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Chevy Volt Won’t “Pay its Rent” to GM

April 7th, 2009 | Posted in: Financial

An important element of GM’s recovery plan is that every vehicle in its portfolio must be able to pay its rent. This refers to a break from past operations in which the company would make healthy profits on every truck and SUV it sold but either break even or sell at a loss small cars.

The Chevy Volt, however, will be allowed to stay as the exception to this new rule.

“We can’t make money on the first Volts,” reports Troy Clarke, GMs president of North America. “But as we get a chance to change the generations of technology, we’ll lose less and less.”

Now that the Volt is nearing engineering completion, GM is already working fervently on 2nd and 3rd generations of the car. In these iterations the company is striving to take as much cost out of the battery packs as possible. These packs, costing several hundred dollars per kwh, are the prime reason for the car’s high price tag and non-existent profit margin. Volt vehicle line director Tony Posawatz says GM has the potential to take several thousands off the price of the car in future generations.

But, according to John Smith GM VP of global product planning, even the second generation Volt may not make money.

Looking forward to a change in philosophy for the company, Clarke said “It’s not our intention to lose money forever.” All future products “have to have a line in sight to be commercially viable.”

In related news GM VP of R&D Larry Burns told reporters that GM once made viable is likely to get $10.6 billion in low cost advanced technology loans, including $2.3 billion for developing and producing two other new electric cars and one hybrid car in addition to the Volt. “Treasury wants to fully understand what our ultimate destiny is before giving us that (DOE) loan,” said Burns.

Source (Automotive News) and (Reuters)

Posted by: Lyle

115 Responses to “Chevy Volt Won’t “Pay its Rent” to GM”

k-dawg Says:
April 7th, 2009 at 6:53 am

Gotta have a 1rst Gen to get to a 2nd Gen
(to quote Lutz)

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Rashiid Amul Says:
April 7th, 2009 at 6:53 am

From the article
“We can’t make money on the first Volts,” reports Troy Clarke, GMs president of North America. “But as we get a chance to change the generations of technology, we’ll lose less and less.”
———
This sounds painful. Maybe by the third generation they can make money.

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Tom Says:
April 7th, 2009 at 6:57 am

So the car has to make money to be viable and they can’t get the DOE loan until they show they can be viable but the loan is to develop advanced technology??? Does this make sence or am I reading it wrong???

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statik Says:
April 7th, 2009 at 7:01 am

Wow…that has got to be the most depressing post you have every put up Lyle.

/makes me feel all warm and full of life inside

+1

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statik Says:
April 7th, 2009 at 7:04 am

From the article:

–“We can’t make money on the first Volts,”
–“But as we get a chance to change the generations of technology, we’ll lose less and less.”
–Tony Posawatz says GM has the “potential” to take several thousands off the price of the car in future generations.
–John Smith GM VP of global product planning, even the second generation Volt may not make money.
–Clarke said “It’s not our intention to lose money forever.” All future products “have to have a line in sight to be commercially viable.”
–“Treasury wants to fully understand what our ultimate destiny is before giving us that (DOE) loan,” said Burns.

———-
Take your pick of what to discuss, lol.

I’m guessing this post is unlikely to get near the 400 or so posts the last one did. Lyle, what you need to do for threads like these is to just add something like, “…and Toyota said the Volt sucks” in pica type right at the bottom to keep it hopping.

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k-dawg Says:
April 7th, 2009 at 7:10 am

Not to bring up this sore subject again, but since we’re talking about profitability, it will also depend on gas prices. Higher gas prices = higher Volt prices. The only way to skirt this is if there’s a direct competitor and we have a price war.

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David K (CT) Says:
April 7th, 2009 at 7:11 am

Toyota said the Volt “sucks?”

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Dave G Says:
April 7th, 2009 at 7:16 am

From what I understand, it’s fairly typical for a car maker to lose a little money on the first model of a completely new car design, new technology or not.

As for the cost of the battery, I’m not quite following what the issue is here. The CEO of Compact Power, Inc., the subsidiary of LG Chem that currently builds the Volt battery packs, says the battery pack costs $1000/ available kWh, and he makes clear in his statements leading up to this that he is talking about the battery energy that’s available for use, and not the total battery capacity. Here’s the link for that:
http://www.greencarcongress.com/2009/02/profile-li-ion.html

We know that the Volt has 8kWh of battery energy available for use, so CPI’s CEO is essentially placing the cost of the Volt’s battery pack at $8000. We also know that there is a $7500 tax credit that is directly tied to the total capacity of the Volt’s battery.

So this essentially means that the government is paying for the Volt’s battery pack until the tax credit runs out. Given that the tax credit specifies 200,000 units per manufacturer, I would assume the credit won’t phase out until 2014 or later (probably later). By this time GM has this unit volume, manufacturing costs will have fallen dramatically, both the cell and the pack level.

What am I missing here?

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BillR Says:
April 7th, 2009 at 7:17 am

I think this will all depend upon production levels.

If the car is a big seller, and GM also introduces other Voltec vehicles, the high volumes will allow GM to find ways to reduce cost and make these vehicles profitable. My guess is that they will need a production volume of 250k per year to get the cost down to where the Voltec cars are profitable.

To get volume, they need a more diverse portfolio. That is why I believe we will see GM put Voltec on the same platform as the Opel Insignia, the Epsilon platform (based on wheelbase dimension, I think the Converj may be designed on this platform). With this bigger platform, we could perhaps see the new Buick LaCrosse with Voltec technology and also a small SUV.

The higher end cars will make more money for GM, and thus increase their profitability.

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sudhaman Says:
April 7th, 2009 at 7:21 am

the first gen will make less money sec gen will make profits and third gen in excess.

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Jeff Says:
April 7th, 2009 at 7:23 am

#5 Statik
#7 David K (CT)

Nice…keep it hopping.

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Jim in PA Says:
April 7th, 2009 at 7:34 am

For those of you depressed by this posting, let me plunge you even farther into the depths of despair. GM has paired up with Segway (ughh) to come out with a concept for an urban electric transport that looks like a motorized wheelchair with a windshield. I have been a GM guy my whole life, and this one picture I have linked to was nearly enough to make me start openly sobbing in front of co-workers. So without further adieu; I give you …..(drumroll) …… the PUMA!!!

http://www.autoblog.com/2009/04/07/gm-and-segway-working-on-new-balancing-2-wheeler/

Please note from the date that this is not an April Fools joke.

Seriously, listen up GM. There is already a small efficient single-person transport vehicle. It’s called a motor scooter. Just slap a lithium battery into one and you are good to go. This PUMA is clearly suitable only for the handicapped, the morbidly obese, and the incurably uncoordinated. God help us all…

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RB Says:
April 7th, 2009 at 7:34 am

“We can’t make money on the first Volts,” reports Troy Clarke, GMs president of North America.
======================================

It pays to look carefully at statements like this one. If one begins with
Margin = Income – Expense
Then “margin” and “income” are well defined. “Expense” is another matter.

If Expense means the cost of buying the parts, then assembling and delivering the car, I think Volt will have a positive margin.

But no doubt Expense can be loaded up with enough other stuff to make Margin a negative. Right now I think GM wants Margin to be negative, as that helps their case for more gov aid.

