from 30K to ‘just below 40′ as used this as the reason.”
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Yes, they are playing these word games with us at every turn, sort of like the guy who does magic tricks. Imagining myself in their shoes, I would say that GM is trying to frame the issue so that what they want us to do seems as attractive as possible.
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November 10th, 2008 at 2:13 pm
#32 Richard G on the recent strengthening of the $US
I agree, the recent strengthening is the reverse of the longer trend, negative.
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November 10th, 2008 at 2:13 pm
I was at the Seattle Auto Show last night, no Volt there either. I asked where it was and the very attractive Chevy lady said since there was only one Volt available to show, they are only showing it at the MAJOR auto shows. Bummer.
On a positive note, the “green” section with all the BEVs and modified Prius’s was much larger this year.
Stew.
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November 10th, 2008 at 2:15 pm
Isn’t this the same video that has been on this site for months and been posted on several post? It does not really tell us anything that we don’t already know. And, the sound quality is terrible.
Lyle, just ask Lutz for a current time frame interview and take along your digital video camera on a tripod. You could do better without all the other things going on that distracts from the video as shown.
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November 10th, 2008 at 2:15 pm
If California’s 10-year 100K mile requirement is the sticking point, why not come up with a no-replacement-battery-cost-cooked-in version of the Volt; for sale anywhere — except where prohibited by law. That would be 49 states in a nationwide roll-out. California? Why, they will have to fork it up for the battery-cost-cooked-in version, of course.
Eco-arrogance isn’t so much fun when it costs more, eh California?
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November 10th, 2008 at 2:17 pm
#44 StevePA said
Auto purchase financing…
Have noticed of late (last week or so) that GM TV commercials are mentioning availability of credit through a network of “hundreds of banks” to help put our behinds in one of their vehicles.
Would be interesting to learn what the credit score requirements are for such loans…and what GM had to pay these banks to get on board.
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I believe statik was discussing this a few threads back. He said that the list of banks is not a newly created one but one carried forward fro some time (years?) ago. If so, the ad is true, but….
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November 10th, 2008 at 2:32 pm
@Jackson
I agree.
One thing they should do is “Standardize” on the battery pack in a sense that it would be interchangable to other vehicle. Start with the Volt’s design. This would open up a battery market in the US for it as well as a mrket for the chargers. Hell, if this were to happen, it would help out the Volts viability. Get the rest of the BEV mfgrs onboard and design a compatable charger accross the board.
I think the issue with the cost of batteries is because each one of them is so “Special” for the vehicle. It really shouldn’t be. It’s just a battery pack.
Or am I asking too much?
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November 10th, 2008 at 3:50 pm
#51 Jackson:
It’s not eco-arrogance, it’s survival. As with GM and its product lineup, many will realize it only when it’s too late. Wait for it. I’m happy to pay the extra cost.
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November 10th, 2008 at 3:58 pm
I am asking myself how much it would cost the feds to keep GM in business for 2 years. That’s enough time to introduce the Volt, and perhaps more importantly for the economy to make it through the current bottom and be moving back up (even if slowly). It could be that 2010 will be a good year for auto volume because of the large number of deferred sales.
I am not talking about a clean start from scratch, just surviving for another 2 years, paying VEBA as owed, paying others as obligated, and retooling for the 2009 and 2010 model years, including introducing the Cruze and Volt and making however many of the existing models are required to meet but not exceed demand.
How much is that if estimated in a way that is realistic but not pessimistic?
Statik?
Others?
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November 10th, 2008 at 4:45 pm
#41 Jeffhre
Statik, Lets say I spend $3,500,000,000.00 for a revolutionary vehicle that is a huge risky technological leap beyond all other vehicles. Then after spending $3,500,000,000.000 to develop that vehicle you (Statik) buy the first production vehicle for $36,000.00. Assuming your check clears, have I banked a profit? It took Toyota years of tinkering with the formula to wring a profit from the Prius – with virtually no reasonably similar competition.
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Thats not the way the car business works. There is a thing called amortization of expense over the likely duration and run of a project.
If the Volts has R&D of 1 billion, the manufactured car costs $25,000, they allow for $10,000 in estimated warranty/repair/misc and 250,000 units, that comes out to $39,000…and if $39,000 is the ceiling of what the ‘bean-counters’ think the public will pay…they barely breakeven (depending on price structure).
