Their goal is to have electric and plugin hybrid vehicles account for 75% of all light duty miles by 2040.

To achieve that objective, two shorter term milestones are proposed:

1. by 2020 plug in cars should account for 25% of all car and light duty truck sales.  Meeting this objective would mean having 14 million plugin cars on US roads by that year

2. by 2030 plugin vehicles should;d account for 90% of all car and light duty truck sales.  This would require 120 million plugin cars on US roads by that year.

To reach those benchmarks the group recommends rolling out electric cars and infrastructure in selected markets and expanding those markets incrementally through learning about consumer behavior.  This approach is preferred to a blanket national rollout.

The group also recommends government funding to help achieve the goals which would come at a cost of $124 billion. They would like more than $7500 in tax credits to go to each buyer of electric cars, and for the government to provide 50% tax credits for utility company upgrades and 50 to 75% credits for the cost of installing public infrastructure.

“The first electric vehicles will be delivered in 12 months,” said member Carols Ghosn, Nissan CEO. “The widespread acceptance of zero emission cars will require more than the efforts automakers can provide on their own. Public and private collaboration will be the key to mainstream acceptance.”

If the 2040 target were achieved it would mean US petroleum consumption would be reduced from its current rate of 8.6 million barrels per day to 2 million barrels per day.

Members of the group are as follows (absent anyone from GM):

Timothy E. Conver, Chairman, President & CEO, AeroVironment, Inc.
Peter L. Corsell, CEO, GridPoint, Inc.
David W. Crane, President & CEO, NRG Energy, Inc.
Kevin Czinger, President & CEO, Coda Automotive
Peter A. Darbee, Chairman, CEO & President, PG&E Corporation
Seifi Ghasemi, Chairman & CEO, Rockwood Holdings, Inc.
Carlos Ghosn, President & CEO, Nissan Motor Company, Ltd.
Ray Lane, Managing Partner, Kleiner Perkins Caufield & Byers
Richard Lowenthal, Founder & CEO, Coulomb Technologies, Inc.
Alex A. Molinaroli, Chairman, Johnson Controls-Saft and President, Johnson Controls Power Solutions
Reuben Munger, Chairman, Bright Automotive, Inc.
Frederick W. Smith, Chairman, President & CEO, FedEx Corporation
David P. Vieau, President & CEO, A123 Systems, Inc.

Source (Electrification Coalition)

Overall, there was not a lot to hang your hat on in this update if you consider yourself a defacto shareholder of ‘new’ GM, but if you were concerned that GM may not have deep enough pockets to someday see the Chevy Volt roll onto your driveway, today is a good day.

GM had a consolidated $42.6 billion in cash (including $17.4 billion in government escrow accounts) at the end of the quarter, leaving even the most unoptimistic of forecasters to come to the conclusion that GM is not going away anytime soon. So put your Volt deposits down with confidence, your Volt is coming. (Unless of course your local dealer is Maxton Chevrolet in Ohio, who is taking deposits and is not yet a approved retailer)

GM CEO Fritz Henderson had this to say about his company’s first 83 days of operation:

“We have significantly more work to do, but today’s results provide evidence of the solid foundation we’re building for the new GM. With a healthier balance sheet and a competitive cost structure, our focus is on driving top line performance. We’ll achieve that by winning customers over, one at a time, with vehicles that deliver performance and value.”

If you only want to hear good news, I would encourage you to stop reading at this point…or at least skip down to the last paragraph.

It is worth noting that this update is not a official filing, and with an understanding from the SEC to complete its Fresh Start reporting by March 31, 2010, this report leads out with the disclaimer that “the managerial financial statements do not comply with Generally Accepted Accounting Principles (GAAP)…” /yuck

Basically this means, ‘everything we say, you have to take with a grain of salt.’ Which also means, we are forced to dig a little deeper to understand the situation at GM. Namely the same two questions everyone always wants answered; how much cash do they have now, and how fast are they burning it?

So how much Cash Do they Really Have?
Looking closer, we find that the $42.6 billion was only a snapshot on Sept 30th, and that escrow account has nowhere near $17.4 billion of accessible cash at this moment. $2.8 billion has gone to Delphi, almost a billion to Canadian pensions, and another 8.1 billion is earmarked to repay UST (US Treasury) and EDC (Export Development Loans), which leaves only $5.6 billion unspoken for.