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Tim Says:
April 7th, 2009 at 7:45 am

GM is like a mountain climber with an “A.D.D. buddy” (gov’t statists) acting as piton holding his rope to the side of the cliff.

The “A.D.D. Buddy” could let go at any time if an unfavorable political wind blows by. Sounds like fun? Then invest in GM!

http://en.wikipedia.org/wiki/Attention-deficit_hyperactivity_disorder

http://en.wikipedia.org/wiki/Piton

Bankruptcy reorganization would have been Constitutionally legal and far less frightening, pricey and painful.

Instead, we get to pull the band aid off…

Ssssssssslllllllllooooooowwwwllllllyyyyyyyyy.

http://en.wikipedia.org/wiki/Sadomasochism

Yipee!

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Dave G Says:
April 7th, 2009 at 7:47 am

#9 BillR Says: I think this will all depend upon production levels… My guess is that they will need a production volume of 250k per year to get the cost down to where the Voltec cars are profitable.
————————————————————————————–
Yes, exactly. And note that this lines up closely with where the PHEV tax credit runs out.

As for other platforms, I’m not so sure that will happen soon. GM can do a lot on the current compact delta-II platform. For example, the Chevy Orlando is set to debut in 2011. This is a station-wagon / micro-van with SUV type styling. It seats 7 people, 5 people with some cargo, and 2 people with a lot more cargo area.
http://www.chevrolet.com/orlando/

For some reason, GM has canceled the Orlando in the U.S., but not overseas. I suspect U.S. gas prices under $2/gallon had a lot to do with this decision.

Anyway, given that GM is moving ahead with the Orlando internationally, it would be fairly easy for them to make an EREV version of the Orlando, given that the Volt uses the same chassis and many of the same parts.

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k-dawg Says:
April 7th, 2009 at 7:49 am

Dave G
What am I missing here?
——-

Lots of new tech on the Volt. I think there’s a lot of cost in the “low energy” electronics of the car, and also the battery packing/cooling itself. I think the price per kwh may just be for the cells themselves, not the entire pack. There’s also a large electric motor along with an ICE. More “extras” than a typical car.

Should do a spreadsheet breaking the car down…. come up w/a cost.

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Tim Says:
April 7th, 2009 at 7:50 am

Jim in PA (#12)

HA HA HA HO HO HO HO HO HE HE HE… SNIFFLE

BOO HOOOOO HOOOO HOOOO…

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Dave G Says:
April 7th, 2009 at 7:58 am

#12 Jim in PA Says: I give you …..(drumroll) …… the PUMA!!!
http://www.autoblog.com/2009/04/07/gm-and-segway-working-on-new-balancing-2-wheeler/
————————————————————————————–
Thanks for the link!

This could be a big hit internationally. I think it’s much better than the motor scooter many of them use now. Just the fact that it’s covered on top, and has some protection on the sides, that’s a big deal. If GM can get battery pack volumes higher using this, why not? It’ll just make the Volt less expensive.

By the way, if you want an electric motorcycle, check out the Zero-S:
http://www.zeromotorcycles.com/zero-s.php
60 miles electric range. 60 miles per hour top speed. Faster than a sports car from 0-30 mph. Less than $10K. Check out the drag strip video here:
http://www.zeromotorcycles.com/gallery.php

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k-dawg Says:
April 7th, 2009 at 7:58 am

Jim in Pa.

Unni posted that yesterday. I dunno.. another toy IMO. It does have room for 2 pple which makes it more fun than a Segway. Its also faster. But im not sure 2 large Americans would fit in it.

I have a gas scooter. Almost bought an electric one (Vectrix) but they cost too much. Sounds like this PUMA will too.

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Tim Says:
April 7th, 2009 at 8:10 am

Dave G (#18)

Look again at your watch, today is April 7, not 1.

Good engineering is simplicity in design!

You can put some of the new batteries and a hub motor on 10 bicycles for the price of ONE of these ego-stoking gadgets and Electric Bicycles will “scoot” through traffic much easier than the side by side design of this menace.

One fast stop and you’re a bowling ball!

Need a windshield and roof? TAKE A BUS or CAB!

For longer (1-2 person) distance, buy a Zero. They are much cooler than the “gay” Vetrix scooter. Yes, I know… opinions vary. That gives spice to life!

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zipdrive Says:
April 7th, 2009 at 8:11 am

Jim@12
—————–
Yeah, that “Puma” should be named “Puke-a”, because that’s what I almost did when I saw it.

I simply woud not want to be SEEN in that thing.

GM, please do not degrade yourself by getting involved in that contraption.

Stay focused on the VOLT.

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Van Says:
April 7th, 2009 at 8:12 am

Remember the “quick rinse” to “cleave” the overhead costs (retirement and health) so GM will be viable – no longer selling every vehicle it makes for a 20% loss? Lets say the break even price for the Volt is
$40,000. GM planned to sell it for $37,000, losing money on every Volt. But if $8,000 will be “cleaved” then at $37,000 GM will make money on every Volt.

Bottom line, this sounds like a “poor pitiful me” sales pitch, “cause I am losing money at this price” and I do not believe it for a minute. Why? Because the cost of the battery pack has not been disclosed.

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HyperMiler Says:
April 7th, 2009 at 8:17 am

If GM can’t make money at $30,000 after $7,500 credit, then there is something wrong with GM’s cost structure.

Afterall, GM’s talking about having to sell Cruze for $18,000 in the US, a car that GM Daewoo is selling for half that price in Korea.

Maybe it is time to bankrupt GM and let some Japanese or Korean automaker with better cost management take it over.

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Dave G Says:
April 7th, 2009 at 8:19 am

#16 k-dawg Says: Lots of new tech on the Volt. I think there’s a lot of cost in the “low energy” electronics of the car, and also the battery packing/cooling itself. I think the price per kwh may just be for the cells themselves, not the entire pack. There’s also a large electric motor along with an ICE. More “extras” than a typical car.

Should do a spreadsheet breaking the car down…. come up w/a cost.
————————————————————————————–
Yes, we need another spread sheet! LOL!

I agree that many of the other subsystems in the Volt besides the battery will probably be somewhat expensive initially, but this doesn’t explain why everyone keeps blaming the battery for cost and profitability issues.

As for the battery packing/cooling itself, I’m sure CPI knows about this, since they are making the Volt packs today. The CEO of CPI was fairly clear that the pack overhead is included in the $8000 battery price ($1000/ available kWh), so it looks like the $7500 tax credit offsets that as well.

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statik Says:
April 7th, 2009 at 8:20 am

#8 Dave G said:

From what I understand, it’s fairly typical for a car maker to lose a little money on the first model of a completely new car design, new technology or not.

As for the cost of the battery, I’m not quite following what the issue is here. The CEO of Compact Power, Inc., the subsidiary of LG Chem that currently builds the Volt battery packs, says the battery pack costs $1000/ available kWh, and he makes clear in his statements leading up to this that he is talking about the battery energy that’s available for use, and not the total battery capacity. Here’s the link for that:
http://www.greencarcongress.com/2009/02/profile-li-ion.html

We know that the Volt has 8kWh of battery energy available for use, so CPI’s CEO is essentially placing the cost of the Volt’s battery pack at $8000. We also know that there is a $7500 tax credit that is directly tied to the total capacity of the Volt’s battery.