But if they can get me to pay top dollar $39,000 and can get me off of the whole pack replacement thing, they can take that extra $8,000 out of the costing equation.
Regardless, by costing it in from day one, they net that $8,000 to do with as they plase…the name of the game for the Volt becomes ‘value retention’ for GM…hence my nagging feeling it will be darn tough getting a new battery out of them…other than catastrophic failure. I doubt we can walk up in year 9 and say, ‘hey my Volt range is only 30 miles’ and they hook us up with a new one. There is likely going to be a ‘rider’ a mile long on the warranty.
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November 10th, 2008 at 4:51 pm
#56 Statik
It is going to be all in the fine print. As they say, “The devil is in the details”.
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November 10th, 2008 at 5:03 pm
#55 RB
I am asking myself how much it would cost the feds to keep GM in business for 2 years. That’s enough time to introduce the Volt, and perhaps more importantly for the economy to make it through the current bottom and be moving back up (even if slowly). It could be that 2010 will be a good year for auto volume because of the large number of deferred sales.
I am not talking about a clean start from scratch, just surviving for another 2 years, paying VEBA as owed, paying others as obligated, and retooling for the 2009 and 2010 model years, including introducing the Cruze and Volt and making however many of the existing models are required to meet but not exceed demand.
How much is that if estimated in a way that is realistic but not pessimistic?
Statik?Others?
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I’ve thought about this one myself…although I still have difficulty seeing any immediate benefit of the new platforms in 2010.
Barring all that jazz. If the NA sale rate levels off at 9-10 million and stay flat through 2010, that would put GM’s month cash burn at a lower level than this quarter, but probably still around 1.5ish.
I’m going to assume we want to figure out the number to the point where the first production Volt rolls off…the earliest date for this is probably December 2010…so lets say 25 months. Here are my ‘guess-ti-mates’
Cash Burn: 37billion-ish
VEBA comittments: 11 billion
Delphi committments: 7 billion (this is tricky…C11 judgement in 3 weeks..we will know then)
GMAC interim stabilization or alternate credit (for dealer’s only): 5 billion
Unforeseen/Misc ‘one time items,’ other parts suppluer funding: 5 billion
So, my guess would be 65 billion-ish.
Wild card is financing for consumers auto purchases…I’m not sure that we have seen the true effect of the loss of the leasing and cost to GM on the loss of traditional financing. I am attributing a great deal of this month’s -45% to that…because the previous 3 months under this new GMAC situation was masked by huge rebates and GM subsidizations.
GM was off -45% in sales, but we are seeing that the high margin/larger value cars are being totally obliterated and also being massively reduced at the same time…just going over the numbers by brand it seemed like the ‘over 25K’ crowd in GM’s lineup really got hammered, north of 55% off in net sale (then you ahve to factor rebates off hte MSRPs on top). This will have a even bigger impact on next quarter’s results…remember this latest quarterly disaster DID NOT include October’s nightmare (or the similar falloff in global sales). The balance of ‘one time items’ in this report versus realistic sales numbers in the next may prove to wash each other out…and put GM’s burn north of 2 billion/month.
So you may have to tack on another 12-20 billion to that 65 billion estimate if that ‘new realty’ model holds true. That factor is something only the inside bean counters at GM could answer with any accuracy.
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November 10th, 2008 at 5:18 pm
It sure looks like GM is toast, so the way forward is bankruptcy. And if the sell off assets, perhaps Toyota could buy the Cruze and the Volt and the engine plant. The Chevy with the HSD could be called the Postus.
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November 10th, 2008 at 5:25 pm
My guess is that they got there from the over $40K price by taking additional costs of the warranty out of the equation.
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I agree, that that is a reasonable guess. But don’t forget, in a free market economy (such as we have had for 200 years, and will have for at least a few more months) companies do not restrict themselves to cost plus pricing. If they can make 10,000 Volts the first year, a very powerful part of the pricing decision is at what price 10,000 people will want to buy a Volt.
