GM-VOLT : Chevy Volt Electric Car Site

On Wednesday GM released its ‘fresh start’/GAAP compliant results, and while this report is of interest for many people anxious to find out just how ‘new’ GM is doing, the results have been prepared by GM with a much different intention from releases in the past.

The very first line of the chart set accompanying the results from GM said it all, “Building the Foundation to Go Public”…at least it used it. Shortly after GM put out the press chart, the most important statement in the whole release disappeared, now there is just a empty space with no indication of what you are about to read.

That statement really got to the heart of the matter. The report itself was not intended to wow anyone, nor is it intended to convince anyone the company is A-OK right now, it is not prepared with a focus on the ‘spin’…this report is for taking out the trash.

GM has looked around for anything lying around the Ren Center that could be bad for the bottom line in upcoming quarters, or that could appear as a negative in the future, and they have put it in here. ‘One time’ items are running wild, and reasonable assumptions abound, a good clean report all around. Unsurprisingly, it ends up to the tune of a 4.3 billion dollar loss.

GM CFO, Charles Liddell characterizes GM’s progress as follows: “As the results for 2009 show there is still significant work to be done. However, I continue to believe we have a chance of achieving profitability in 2010.”

While GM is still talking up the finer points of its business in this report, that is not at all what this report is intending to represent. GM is cleaning house. They are setting up the pins to be knocked down. This report is the target for the next quarters to destroy.

The only real information to be gleaned from this report is the cash. (It is always about the cash) How much do they have, and is it going up or down. Well, it is still going down (1.9B used in Q4) and they have about 23 billion of it left (non-restricted). Which would be more than adequate going forward, except for the black hole that is Opel, and the fact the pension fund is still under funded by 27 billion…and of that the GAO (Government Accountability Office) just recently concluded that GM will have to add 12.4 billion to by 2014.

But nevermind all that, the days of ‘real’ trouble are still years in the future, thanks to the 50+ billion the government provided GM out of C11, which was clearly calculated to at least see them through the next election cycle. Right now GM has two goals in mind while releasing this financial update, and neither of them is profitability or the current cash flow chart, and those two goals are both only three letters long: IPO and DoE.

IPO
The general consensus (and the rumblings from GM itself) indicate that a IPO is coming later this summer, and to make it successful GM needs to cultivate a atmosphere of optimism and hope for the future. The best way to do that is by first selling cars, lots of cars; and secondly by having a a really great, breakout quarter to really get the ball rolling to go along with those sales.

Enter the master of managing expectations and beating expectations by a penny, former Microsoft CFO, Charles Liddell. He was born for handling a job like this. If turning a profit in the upcoming quarters was considered a miracle, GM is halfway to sainthood already…it is in the bag.

Short term success/acceptance of a IPO very many times is based on sentiment at the time, which can be brought out by just plain old good self promotion. Looking past the initial buzz, and at the actual viability of the company, it doesn’t look so good. GM has to make a profit of at least $5.9b in 2013, and $6.4b in 2014 to just meet commitments on their pension funds. /how likely is that?

For GM’s part, they themselves have said they need to maintain their piece (market share) of a auto industry that sells north of 10.5-11 million just to break-even. And while the SAAR has shown signs of life of late, GM reported US market share down to 19.6% from 22.1% and globally at 11.6%, down from 12.4%. To that end, GM has voluntarily reinstated over 660 dealers that only months ago were deemed unprofitable, and a necessary elimination under the turnaround plan, as a last resort to ‘goose’ sales in the short term ahead of the IPO. /very old GM

DoE
More specifically, the letters ATVML, which stand for Advanced Technology Vehicle Manufacturing Loan program. This road has been a long and winding one. Even before GM went bankrupt they were looking to the DoE to start the process, but there was a viability clause in the program that says they have to have a reasonable chance to be in existence for the term of the loan. Wisely the DoE decided to not light that money on fire, keeping it to themselves and telling GM to come back later.

After GM’s bankruptcy they did indeed go back to the DoE, and figured while they were there why not request a additional 2.6 billion dollars on top (GM submitted the plan to develop the Volt and two other spin-offs based on the Voltec platform), bringing the total request to well over 10 billion. At the time it was thought that a clean and rinsed GM, flush with taxpayer’s money would get at least a piece of this money without much effort. Turns out…not so much

While the DoE was busy handing out cheques to Ford (they asked for 11 billion, and got 5.9) and Nissan (received 1.6 billion, only took 1.4B), GM was slow-rolled again. No GAAP reporting, no cash. It is thought today’s milestone is one of the last hoops to jump through to gain access to this resource.