So this essentially means that the government is paying for the Volt’s battery pack until the tax credit runs out. Given that the tax credit specifies 200,000 units per manufacturer, I would assume the credit won’t phase out until 2014 or later (probably later). By this time GM has this unit volume, manufacturing costs will have fallen dramatically, both the cell and the pack level.

What am I missing here?
=================================
Two things:

A) GM is pricing in TWO packs per car…not one, because of the longevity issues

B) Supply and demand – cost pricing comes down as more EVs are available…price also comes down. There is a HUGE premium built up right now…right now GM is charging $40,000 for a fancy electric car/E-Rev, and people want it bad, they are looking past the product itself.

In 2014, with multiple EVs on the road, and all the initial demand gone, all GM will be selling in the customers eye is a Cruze missing one seat, that also happens to go ‘up to’ 40 miles electric. If the price now with limited/no supply is $32,500 (after rebate) to the customer, then the price will have to be around $26,999 to sell deep production later…and there will be no rebate left to lace GM’s pockets with.

/thats $13,000 worth of ‘dramatic manufacturing costs’ needed to just continue to lose however much money they are losing on Volt #1.

I see no scenario that GM does anything but lose money on this project for the foreseeable future, but thats ok, it doesn’t have to….it is a government pet project now, lol.

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Randy Says:
April 7th, 2009 at 8:21 am

Govt money for the volt should be GRANTS not loans. We give money to every 2nd class dictator in the world but when its for our own country its always LOANS. Also grants to tesla and ford and chrysler should get loans as its privately and foreign owned.

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Adrian Says:
April 7th, 2009 at 8:22 am

Thumbs up to Tim #14.

So, I have read (I will assume it is true) where due to cost overhead GM cannot make/build/assemble small cars for a profit in the USA. The only way they could do so, is either to redo the entire cost overhead structure or build the cars outside the USA and ship them here. By law, at least US companies are taxed in such a way where they can’t build outside the USA and ship cars here for a profit.

So, saying all that I guess this means the labor, cost overhead GM has will be allowed to be reworked in such a way they can make money on small vehicles. If not, the statement in the article would prevent small cars from being made by GM.

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Tim Says:
April 7th, 2009 at 8:22 am

HyperMiler (#23) Said:

“If GM can’t make money at $30,000 after $7,500 credit, then there is something wrong with GM’s cost structure.”

Yep, it’s primarily UAW “legacy” obligations. Executive compensation is also a problem but it is a VERY small % of the cost structure problem when compared to TERRIBLE union contracts.

Good job UAW, you’ve “helped” poor management and Gov’t over regulation kill an American industry!

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PLJ Says:
April 7th, 2009 at 8:22 am

Didn’t the Prius lose about $10,000 a pop in the first generation?

So, it is no surprise that GM predicts no profit on the first generation or two.

Changing the world of motoring takes time. And lots of money.

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statik Says:
April 7th, 2009 at 8:24 am

#29 PLJ

Didn’t the Prius lose about $10,000 a pop in the first generation?

So, it is no surprise that GM predicts no profit on the first generation or two.

Changing the world of motoring takes time.
===========================
…and deep pockets

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Dave G Says:
April 7th, 2009 at 8:26 am

#22 Van Says: Bottom line, this sounds like a “poor pitiful me” sales pitch, “cause I am losing money at this price” and I do not believe it for a minute. Why? Because the cost of the battery pack has not been disclosed.
————————————————————————————–
Right. It seems kind a little fishy that GM will lose money on each car at $37,000 in the second and third year of production. This could be some kind of ploy on GM’s part. Obviously, it will take several years to recoup their initial development costs, but losing money on every car sold, that’s a different story.

As for the cost of the battery pack, CPI essentially leaked this at $8000. See my post #8 for details. What’s more, the tax credit offsets $7500, and that is directly tied to the size of the battery. So that makes things look even more fishy…

Or to put it another way, I have a lot more trust in GM’s engineering folks than in their bean counters. GM’s accounting practices have been a horror story for the last 40 years.

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Adrian Says:
April 7th, 2009 at 8:26 am

If Volt still need special outlets/voltage for recharge (like I believe it does), has anyone figured the cost for in home upgrades? Last time I checked, running new wire wasn’t free.

GM better prep the dealers for when they say ‘when you buy this car you need need to have new electrical wire run just to recharge it.’ You can almost see people walking away. There is a PR battle to be won just on that.

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carcus1 Says:
April 7th, 2009 at 8:28 am

A shadetree mechanic looks at battery price:

Let’s compare Li-ion to something we know more about – - lead acid. Lead acid is obviously a very mature technology and is already very much at the bottom of it’s price vs time in development curve.

What would a 16kwh decent quality lead acid pack cost? Using the 75ah/12v optima D31 for our comparison, the volt’s 16kwh pack would take 18 of these batteries and cost $4,140. (about $250/kwh)
http://www.bigtimebattery.com/store/d31.html

Figure the much cleaner, more precise manufacturing that must go into Li-ion, and then add in the cell monitoring (temp, amps) that is involved in preventing thermal runaway, and I think we can safely assume Li-ion pack is going to be AT LEAST double the price of lead-acid for quite a while.

Conclusion: Hoping for anything less than $500/kwh (or $8,000 for a volt pack– full pack, not talking available here) is pie in the sky IMHO.

P.S. I realize that’s not a sophisticated way of estimating Li-ion pricing, but it seems quite valid to me.
P.S.S. I left out a demand vs. lead price argument for the return of lower lead acid battery prices, but given the future demands and possible limitations on lithium, I figured this was a wash.

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k-dawg Says:
April 7th, 2009 at 8:33 am

Adrian,

If you have the ability to plug in a plasma TV, then u can plug in a Volt.

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GM-fan Says:
April 7th, 2009 at 8:35 am

Of course GM won’t make money….

They don’t own the battery….LG can just hijack with whatever price…as they understand US government/GM need it to prove that they have future

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Dave G Says:
April 7th, 2009 at 8:38 am

#32 Adrian Says: If Volt still need special outlets/voltage for recharge (like I believe it does), has anyone figured the cost for in home upgrades? Last time I checked, running new wire wasn’t free.
————————————————————————————–
No. The Volt uses a standard 110 volt home outlet, and draws about the same juice as a vacuum cleaner (around 11 amps). This fully charges the Volt in 6-7 hours.

As an option, the Volt also supports 220 volts, which lowers the charge time to a little over 3 hours. But again, this is an option, so there is no need to run a special line. In fact, if you only charge at night, which is what most plug-in experts recommend, then the 220 volt option makes little sense.

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HyperMiler Says:
April 7th, 2009 at 8:40 am

#35 GM-fan Says:

> They don’t own the battery….LG can just hijack with whatever price…
The contract price is fixed with a pricing schedule depending on ordered quantity. The more GM buys, cheaper they become.

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Dave G Says:
April 7th, 2009 at 8:46 am

#35 GM-fan Says: Of course GM won’t make money… They don’t own the battery….LG can just hijack with whatever price…as they understand US government/GM need it to prove that they have future
————————————————————————————–
It doesn’t take an MBA to figure out that LG will make more money if GM sells more Volts, and GM will sell more Volts if battery cell costs are lower. What’s more, GM is keeping the door open with A123 and other battery manufacturers for the 2nd and 3rd generations of the battery pack.