And yes, the money that GM is ‘repaying’ is coming out of that same government escrow account that was just set up. /beauty

Additional pressure already being felt on GM’s cash situation since this update is the forced repayment of the German government’s interim loan from the Opel ‘non-sale,’ of which about $700 million has been repaid since September, and another $600 million is due by month’s end. Operational shortfalls at Daewoo has also cost the mothership north of $400 million, and threatens to drain more.

Realistically, accessible cash on hand at this moment is more than likely around $28 billion…which is still a very high/adequate level. The biggest ongoing threat to this reserve is the cost associated with retaining Opel if GM can not receive more international aid. GM estimates the restructuring costs for Opel at around 3 billion euros ($4.4b)…some independent analysis puts that figure as high as €10B.

On the very last line of the press release, I think GM does a good job of assessing the situation, without giving any specific estimates, “…global cash balances at the end of 2009 are expected to be materially lower than third quarter levels of $42.6 billion.”

What is the Cash Burn Rate?
Short and sweet answer is we have no clue. Without a GAAP report and a couple historical statements under GM’s belt to make time comparisons, it is impossible to say.

According to GM, they report that “for the period July 10-Sept. 30, GM had positive managerial operating cash flow before special items of $3.3 billion, reflecting the favorable working capital impact from production start up, timing of supplier payments and lower capital spending.”

Which basically means, a perfect storm of things happened to overinflate this number. In the ‘looking ahead’ section of its report, GM admits it “expects to have negative net cash flows in the fourth quarter of 2009 due to a number of factors…” /they don’t know either

Overall Thoughts
All things considered it was a pretty good first report, about as decent as it could be anyway. The plan to overproduce vehicles under the threat of bankruptcy (peaking at 872K units at end of 2008), then sell the bulk of them to increase liquidity post C11 (down to a low of 379K in August) was by far their best forward looking move in a long time.

While the sales since the bankruptcy have continued to be poor (as it has been throughout the industry…forgetting Hyundai for the moment), the ongoing operating losses may be a by-product of huge incentives on the hoods of GM cars, put there to reduce/monetize the massive stockpile of 2009 inventory they had produced. The remaining question is, will customers that have grown accustom to such deep discounts, still purchase GM cars in their absence?

Given that GM has achieved a 75% reduction in structural costs, a clean balance sheet, and now has a ample money supply coming out of C11, they have a once in a lifetime opportunity to right the ship…and because the success of the Volt, and possibly the future of domestic EV production itself lies with GM, I hope they succeed.

For one thing since costs of early models will be high, there is a government $7500 tax credit that buyers of the Volt will be eligible for.

However, some auto executives think even that isn’t enough. Proposed is a gas tax.

The idea is nothing new but the problem is at gas prices below $4 per gallon, electric cars are a hard sell to the mass population.

“Unless gas is $3.50 or $4 a gallon, consumers are not going to want to buy those cars,” said former GM board member Jerry York.

Currently, gas prices are around $2.66 per gallon nationally.

I can also attest that the traffic to GM-Volt.com nearly tripled during the gas price peak in Summer of 2008 when prices were greater than $4 per gallon.

“The U.S. allows the price of gasoline to go back and forth across this line where the consumers don’t care about fuel efficiency and where consumers do care about fuel efficiency,” said Mike Jackson, CEO of AutoNation Inc.

Jackson proposed a gradual increase of gas tax until an average price of  $4 to $5 per gallon in reached.

Of course this idea isn’t popular, every politician sells hem or herself by pledging to lower and not raise taxes.

“In the United States, we’re afraid to touch the fuel price,” said Tim Leuliette, CEO of parts supplier Dura Automotive. “We’ve got to continue to raise taxes in the United States so that, by the end of the next decade, gas is about $8 a gallon in today’s terms.”

“Energy independence in this country ultimately means that fuel has to be more expensive,” Leuliette said.

Early adopters like us will buy the car for many reasons even if gas prices isnt one of them, but do you believe gas taxes should be raised to promote electric car adoption?