It is ironic that while the program is intended to “support the development of advanced technology vehicles and associated components in the United States,” Walter Borst (GM’s Treasurer) told a congressional oversight committee this past July that, “securing those funds are a component of GM’s shorter-term liquidity assumptions.” and indicated these funds are a source of liquidity that GM is factoring into its plans in order to meet its capital requirements in the future. /hrm

Volt
A big part of any Department of Energy money coming GM’s way will be because of the plan submitted to the DoE based on the Volt’s high visibility, and its ability to compete in the US market. Therefore, given the recent pressure of Nissan pricing the Leaf at $32,780, and Mitsubishi’s announcement last week that not only will they sell the i-MiEV in the US in 2011, but that they are “targeting sub-$30,000 for the U.S.” (pre-rebate). Look for GM to back away from talking up a $40,000 price tag, or the fact they will be losing money at that price. (Bob Lutz certainly won’t be commenting about it on Letterman again).

So our Volt is not only the focus of getting vital DoE money, but it is going to be the poster child of GM’s upcoming IPO. Volt pricing is no longer about supply and demand, or what the public will pay…or even if GM can make money on it or not. For better of worse, the Volt is all about image now, it will be the face of ‘new’ GM, and it has to be perceived as a competitive, if not dominant player going forward, regardless of actual P&L. It is the ‘sizzle’ of new GM, and the sizzle is what will sell the IPO…not the steak.

GM doesn’t want to sell high volumes of a car at a loss, and they don’t want multi-year back order lists. I’d look for a Volt MSRP around $35,000, with less talk about the Volt being unprofitable and more talk of unexpected cost savings. $35,000 would be a competitive price, but would not likely generate huge backlogs, giving GM time to slow roll as Nissan burns through their allotment of $7,500 rebates and battery prices come inline with the asking price.

The Detroit-Hamtramck or D-HAM assembly plant is the GM facility where the Chevrolet Volt will be built when it goes on sale at the end of the year.

The Detroit Free Press ran an article about the plant and its manager Teri Quigley, which included some interesting facts.

The first Volt came off the line on March 31st, and last week overall three cars were built.  The plan is to build nearly 500 pre-production Volts over the coming months before transitioning to the salable units, the building of which will start in November.

Besides the Volt, which won’t have its own separate assembly line, the plant will also be used to produce the Cadillac DTS and Buick Lucerne.

Quigley told the reporter she is seeing intense interest in the plant and demand for tours.

“I’m expecting that we will have all different kinds of visits,” she said.  “I think it will be five times as many people as normal at the onset.”

The plant has an 1100 person workforce and is currently running one shift per day.  Quigley hopes future demand for the Volt will eventually push the plant to a second shift.

She noted that her team began “quietly preparing” for the Volt in late 2008, a time of dark days for GM.  In 2007 there were even rumors of the plants closure. Now the mood is positive after the plant got a $336 million investment to prepare for the Volt.

Quigley was very excited about the first pre-production Volt build, which went very well.

“It was a heart-pumping moment,” she said. “It’s real — we’ve been looking at this thing for a long time.”

She is also optimistic about the prospects for the future.

“It’s really, really great that we’ve got this Volt in our system. It’s real. We can touch them and feel them and do our job on them,” she said. “The desire to succeed is there.”

It is believed the D-HAM plant has a maximum capacity of about 200,000 cars per year, though GM won’t officially confirm that.  ”We won’t publicly discuss line rates or production capacity for any of our facilities,” said GM spokesperson Rob Peterson.

Source (Detroit Free Press)

One of the more dramatic elements of Nissan’s Leaf EV pricing announcement is the remarkably low lease price of $349 per month.  Consider that the MINI E is being leased for $850 per month, and the Leaf is a much more-refined, feature-filled and road-ready vehicle.

Also take into account that the average driver driving 1000 miles per month, at $3 per gallon of gas, and 25 mpg, will save about $100 per month in fuel costs by using electricity.

So how has Nissan created such a striking number?

The trick is that they have incorporated the $7500 federal tax credit into the lease payment.

In the case of the Leaf, when a person leases the car, it is actually being bought by Nissan, who will then get the $7500 tax credit from the government.