Besides, LG is a competitive company.

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Starcast Says:
April 7th, 2009 at 8:47 am

#12
Laugh if you want. (I did ) But truth is I can see people buying the Puma. It kinda looks like a Smart car without the sides on it.

Better then a scooter. 2 people only for short city trips. Maybe they could make it round so it would roll if it was hit. ;>)

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carcus1 Says:
April 7th, 2009 at 8:48 am

A shadetree mechanic looks at volt price:

The volt -sans battery pack- looks like a $22,000 car to me. It’s got all the stuff a regular car has in it except for a transmission. Then you’ve got to add the generator and all the controlling hardware/software all the battery heating/cooling stuff. Then put in a very “matured” battery pack price of $8,000 and you’re looking at absolutely best case a $30,000 volt. If ( at that time) GM can price the volt at $35,000. They would then need to sell 600,000 copies to get their (our?) $1 billion in development costs back.

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Cautious Fan Says:
April 7th, 2009 at 8:48 am

GM maybe speeding up the bankruptcy proceedings, trying to keep the threat credible.

http://www.bloomberg.com/apps/news?pid=20601087&sid=af2zdGPHQ0NU&refer=worldwide

Of course the bondholder hold a nuclear option too, though that would seem an irrational move to make. But it’s also unlikely that democrats would let it get to that point. Exciting times.

http://online.wsj.com/article/SB123853988781575499.html
http://online.wsj.com/article/BT-CO-20090330-716591.html

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Tim Says:
April 7th, 2009 at 8:53 am

HyperMiler (#37)

I also want to remind people that GM is only buying individual cells from LG and producing the packs and control systems in-house. They are doing this specifically to allow for new pack chemistry as it becomes available.

This strategy will also allow GM to source packs form MANY different suppliers and use supplier COMPETITION to lower cell cost while spurring competitive innovation while GM uses SCALE to lower internal pack cost.

I don’t agree with Statists redistributing taxpayer money to for-profit companies thus screwing up competitive market forces and the risk/reward dynamic, but I believe that GM’s strategy battery is inspired and I do want EVs available to the marketplace from MANY different manufacturers.

The more competitors, the better… for US!

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carcus1 Says:
April 7th, 2009 at 8:56 am

From GM’s President of North America:
Looking forward to a change in philosophy for the company, Clarke said “It’s not our intention to lose money forever.” All future products “have to have a line in sight to be commercially viable.”
______________________________________________________

Wow, what a concept. These new philosophy GM top brass guys are friggin’ smart. How many board meetings did it take to figure that one out?

P.S. Just curious, what exactly was the old philosophy?

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Guy Incognito Says:
April 7th, 2009 at 8:57 am

44.
Guy Incognito Says:
April 7th, 2009 at 8:57 am

If the Volt won’t “Pay its Rent” to GM, then I guess GM will have to evict it.
This is’nt as bad as it sounds, when someone is evicted, they’re thrown out into the street.
Reason I say this a good thing is because that’s where the Volt belongs; on the street.

Throw that bum out on the street GM….put it where it belongs.
_-=

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Tim Says:
April 7th, 2009 at 8:57 am

Starcast (#39) Said:

“Laugh if you want. (I did ) But truth is I can see people buying the Puma.”

Starcast, are you old enough to remember the “Pet Rock”?

http://en.wikipedia.org/wiki/Pet_Rock

It was successful because it was funny AND CHEAP.

Well, the Puma is funny…

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Ray Says:
April 7th, 2009 at 8:59 am

Hey GM… I Got an extra $1000 (above my $4000 down payment) if I can have a Gen 3 Volt instead of the Beta one… Delivery 2012..

What do ya say

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RVD Says:
April 7th, 2009 at 9:09 am

If they can not make any profit on $40k 4 seat car, they should not even start making it! They are digging their grave themselves, fools. Meanwhile, Toyota will eat their lunch making healthy profit on $20k 5 seat Prius. And Honda is there too with even cheaper hybrid.

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Dave G Says:
April 7th, 2009 at 9:09 am

carcus1 Says: P.S.S. I left out a demand vs. lead price argument for the return of lower lead acid battery prices, but given the future demands and possible limitations on lithium, I figured this was a wash.
————————————————————————————–
I read the paper that makes the claim that Lithium will run out. When you look at the assumptions, it’s ridiculous. They assume:
1) Nobody will recycle Lithium.
2) World population will grow exponentially for the foreseeable future.

If you make these two assumptions, any mineral resource you pick will run out. Copper, Iron, Aluminum, etc. will all run out if you make the same assumptions.

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carcus1 Says:
April 7th, 2009 at 9:12 am

I wonder if, in the history of automotive manufacturing, has any company ever accepted and then went ahead with the idea of not making money until generation III of the product?

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kgurnsey Says:
April 7th, 2009 at 9:13 am

k-dawg:

The problem is one of managing expectations. For marketing purposes, charging times are most often quoted assuming you have a dedicated 240V circuit near wherever you park the car to charge it. Unless you have a welder in your garage, a 240V plug is not standard fare. Especially for the non-garaged among us, I would doubt very many people have a 240V plug sticking out the side of their house. Therefore, for most people, if you want to take advantage of the advertised charging time, you will need to run a line to wherever you park your car. Not a big deal in reality, but a scary proposition to someone who is not electrically savy, who expected to just be able to plug it in “like their plazma TV” and get the advertised charge time.

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jabroni Says:
April 7th, 2009 at 9:13 am

Of course, GM did have options that it REFUSED to consider….namely lead acid and NiMH battery technologies. These options utterly obviate the “expensive battery” mantra they continually spout.

NOTE: I know for a fact that they refused to consider the options as I e-mailed Bob Lutz on more than one occasion asking him.

In other words, maybe GM could have broke even with this car at first by using much less costly battery technology and then using Lithium in gen 3, etc.

But no, we have to pay for a Li ion battery precisely TWICE as large as necessary. People in the southern climes could have easily gotten by with the Panasonic lead acid batteries used in the EV1.

We are only talking about 40 miles EV range, for pities sake.

Imagine a 40 mile Volt using lead acid (high quality lead acid) AND getting the 7500 federal tax rebate…how much would that have cost us? 20K?

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CorvetteGuy Says:
April 7th, 2009 at 9:15 am

This just popped up: GM’s new 2-wheeler!

http://online.wsj.com/article/SB123906731177395605.html

Talk about a ‘lean machine’ !

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N Riley Says:
April 7th, 2009 at 9:18 am

#8 Dave G

“What am I missing here?”
——————

I don’t think you are missing anything. GM has not given any indication of when they expect to start making a profit on the Volt. It may occur earlier or later in the production cycle than any of us may have considered. Who really knows at this junction. I don’t think even GM really knows. Having more electric cars being built (Volts and non-Volts) will certainly bring battery cost down. How much is again a subject of speculation. I think GM has finally realized the Voltec technology is their future and they are moving towards producing as many of them as they can. But where they start making a profit, no one knows. IMO.