Source (Reuters)

GM +.4% (177,603 vehicles sold)
Toyota -3.5% (152,165 vehicles)
Ford -.6% (136,920 vehicles)
Honda – .4% (85,502 vehicles)
Chrysler -33% (65,803 vehicles)
–adjusted for sales days

Naturally there is a (*) asterisk in the title, but lets dwell on the good things for awhile.

For the first time in 22 months, since January of 2008, General Motors sales increased year over year. Retail sales were up 15%. And Pontiac-less dealers found that Buick and GMC were both up 14.2% and 16.1% respectively. An impressive showing to be sure.

Somewhere ex-GM marketing guru/thesaurus owner Mark LaNeve must wonder if the universe is playing a cruel joke on him, as new head of US Sales, Susan Docherty has the easy task of spinning the month’s results:

“We’re very pleased with consumer acceptance to our newest cars, crossovers and trucks. While we have more work to do, we are making progress and will continue our focus on delivering vehicles and a sales and service experience that brings consumers to Chevrolet, Buick, GMC and Cadillac – and keeps them coming back”

Asterisk moments:

(*) These are year over year numbers…and the comparison to the other automakers is not a fair one. October of 2008 found GM reeling in a bad economy and under the threat of bankruptcy…off a staggering 45%. The rest of the pack, (except for the albatross named Chrysler) were all up against much better set of worse numbers, ranging from -23 to -29%

(*) GM bought these numbers/this month. GM is no stranger to putting ‘cash on the hood’ to make a sale, but it has never been more true than it was in October. Fearful of losing customers because of the closure of brands, GM looked to regain these newly found ‘free agents’ by lining their pockets with cash…to the tune of about $4,277. With new 2010s finding there way onto dealer lots, every other manufacturer lowered their month over month incentive spending. Leading that charge, Honda offered only $508 in incentives per car, while Toyota came in second at $1,338.

Overall however, GM had a pretty good month all things considered. Sure they were up against some bad comps, sure they bought these results…but they did so with a plan, and that was to retain and/or increase market share. In this regard, they were a raging success, taking in a estimated 21% of all light vehicles sold.

/now if GM could only get the SAAR (Seasonally Adjusted Annual Rate) for auto sales back up over 16 million (currently around 10 million), ‘new’ GM will be a thing to behold

GM Retains Opel
Fresh from announcing this month’s positive sales results, GM also announced late Tuesday, that it would not be selling Opel to a group lead by Magna International.

Despite having just disclosed in a SEC filing that only 13.6 billion remained in their escrow account from the government funded bankruptcy, GM cited its own improving financial condition and a more favorable environment in Europe as the reason it would be retaining Opel.

GM CEO Fritz Henderson had this to say on announcement, “While strained, the business environment in Europe has improved. At the same time, GM’s overall financial health and stability have improved significantly over the past few months, giving us confidence that the European business can be successfully restructured.”

GM had been very leery of relinquishing control of Opel to the Magna group, for fear that one of the financial backers, namely Sberbank (a Russian bank), would flip its interest in Opel to Russian carmaker Gaz, who would then gain access to GM’s platforms/technology, and use that position to ruin GM’s own business in Russia.

GM must now convince the European governments (namely Germany) to continue to provide the interm support it says it needs to stay healthy, around €3 billion ($4.43 billion). Germany had previously offered a €4.5 billion Euro loan under the Magna deal. They also must seek new concessions with the strong labor unions throughout the region…and pray they don’t ever need to infuse capital received from the US government to prop up a international division.

In a statement from Magna on the happenings, Siegfried Wolf, (Magna’s co-chief) said that Magna understands GM’s board’s decision on the matter, and vowed to continue supporting Opel and GM.”

Some issues germane to us were discussed.

He was asked what he thought it would take for electric cars to truly gain a foothold in the marketplace.

He indicated cost to consumers was paramount.

“The three things you need are battery costs coming down, motor costs coming down, control costs coming down,” he said.

“The more companies that actually develop technologies around electric, the more the supply structure will develop, the better off we’ll be,” he said.  “We can’t carry the load ourselves. GM can’t. No way. We need to have more companies. We source most of these things. We don’t do them. We’re not in the chemistry business.”

He also believes range anxiety caused by driving pure EVs is a hindrance to mass adoption.