“Since Nissan is technically the owner of a vehicle that is leased,” says Nissan spokesperson Katherine Zachary.  “Nissan will receive the $7,500 tax credit.”

“Nissan will apply the benefit of that tax credit into the lease price, which is why we’re able to offer the $349 lease price,” she added.

Aside from state taxes, which the $349 payment doesn’t include, monthly lease payments are otherwise composed of two main components; the depreciation payment, and the finance payment.  Nissan hasn’t disclosed the the Leaf’s 36 month residual value, nor the APR of the deal’s financing.

If there were no tax credit, the Leaf would lease for $558 per month.

BMW has not offered to contribute the $7500 tax credit into its $850 per month MINI E lease for the current 450 US drivers.  They have offered current drivers, one of which I am, the opportunity for a second year lease at $600 per month, with the option to lease the upcoming BMW Active E electric 1-series after that.

It isn’t clear if BMW will be receiving the $7500 per vehicle tax credit for the MINI Es, and BMW spokespersons have not yet responded to requests for comment.

GM having not yet priced the Volt, also has the opportunity to price the tax credit into a creative lease as well.  We shall see.

For what its worth, I declined a second year lease on my MINI E.  For me its Volt or Bust!

In the early days after the Volt concept was first unveiled, Honda stood out as being particularly hesitant to embrace the idea of electric cars. In fact their CEO at the time, Takeo Fukui, went on record saying he saw “no value in developing plug-in cars.” He also publicly disparaged the Volt concept calling it “a battery electric vehicle equipped with an unnecessary fuel engine and fuel tank.”

By Spring 2009 he had completely changed his tune when he made the announcement of a lithium-ion battery joint venture with GS Yuasa. In the fall of 2009 Honda unveiled their very own city car EV concept.

Now according to anonymous sources the company is testing its own extended range electric car design.

Honda has so far largely put its resources into developing hybrids.  Last year they brought the second-generation Insight to market.  The $20,000 car is small, slow and offers lackluster driving experience.  Along with a mild hybrid design and 40 mpg|41 mpg EPA fuel economy, sales numbers have been low, only about 25% of the 100,000 per year in North America that Honda projected.  Coming in just around $2000 less than a 50 MPG more powerful base Prius hasn’t helped either.

Honda is now releasing a new hybrid sports coupe called the CR-Z which has already sold 10,000 copies in its first month in Japan.  It is not available in the US yet. Those sales figures are surprising in that the car is a 2-seater with a 122 hp engine, only does 0 to 6 in 8.3 seconds and obtains 36 mpg city | 38 mpg highway using a 1.5L mild hybrid IMA system with a continuously variable transmission.  Honda executives were unsure if it was worth building at all.

Now according to inside sources, Honda is already developing a higher power next generation CR-Z, and of particular interest to us, an EREV drivetrain.  The next gen CR-Z would utilize a 2.5L 4 cylinder engine with mild IMA hybridization, and offer improved performance as well as four seats.

The EREV drivetrain employs a gas engine and electric motor and is said by the insider to be intended for use in medium to large passenger cars as well as SUVs.   The design is said to contain a third capacitor-based range extending component:

Honda would employ an engine and electric motor setup, which, when all the stored electricity is used, would automatically switch to an on-board capacitor that would further extended its range.

The drivetrain is apparently set to first appear in the next generation Accord.

If this report is true it would be very substantial, as it represents the first major carmaker other than GM planning to offer an EREV as a high volume mainstream vehicle.

Source (MotorTrend)

Nissan surprised the world with a highly affordable price for its upcoming Leaf EV.  A mere $25,280 after the $7500 tax break, or $349 per month lease puts it into an affordable range, even against a gas-powered car.  Considering electricity cost of 2 cents per mile versus 10 cents per mile for a typical gas car, without considering all the benefits of driving without oil, the Leaf even makes financial sense.

It is clear that the bulk of cost for electric cars are their batteries.  One could assume that the Leaf’s 24 kwh lithium-ion pack at today’s most accurate rate of $650 per kwh, puts the pack alone at $16,500.  Thus the rest of the car itself is being sold for $16,000.  Asked whether at that price Nissan will turn on a profit on the car, “Yes” replied Nissan spokesperson Catherine Zachary.

The Volt on the other hand hasn’t been officially priced yet. It should only have 2/3 the battery cost, and has been said to not be profitable at first.  The MSRP has been speculated as anywhere from the low 30s to $40,000.