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Arch Says:
April 7th, 2009 at 9:26 am

I do not post much here any more. I am so sick and tired of the crap PRs put out by GM. They say that EV-1 cost $87,000 to produce. SURE they made so few of them! You tell me does it cost more to produce a car with ONE moving part NO gas tank No transmission NO exhaust system No fuel system? The PR people at GM are working overtime to make us think they are doing us a favor by building the VOLT. The truth of the matter is they blew it. They drove GM into a deep hole. All the time collecting a BIG pay check. Now they want us to bail them out. When we first started this site I was excited to see the volt being built. Its the same car I built in the early 70s. Now I am just plain sick and tired of the crap that comes out of GM every day. I still believe in the hybrid concept but I am sick and tired of GM! JMHO

Take Care
Arch

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ThombDbhomb Says:
April 7th, 2009 at 9:27 am

How many business ventures are instantly profitable?

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Dave G Says:
April 7th, 2009 at 9:27 am

#42 Tim Says: I also want to remind people that GM is only buying individual cells from LG and producing the packs and control systems in-house. They are doing this specifically to allow for new pack chemistry as it becomes available.

This strategy will also allow GM to source packs form MANY different suppliers and use supplier COMPETITION to lower cell cost while spurring competitive innovation while GM uses SCALE to lower internal pack cost.
————————————————————————————–
Two points:

1) GM hasn’t actually built any of the battery packs yet. CPI (a subsidiary of LG Chem) is currently supplying the packs for the prototypes. However, CPI will help GM to start building their own packs, and I’m sure LG will give CPI the proper incentives to make this happen. This is actually a fairly typical business arrangement in many industries.

2) Every battery supplier is going to have a different chemistry formulation, and this significantly affects battery pack performance under various conditions, as well as durability in different scenarios. Since all of these issues involve a huge amount of testing, I wouldn’t be surprised if most automobile traction battery cells are sole sourced for a given model year.

However, when the pack moves to a new design generation, everything has to be re-tested anyway, so this allows the substitution of a new sole source for the new pack design, which gives GM some leverage with the cell supplier.

This whole scenario is not unlike the process of a computer maker selecting a processor chip supplier for a given model. Yes, the processor chip for a given model is sole sourced, but the computer maker still has the leverage to choose a different processor chip supplier for the next computer model.

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Mitch Says:
April 7th, 2009 at 9:29 am

I wonder if this $8000 figure is the OEM cost or the cost to the consumer ( as a fraction of the list price).
Given the typical (in consumer electronics) product cost going from parts to list price, there is a multiplication factor of between 2 and 4.
This costing shorthand covers the overhead you don’t commonly consider, from labor, R&D, utilities, handling, shipping, rent, warranty and even (gasp) Profit.
I know that we are talking about the auto industry and razor thin margins.
In short, an $8000 (OEM) battery may factor in to the list price cost to be $16000 or more!

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carcus1 Says:
April 7th, 2009 at 9:31 am

Quick recap from GM:

We’ve lost $82 Billion in the last 4 years.

Our car sales are the lowest they’ve been in 30 years.

But we’ve got a plan. We have a new type of electric car that we won’t let anybody else drive and we see absolutely no way of making a profit on. It’s going to save the company!

Now how about that loan?

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k-dawg Says:
April 7th, 2009 at 9:34 am

50 kgurnsey

I was quoting GM’s Denise Gray w/the plasma TV concept. All you need is a 120V plug rated at 12amps. Maybe an extension cord.

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old man Says:
April 7th, 2009 at 9:40 am

#54 Arch

I do hope you continue to post. I can count on your post being civil and usually positive.

Now back to the Volt. G M has not stated this but I would bet generation 2 OR 3 will be available as a 100 mile BEV and by then the electronics will be way down in cost and be profitable to build.

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carcus1 Says:
April 7th, 2009 at 9:41 am

I’m done posting for a while. I hope GM goes into bankruptcy quickly and the whole management tree gets shook like there’s a #9 earthquake. Maybe something worthwhile comes out on the other side.

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Dave G Says:
April 7th, 2009 at 9:41 am

#55 ThombDbhomb Says: How many business ventures are instantly profitable?
————————————————————————————–
Good point.

Expensive high performance niche products generally become profitable very quickly, which is why most new technology products start there. But even that takes some time. For example, Tesla actually loses money on every Roadster they sell today. They hope to become cash flow positive in June. Their previous estimates in this regard have always been very optimistic.

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GM Volt Fan Says:
April 7th, 2009 at 9:43 am

I think Buick might have a winner what will “pay the rent” with their 2010 Lacrosse:

http://www.youtube.com/watch?v=tvCsPfGcaGA

I like the headlights and grille on the front end. That’s the right “look” in my opinion for a car this size. It reminds you a bit of a Lexus. Hopefully, GM will give it decent performance and handling like a Lexus also. A super quiet E-REV version of this car in 3-4 years would be nice.

GM needs to get focused on the mid-size sedan market with the Malibu and the segment that cars like the Lacrosse are in. They need to have an world class competitor vs. the Honda Civic in the small car market and an excellent “small SUV” vs. the Toyota RAV-4 and the Honda CR-V.

The Cadillac division needs to get focused on beating BMW, Lexus and Mercedes in that segment. Cool looking exteriors and interiors, great performance and handling, good quality ratings by JD Power, Consumer Reports, etc. All that stuff. GM should focus on building one excellent vehicle at a time … and THEN think about creating new models once the first one is well accepted in the market.

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ThombDbhomb Says:
April 7th, 2009 at 9:46 am

#58 carcus1

Your recap is an oversimplification that left out the salient matter of restructuring.

EDIT: I see your #61 adds a form of restructuring (and hope) to your analysis.

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kgurnsey Says:
April 7th, 2009 at 9:49 am

k-dawg:

Very true, if you want to charge up in 6-7 hours. If the public expects to charge in 3, then your statement is false, and could lead to dissapointment and anger towards the Volt. Marketing can be a tricky thing.

Quoting Dave G:

“The Volt uses a standard 110 volt home outlet, and draws about the same juice as a vacuum cleaner (around 11 amps). This fully charges the Volt in 6-7 hours.

As an option, the Volt also supports 220 volts, which lowers the charge time to a little over 3 hours. But again, this is an option, so there is no need to run a special line. In fact, if you only charge at night, which is what most plug-in experts recommend, then the 220 volt option makes little sense.”

If you market the Volt as being chargeable in 3 hours, you better also tell people that you have to install a 220V line on your own dime. Managing expectations.

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Dave G Says:
April 7th, 2009 at 9:52 am

#61 carcus1 Says: I’m done posting for a while. I hope GM goes into bankruptcy quickly and the whole management tree gets shook like there’s a #9 earthquake. Maybe something worthwhile comes out on the other side.
————————————————————————————–
I’ve appreciated your challenging my assumptions. It’s always good to have balance.

As for shaking the tree, yes I was hoping for a bit more here as well. In particular, it might be good to have someone from outside GM at the helm right now.

But there is some hope. Most of GM’s board is being replaced this summer. And maybe Fritz Henderson will actually be a good turn-around guy. And by the way, after Fritz discovers what a good turn-around guy really is, he may not want that position for very long…

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Arch Says:
April 7th, 2009 at 9:59 am

http://www.hybridcars.com/news/chinese-scare-electric-cars-are-coming-25701.html

Take Care
Arch

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k-dawg Says:
April 7th, 2009 at 10:00 am

60 Old Man

GM said they are sticking with the 40mi range for now (at least Gen 2). You may be right about Gen 3.