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November 10th, 2008 at 5:35 pm
I am asking myself how much it would cost the feds to keep GM in business for 2 years. That’s enough time to introduce the Volt, and perhaps more importantly for the economy to make it through the current bottom and be moving back up (even if slowly). It could be that 2010 will be a good year for auto volume because of the large number of deferred sales
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This is a good question. This type of question is what makes this site so interesting. I think the premise needs to be adjusted however. If they sell 10,000 Volts the first year at $40,000, that will give them revenue of $400,000,000. Even if that were pure profit, that would offset just one week of their existing cash burn. For the Eflex platform to impact GM’s bottom line, they would have to sell about a million of them, so we are looking at surviving until about 2015.
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November 10th, 2008 at 8:14 pm
The biggest problem with bailing out GM is where does it stop? Boeing could be next. Unlike the 1930’s when we had cheap oil to help recover from the mess, it will not be so ‘easy’ this time.
A severe shortage in aircraft delivery financing is threatening to leave Airbus and Boeing stranded with perhaps 200 “white-tail” aircraft they can’t place with customers.
The aircraft financing crisis comes on top of fears by analysts that 20-30% of Airbus and Boeing backlogs may be at risk as airlines go bust. Exacerbating the situation is that the leasing sector – which both aircraft makers were hoping would help them ride through the storm – also has entered a period of upheaval and restructuring.
Next year could see a shortfall of $10-20 billion in available funding, warns Christian McCormick, managing director for the fourth-largest aircraft financing bank, Natixis Transport Finance. For airlines that haven’t secured funds for deliveries this year, the crisis could already be at hand as many banks are making no further obligations through year-end.
In the past year, the number of financial institutions working with the airline industry has been halved, notes Brian Pearce, the International Air Transport Assn.’s chief economist. “This is becoming a problem for airlines and manufacturers.
http://www.aviationweek.com/aw/generic/story.jsp?id=news/aw111008p3.xml&headline=Financing%20Crisis%20Could%20Saddle%20Airbus,%20Boeing%20with%20%27White%20Tails%27&channel=awst
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November 10th, 2008 at 8:43 pm
#60 statik
#61 Tom H
Thank you for the additional data and comments.
Accepting statik’s numbers, which to me seem realistic, we have a kind of a guideline. If the feds commit $75B to GM, that gives the company a couple of years of life. From the viewpoint here, we get to see some Volts, so that’s good. As Tom H said, that’s not long enough for the Volt or other E-REVs to have much of an effect financially, though once EREV cars are real it may change people’s outlook about them (assuming they like what they see).
What 2 years might do, possibly, is to extend GM’s lifetime long enough that they can restructure internally, get into a more favorable financing time period for auto sales, and with good luck have a very good sales year during 2010. Maybe by then the prospects for E-REV look good enough that somebody (not me) would like to make a further investment in GM, or they will have a better environment to sell off parts of the company. Of course, with bad luck, by 2010 they are just back in the same place they are now, after $75B of taxpayer $ has gone down the tubes.
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November 10th, 2008 at 8:51 pm
#62 NZDavid — on Boeing and aircraft financing
It may be that the attention being given to banks and lending help remedy the Boeing problems by make the financing more readily available. I think that’s the intention, at least, and it may work.
I’m going to hope so, at least
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November 10th, 2008 at 9:19 pm
RB. If they do this then its reasonable to expect the car companies to get help with financing cars.
Statik could probably cost out bailing out leasing and funding for Boeing but it seems the 630 Billion (after exec pay) won’t be enough for Boeing and GM et al financing.
I hope so too, but my heart tells me Statik will be proved right. I just hope the Volt makes it through C11. It seems to me this site will be more important than Lyle ever imagined in his most wild dreams.
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November 10th, 2008 at 9:34 pm
#65 NZDavid — car companies help with financing.
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My opinion is that help with auto financing will happen, just as it will with aircraft, and soon, because it is the only part of the situation in each case that is fairly cleanly authorized under the $700B bailout program passed by congress. Whether it will happen through GMAC or some other banking mechanism I have no idea, but it seems to be what the federal reserve intends, and what they intend usually happens, insofar as US banking is concerned. (As you know, there is a saying in US finance “never fight the fed”.) In fact, it seems to be the case that it is not hard to get an auto financed today, for a person who has a good credit history.
Whether anything happens to help GM beyond that is the big question mark in my mind. It is my impression that it will, because it is favored by Obama, it seems, but just what or how much remains unclear (to me at least
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November 10th, 2008 at 9:44 pm
I hope you are right RB. I pray GM can make it to January 20.
It would just be too sad to lose my Volt at this stage.
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