Though the Volt has been in the limelight much longer than the Leaf, and though the Leaf wont begin rolling out until a month after the Volt, Nissan took the daring leap of pricing the Leaf first, along with a pre-order purchase process.

This potentially puts GM in a reactive position.  They can choose to price the Volt close to the Leaf or simply promote it as a different league of vehicle.

The latter choice may make the most sense, for despite all the media suggesting they are, the Volt and the Leaf are really not comparable at all, styling aside.

The Leaf is a much simpler, far more limited use vehicle with an air-cooled battery.  The Volt is an electric car plus it contains a complex combustion/generator system and groundbreaking power electronic controls as well as a very sophisticated battery thermal management system.   The Volt can carry drivers most of the time on electricity but deliver limitless driving when the situation requires it, and can never get caught depleted and in need of a tow.  It also doesn’t require the $2200 220V charger the Leaf does.

Furthermore the Volt will likely provide a 10 year 150,000 mile battery warranty.  Asked whether Nissan will announced the Leaf’s battery warranty at this point, “No, not yet,” replied Zachary.

Nissan says it now has 85,000 interested parties and hopes to get 25,000 pre-orders by December.  It plans to build 50,000 copies globally in its first year.  Sales will be limited t 20 large cities in the US its first year, before rolling out nationwide by the end of 2011.

So the question arises, how should GM price the Volt now that Nissan has priced the Leaf?

Some analysts believe the Volt with its elimination of range anxiety and range versatility will have much wider appeal.  It is also a heavier, more sophisticated car.

“The Volt … has a much larger appeal,” said Aaron Bragman, an auto analyst from IHS Global Insight.

“We take a lot of factors into account when pricing our vehicles,” explains GM spokesperson Dave Darovitz. “In order for the EV category to be accepted widely by consumers, we must have varied pricing, performance and functionality differences.”

“The Volt stands out from the competition,” he says. “Thanks to its range-extending engine generator that eliminates range anxiety and gives the customer piece of mind.”

GM remains coy about the timing of when they will release the price.

“We expect to announce Volt pricing and warranty information later this year,” says Darovitz.  No kidding Dave!

All other things considered equal, now that you know the price of the Leaf, how much should the Volt sell for (prior to the tax credits), that would cause you to choose the Volt over the Leaf?

Source (Forbes)

Its an on-again off-again rumor mill, GM’s decision as to whether to release a small number Chevy Volts prior to the November launch date to some members of the public.

From 2007 GM has stated it was their intention to launch the Volt to consumers, albeit in low volumes, in November 2010. Prior to launch, automakers generally have a small group of pre-production units they call a captured test fleet. Like all cars, the Volt too will have such a fleet. These vehicles are only driven by GM employees, usually engineers, for the purpose of continued real world testing and feedback.

The first such car rolled of the Detroit-Hamtramck assembly line on March 31st and a few hundred in various iterations will be produced for this and other purposes over the coming months.

Automakers as a rule do not release these cars to the public.

However, shortly after Ed Whitacre, former CEO of AT&T and new to the auto industry, took over as CEO of GM there were leaked reports of plans to release a few Volts early.

In fact, I had the chance to discuss this directly with Mr. Whitacre myself and he confirmed the plan. He and the board even offered up to a billion dollars to try to get the car out early en masse, though it was held back by executive engineers who felt adequate testing wouldn’t be possible prior to November.

In the latest and likely final round of this debate, veteran outgoing car czar and GM vice chairman Bob Lutz told reporters the early release plan has been shelved.

According to the Detroit News Lutz said GM “didn’t plan to accelerate the Volt’s introduction by a few weeks” saying such an effort “would be a publicity stunt.”

Lutz did have a lot of good things to say though about the Volt program’s current status.

He confirmed that on March 31st, “The first manufacturing-validation vehicle came down the assembly line,” and that this run of cars is intended to “ferret out any areas that are difficult to assemble.”

He noted that we are now “eight months before production launch,” which “shows that the program is in extremely good shape.”

Lutz, though not directly quoted, apparently said GM will build about 4000 saleable Volts between November and the summer of 2011.  About 11,000 cars are expected in the first complete year of production.

The cars’ software also still needs tweaking which will take place over the next few months.

And despite all that GM  has been through these past years Lutz attested that for the Volt, “there’s never been any problem, there’s never been threat of cancellation,” and “there’s never been any threat of delay.”

Source (Detroit News)