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k-dawg Says:
April 7th, 2009 at 10:03 am

#65 Kgurnsey

Yep… lots of education is needed… in general.

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Redeye Says:
April 7th, 2009 at 10:04 am

GM will lose money on everyone they make but they’ll make it up one volume.

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Dave G Says:
April 7th, 2009 at 10:14 am

#57 Mitch Says: I wonder if this $8000 figure is the OEM cost or the cost to the consumer ( as a fraction of the list price).
————————————————————————————–
It’s GM’s OEM cost, but remember that GM is saying they are losing money with each Volt they sell, so there is no profit.

In addition, look at the list price of a Chevy Cobalt at $16K. This is the same sized car as the Volt, the same compact delta platform, and the $16K sticker price presumably includes some profit for GM and the dealer.

Now add $8K for the battery. That brings us up to $24K. If the Volt sells for $37K before the tax credit, that leaves a $13K OEM cost adder for the other Volt subsystems. When you realize that this is the cost GM pays to their suppliers, that’s a lot. This is why I find GM’s assertion that they will lose money on every Volt they sell a bit fishy.

Maybe the parts will cost this much in low volumes for the first year, but the article above says GM may lose money on each Volt the second year as well, and GM is predicting 60,000 units for the second model year.

I’m not saying the Volt sticker should be a lot less than $37K. I just find it hard to believe they will lose money at that price during the second model year. I suspect there is a ploy to get additional tax credits here, but I fear it could backfire on GM, and the governement could force GM into cutting the range of the Volt. Scary…

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Dwayne Says:
April 7th, 2009 at 10:24 am

#47 RVD – There is no such thing as a $20,000 Prius. I know I tried to buy one. Every Prius I have seen – and I have seen quite a few – cost at least $25,000 and most are closer to $30,000

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Dave G Says:
April 7th, 2009 at 10:26 am

#70 Redeye Says: GM will lose money on everyone they make but they’ll make it up on volume.
————————————————————————————–
I’m sure you jest, but this statement actually makes some sense.

As volume ramps up, manufacturing costs come down significantly, so it will stop losing money and eventually become profitable.

That’s why the government has tax credits, to help increase sales volume up to the point where mass production starts to lower costs.

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Dave G Says:
April 7th, 2009 at 10:30 am

#72 Dwayne Says: #47 RVD – There is no such thing as a $20,000 Prius. I know I tried to buy one. Every Prius I have seen – and I have seen quite a few – cost at least $25,000 and most are closer to $30,000
————————————————————————————–
Good point.

When we looked at cars 2 years ago, I noticed that the Toyota base models were all pretty bare-bones compared to most Honda base models. The Prius was no exception.

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LauraM Says:
April 7th, 2009 at 10:32 am

Well, this explains why they’re limiting production in the first year….That said, I still think that the Volt project would be a win for GM even aside from government bailout funds.

1. It will help them meet cafe standards. They currently lose money on cars they build to meet those standards. And they won’t have to do that anymore if they build the Volt. Even if they lose more per Volt than they do on those cars–at least it means that gen 2 or 3 might eliminate those losses.

2. It’s a halo car–this will definately bring people into the showrooms. And, who knows, it might sell more Silverados….Maybe even convince people to give the Malibu and the Cruze a chance…

3. It will improve GM’s image. Something they desperately need after the EV1 fiasco, buying Hummers, and taking bailout money.

4. The technology is there for cars like the converj–which will make a profit from the very beginning.

5. There is no gen three without a gen 1, and this way they’ll be a lot more prepared when gas prices go back up. If they do manage to make it profitable, it could actually bring back their market share when gas prices eventually go back up to $5.00 a gallon.

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Edwin Mang Says:
April 7th, 2009 at 10:49 am

tax dodge . Even the drug companys use it . cost to much to develope . got to recoup the development cost .

So every time we get something new the goverment has to do it .
Not at Ford .

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Dave G Says:
April 7th, 2009 at 10:54 am

#75 LauraM,

All good points.

I’ll try to add one more, which is something like the Pygmalion effect. If GM believes the Volt will lose money, they won’t build that many Volts. If they don’t build that many Volts, mass production will never kick in, and the Volt will continue to lose money. If the Volt continues to lose money, GM won’t build that many Volts. If they don’t build that many Volts…

So it’s a self-fulfilling prophecy. It takes vision to break this vicious cycle.

The government has provided the vision on the form of tax credits. The dollar amount and the phaseout time of the tax credit are some of the best we’ve ever seen for cars.

Now it’s time for GM to step up to the plate, ramp up the volume, and give their manufacturing engineers the proper incentive to make Volt production less expensive.

Note to GM: Stop posturing for more government help with the Volt. The squeaky wheel gets the oil, but if it squeaks too much, the wheel gets replaced.

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Edwin Mang Says:
April 7th, 2009 at 10:57 am

GM is making wheelchairs for the Bosses and Ford is making
170mpg delivery vans .

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Dave G Says:
April 7th, 2009 at 11:06 am

#78 Edwin Mang,

I have no loyalty to any particular car manufacturer. If Ford made an EREV-40, I would buy it.

As for 170 MPG, that sounds great, until you compare it with the infinate MPG that you get with all-electric range. Specifically, take a look at a PHEV-10 Prius which claims around 170 MPG during electric boost.

With a typical driving pattern, assuming you only charge overnight:
Vehicle ……………… Gallons per year
Volt (EREV-40) …….. 37
Prius PHEV-10 …….. 182
Prius HEV …………… 228
30 MPG car ………… 380
20 MPG car ………… 570

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Jiverly Wong Says:
April 7th, 2009 at 11:11 am

With all those beanheads working at GM i bet they know exactly which unit number (#####) marks the transition to profit on the line. My guess is it won’t be until the third year of production before that is reached on the Volt built in the U.S.

In a normal bankruptcy this would never be allowed. It is still unknown if the Volt will be popular enough to turn a profit ever. Poor business planning is still alive and well at GM.

What a waste of taxpayer’s money.

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Tim Says:
April 7th, 2009 at 11:14 am

Jiverly Wong (#81)

Yep! Common sense is NOT common.

Here’s a REAL economist and not some Keynesian voodoo moron:

http://www.booktv.org/watch.aspx?ProgramId=ID-10300

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HyperMiler Says:
April 7th, 2009 at 11:19 am

#42 Tim Says:

> I also want to remind people that GM is only buying individual cells from LG and producing the packs and control systems in-house. They are doing this specifically to allow for new pack chemistry as it becomes available.

Except that Volt is stuck with LG until the end of 2015; the term of contract is “exclusive”, and switching venders before the end of 2015 didn’t justify the expense either even if the contract was non-exclusive.

> GM uses SCALE to lower internal pack cost.

Meaning GM has to keep buying more from LG to build economy of scale. LG pack for Volt and A123 pack for Converj??? Doesn’t work like that!!!

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statik Says:
April 7th, 2009 at 11:20 am

#72 Dwayne said:

There is no such thing as a $20,000 Prius. I know I tried to buy one. Every Prius I have seen – and I have seen quite a few – cost at least $25,000 and most are closer to $30,000
===============
Well, thats true, the breakdown at cars.com is the following:

under 21K: 9
under 22K: 110
under 23K: 533

So finding a new Prius under $23,000 is reasonable though.

I know there are 24 of Honda Insights under $20,000 though, lol. 368 are in inventory under $21.000

…no real reason for the post, just thought it was interesting

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HyperMiler Says:
April 7th, 2009 at 11:21 am

#79 Dave G Says

> I have no loyalty to any particular car manufacturer. If Ford made an EREV-40, I would buy it.

Ford doesn’t have one; theirs is AER 30 mile, and 30 mile French battery pack Ford is using cost more than LG’s 40 mile pack.

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Anthony BC Says:
April 7th, 2009 at 11:23 am

Chevy Volt Won’t “Pay its Rent” to GM – You gotta spend money to make money! In time the VOLT will sell like hotcakes! Real Fast!

GO EV!

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LauraM Says:
April 7th, 2009 at 11:32 am

#41 Cautious Fan

Interesting reading. The one thing that stood out to me was that Cafe is the UAW’s main leverage. If the Volt becomes profitable, the UAW loses that leverage. Hopefully, that means they’ll have to stick with a competitive wage structure even if GM actually becomes profitable.

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Tim Says:
April 7th, 2009 at 11:39 am

Dave G (#57) & HyperMiler (#84)

The number of cells in a pack can vary depending on the vehicle type and power requirements so ordering cells and building your own packs does allow for economy of scale.

I have not read GM’s exclusivity agreement with LG. Have you?

You may want to (re-) read this 3/19/09 battery update:

http://gm-volt.com/2009/03/19/gm-volt-battery-update/

“GMs main point of the conference was reiterate that they are doing the pack design, engineering, and software controls in-house. So while LG or someone else may make an excellent cell, GM intends to make the best pack and become the worlds best electric car battery make maker. This gives them competitive advantage over car companies that are “married” to a specific cell supplier. Gray is convinced batteries will continue to advance in the future and right now GM is testing cells from “more than a dozen suppliers.”

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Tim Says:
April 7th, 2009 at 11:46 am

Full list of 111 Automotive X-Prize teams released

http://www.autobloggreen.com/2009/04/07/full-list-of-111-automotive-x-prize-teams-released/

111 potential Chevy Volt competitors who are NOT asking for taxpayer money to kill any competition and an unlevel planing field to maximize profits.

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MuddyRoverRob Says:
April 7th, 2009 at 11:56 am

#71,
The factor I think you are missing here is the cost of all the engineers working hard to make the volt happen. This is the rest of the cost in developing a new product. The battery cost is a factor which over time will come down. I do think however it’s paying down the R&D costs are what will keep the Volt accounting in the red for some time. Of course those costs don’t stop when the product hits the road, there will be groups of engineers working production issues. (Don’t fool yourself, every manufactured product has issues! yes even Toyota…) As well as other groups working on those gen 2 and 3 projects.

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Tim Says:
April 7th, 2009 at 12:00 pm

Full list of 111 Automotive X-Prize teams released

http://www.autobloggreen.com/2009/04/07/full-list-of-111-automotive-x-prize-teams-released/

“The organizers of the Automotive X-Prize have released the full list registered entrants for the upcoming super-mileage competition. By the time registrations closed a total of 111 teams had completed the process and are now eligible to compete. Those teams have entered a total of 136 vehicles with 80 of those being in the mainstream class and the remainder being in the alternative class. Eleven different countries are represented along with 14 fuel sources.”

Here is 111 potential Volt competitors with 136 Vehicles who are NOT asking for taxpayer money to kill the competition and produce an unleveled monopoly playing field. All they want to do is compete to produce the very best product that (hopefully) the market will WANT to buy.

This is how we will ultimately get off of oil! COMPETITION!!!!

(now don’t get all “crazy” about the x-prize. This post is about free competition vs gov’t taxpayer funded redistribution corporate monopoly.)

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john1701a Says:
April 7th, 2009 at 12:09 pm

With a typical driving pattern, assuming you only charge overnight:
Vehicle ……………… Gallons per year
Volt (EREV-40) …….. 37
Prius PHEV-10 …….. 182
Prius HEV …………… 228
30 MPG car ………… 380
20 MPG car ………… 570
_________________________

We’ve all noticed how you don’t include a link for details, a disclaimer about those only being ideal conditions, and leave out equal capacity comparisons. You also present the information as if it is fact.

It’s a sad statement on how much more forthcoming that could be, but still isn’t.

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J Man Says:
April 7th, 2009 at 12:38 pm

If they build the 2 additional models that will help bring the costs down for all 3 models. It will allow them the recoup their money on the cars, eventually make a profit and help reduce the cost of all 3 models at the same time. I still seeing the major problem being the cost of the Volt needing to be affordable for the regular family. Anything that can bring down the cost of the Volt or any additional cars would be great.

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Tim Says:
April 7th, 2009 at 12:44 pm

J Man (#94)

I like the way you think so let’s keep following that logic…

If they make 9 models, they could bring down the pack costs 3x faster than 3 models, right?

Good! Then I say they make 27 models and sell me a $20K Volt in 2011!

Question:

If a fool and his money are soon parted, what about a fool with somebody else’s money?

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RVD Says:
April 7th, 2009 at 12:57 pm

#72 Dwayne Says: #47 RVD – There is no such thing as a $20,000 Prius
#74 Dave G Says: Good point. When we looked at cars 2 years ago…

You probably noticed it yourself. Whatever was 2 years ago is invalid today. After Honda undercut Toyota with cheaper Insight it is a matter of (short) time when prices will settle below 20k on these hybrids. This will not include any gov tax incentives.

Twice as expensive Volt is simply ridiculous. Who are they kidding? At a price point of a luxurious BMW exactly how many are they going to sell? And now they are saying every one will be sold at a loss!

GM, if this is all you’ve got I would not give you a dime. Help yourself with a bankruptcy, please.

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Schmeltz Says:
April 7th, 2009 at 1:06 pm

#75 Laura M:
Good points made as to why the Volt can still be regarded a winner, even though it will lose money in the first generation.

Lyle:
Good side view picture of the Volt.

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Frank B Says:
April 7th, 2009 at 1:08 pm

The $7500 tax credit should be assigned to GM by the customer, that way the customer actually pays $7500 less at the time of purchase and GM gets the $7500 to offset the true price of the car against their balance sheet.

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ccombs Says:
April 7th, 2009 at 1:45 pm

For me, these statements are just a “duh” moment. I never thought they’d be able to make any money until Gen II, and really start recouping their investment on Gen III. Let’s just hope fuel prices go up (can’t believe I’m saying that! I don’t want to pay them!)

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stopcrazypp Says:
April 7th, 2009 at 2:01 pm

For people arguing pack costs, Tesla recently quoted $36k for their full 56kWh pack (all the thermal management, safety circuits already inside, supposedly hand assembled though).

That’s $643/kWh (full pack capacity, I don’t get the argument over “avaliable kWh”, that’s determined by how far you want to discharge the pack, it isn’t intrinsic to the pack itself so it’s not very useful for comparison).
http://blogs.edmunds.com/greencaradvisor/2009/02/tesla-battery-pack-replacement-would-be-36000-today-musk-says.html

Minus the thermal management and safety circuits (oh and hand assembly, I suppose GM can save some money on automated battery pack assembly), Tesla uses pretty much the cheapest per kWh cells you can get (commodity cells).

So given 16kWh total pack capacity in the Volt, that’s at least $10288 for the pack in the Volt with the safety circuits included.

Given the Volt isn’t using the cheapest per kWh cells, the $16k ($1000/kWh full capacity again) estimate for the pack isn’t too far off. With $10-16k for the pack and supposedly $18k for the Cruze, that’s $28k-$34k for a Cruze with the battery pack. If the car sells for $40k, they have $12k-$6k to spend on the motor, generator, electronics, and other features. So it’s conceivable to not make a profit on the car, adding in development costs, and depending on if the $18k price for the Cruze includes profit. But it’s close enough that the second gen, third gen is likely to make a profit (unless they lower the price drastically).

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Zach Says:
April 7th, 2009 at 2:07 pm

If they aren’t making money by the 2nd generation, then that must mean they will be dropping the price of the vehicle. Did the Prius do the same thing? I don’t know. Just wondering. I remember it was really expensive when it came out and for several years after that time (or at least a couple years).

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Bob Says:
April 7th, 2009 at 2:32 pm

Build the Converj first! You can charge more for a Cadillac.

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N Riley Says:
April 7th, 2009 at 3:01 pm

Note to all:

Lately I have noticed that this blog site has become less “owned” by Dr. Lyle Dennis than by our good friend “Dave G”. He has really stepped up his commentary lately and now ranks as having the second most posts on this site. I would like to extend my congratulations to “Dave G” for not just the volume of posts, because that is not the most important aspect, but for the content of most of his posts. “Dave G”, you are the man! I say it will all the sincerity I can muster. It is a pleasure to follow along with some of the comments we have seen these last few days and Dave’s comments have been outstanding. There are others, of course, who are very important to the posts on the site. They know who they are as well as do we. I thank them one and all.

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N Riley Says:
April 7th, 2009 at 3:19 pm

#89 Tim

“All they want to do is compete to produce the very best product that (hopefully) the market will WANT to buy.”
—————–

I have not looked to see who is competing, but I would suspect many competitors are people, or small investment groups, that have no mass production experience to produce a vehicle based on their “vehicle” they have entered. Some of these competing vehicles would not be an acceptable product to foist upon the buying public. A company like GM, Ford or Toyota would have the resources to actually produce a workable end product that could be sold to the buying public. The others are just competing for a money prize to further their design work, etc.

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N Riley Says:
April 7th, 2009 at 3:25 pm

#92 Tim

“If a fool and his money are soon parted, what about a fool with somebody else’s money?”
———————

In that case you actually have two fools being taken advantage of. The fool who gave or loaned the first fool the money and the fool who has his money parted from him. In the case of GM, the second fool is actually the government acting on behalf of the rest of us fools. Now, who is the bigger fool here. GM? The government? The taxpayers? Only a fool would not know that answer.

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John Says:
April 7th, 2009 at 3:30 pm

Why not just charge enought for the first gen to make a profit? It seems there are plenty of people that will pay to be the first and show off how green they are. GM can turn all of those Hollywood Prius drivers into Volt drivers. Chare $50k or $80k if needed. Make it an object of desire for the rich. Recoupe the costs that way. I’ll wait until they get the costs down.

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Tim Says:
April 7th, 2009 at 3:48 pm

N Riley (#105) said:

“Now, who is the bigger fool here. GM? The government? The taxpayers? Only a fool would not know that answer.”

It can’t be the taxpayers! We don’t really seem to a have choice with the IRS guns pressed into our ribcages and “our” representatives ignoring the taxpayer’s cries for mercy.

Where’s Zorro when you really need him?

He’s HERE… http://www.campaignforliberty.com/

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CDAVIS Says:
April 7th, 2009 at 3:52 pm

______________________________________________________
If not GM, someone else will figure out how to make and sell EV/EREVS to “pay its rent”.
______________________________________________________

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CDAVIS Says:
April 7th, 2009 at 4:11 pm

______________________________________________________
Irony: GM using the VOLTEC Program (that which offers GM the most future hope) as leverage to further position GM into a position of hopelessness.

The GM strategy guys have hijacked the VOLTEC Program and turned it into a big PR bargaining chip to gain public support for further massive government bailouts/loans so as to allow GM to further slip into a Government owned non-going concern.
____________________________________________________

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Jim I Says:
April 7th, 2009 at 4:42 pm

I am late to this post (some days I really do have to work), but I just have to do it….

I think Toyota and their Prius hybrid suck!

(Quote)
john1701a Says:
April 7th, 2009 at 4:56 pm

I think Toyota and their Prius hybrid suck!
_____________________

1,500,000 more will be put on the road between now and when the second generation (positive cash flow) version of Volt becomes available.

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john1701a Says:
April 7th, 2009 at 5:15 pm

…big PR bargaining chip to gain public support…
______________________

Before Voltec, it was Two-Mode. Before that, BAS. Before that, fuel-cells. GM is great at PR.

Getting beyond that hype has always been a problem. The lack of detail here certainly isn’t breaking the trend.

June 1 is rapidly approaching.

(Quote)
bintoo Says:
April 7th, 2009 at 7:36 pm

Don’t forget the “FU factor” every time you drive by a gas station in your new volt. That my friends, will be worth every penny. Some of us might say PRICELESS!

It’s not about the gas mileage or the cost per year, it’s about saying I’m different, I’m not like the rest of you. This factor alone will sell 100’s of thousands of volts. It will be double or triple the PRIUS effect.

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voltair Says:
April 7th, 2009 at 9:02 pm

#108 John1701a
When Gen1 Prius came out, I clearly remember people in the US Auto industry slamming it for costing a lot more than it sold. Toyota invested. Toyota got a winning product that not only was high volume, but generated enough eco-PR for everyone to ignore that Toyota also makes a lot of gas guzzling SUVs. GM should have been investing in those projects instead of pissing away SUV profits buying companies like Saab.

Clarke said “It’s not our intention to lose money forever,” as a new philosophy for GM. Someone asked if that is the new philosophy, then what is the old: I assume the old policy was to invest only for short term gain.

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john1701a Says:
April 7th, 2009 at 11:32 pm

Remember what else they said?

Countless claims were that Prius didn’t sell well. But in reality, Toyota limited quantity until production could be retooled to the point of profit. Sound familiar? Well, it’s not.

Those were in the days when gas was cheap, the SUV was king, and climate change wasn’t anything more than a greenhugger fear. Prius was simply dismissed as a fade.

The situation is very different now. GM is betting the farm on Volt. Not because they want to, like Toyota did. They have to. They’re being forced to deliver something new and abandon the old. Taxpayer loans must be paid back.

Also, the idea of “eco-PR” is just spin now. All automakers are expected to provide cleaner and more efficient vehicles. It’s not an option. Consumers see right through the “30 MPG Highway” advertising. A monster-size hybrid used for one-person, no-cargo commuting is considered wasteful too.

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Jim Says:
April 8th, 2009 at 2:28 am

The number “several” has been mentioned in many articles. I wish I knew how much “several” was. As in “several hundred/kwHr off the battery price” or “several thousand off the price of the car.”

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Johannes Says:
April 8th, 2009 at 4:21 am

Does it mean that every volt will sell a manufacturing loss or that volt will never pay the overhead research cost due to the small volume?

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