“Everybody is trying to solve the problem of range because we have range anxiety. The consumer doesn’t want to be strained,” he said. “We had the same problem with EV1, not enough range.”

Henderson said GM is hitting the brakes on hydrogen fuel cell car production.

“Are we putting resources into it? Not as much. We spent through the mid-part of this decade a reasonably high portion of our research and our development money on hydrogen fuel cells,” he said.

Henderson was asked yet again what the Volt’s MSRP will be.

“The price is still to be determined. I have a policy of pricing the vehicle when I get close to the market. I know the cost is close to 40 [thousand],” he said.

Finally, if anyone was wondering, he said GM would not go back to the government for more funding.

Under “any reasonable planning scenario,” he said.  “The amount of financing provided was sufficient.”  This is consistent with what he said when I interviewed him just days after GM declared bankruptcy.

“We’re not interested in doing this twice, we’re doing this once,” he had said.

Source (Washington Post) 

Mr. Henderson confirmed that the majority of the restructuring plan that was put in place in July was still on track, and that the four remaining core brands were performing to expectations, and retaining the market share expected of them.

He further announced that through the first three quarters of the year, GM has trimmed the number of dealers to around 5,800 (from 6,575-with many more still to come), reduced the total workforce by more than 18,000, and eliminated three more nameplates on their journey down to 34 for 2010.

Throughout the conference call, GM’s CEO stressed the need for improved business results, good cash flow and profitability in the very near future. The success of those three items being paramount to launching a successful IPO next summer.

In a related matter, ‘new GM’ has yet to release any financial reports at all, and this conference call itself was prefaced by Randy Erics, Executive Director of Investor Relations, with the statement: “…as we review the first 90 days, I would like to point out we will not be discussing our financial results today.”

GM is under no obligation to release financials to the public as it is currently a private company, however Fritz Henderson later suggested that more financial clarity will come at some point in November. The cynic in me now expects a announcement on the DoE ATVM loans to GM to manufacture more Voltec-based vehicles just before this November fiscal update.

While the 90 day update did provide some good prospective on the overall picture at GM, inventory levels and future predictions, the CEO failed to address the costs associated with the failure to close deals on three of the four major brands slotted for sale (Saturn, Saab and Opel-GM did finalize the deal to sell Hummer just this past Friday). As a example of such a problem would be that Saturn was not included in ‘old GM,’ and with the failure of deal with Penske, the 371 existing dealers will now be due compensation under state franchise laws…not to mention the lost revenue stream of not building product for Penske’s Saturn.

Also, Mr. Henderson did not comment on the costs/future commitments that GM is taking on with the reintegration of Delphi components into the mothership (about 2.85 billion-ish), as it exited bankruptcy on Tuesday.

Fortunately for those of us primarily interested in the Chevy Volt, all the news was good. Mr. Henderson stated once again that the Volt project was still on track, while reminding us that the Brownstown Township facility will produce lithium-ion battery packs for extended range vehicles in 2010, and that over 80 pre-production Volts have been produced to date.

Looking past the first 90 days, it seems that the first job for day 91 at GM was to show the door to accept the resignation of Mark LaNeve, VP of US Sales, and former VP of Sales & Marketing. On the conference call Mr. Henderson stated the following in regard to Mr.LaNeve’s dismissal resignation and future plans:

“Mark LaNeve has elected to leave General Motors on October 15 to pursue another opportunity with a non-automotive company.” On a personal note, I will miss Mark’s optimistic wordsmithing on monthly sales reports. Also, that ‘non-automotive opportunity’ is at Allstate, where he is said to be heading up the marketing. It doesn’t seem possible, but Mark will have a even more daunting task at Allstate than GM, trying to make people forget their ‘three D’ mantra for handling claims – Delay, Deny and Defend. /bonne chance

And so the executive shakeup begins. Score one for new Chairman Ed Whitacre.

Which begs the question, can CFO Ray Young’s departure be far behind? While Mr. Henderson acknowledged rumors of Mr. Young’s impending exodus during the Q&A following his presentation, he stopped short of giving Mr. Young a vote of confidence going forward simply saying, “There are a lot of rumors in the press and Ray is our CFO…Ray is our CFO. I read the rumors like you do.”

Strangely enough, on the very same day as Mr. LaNeve elected to leave, GM has already named his replacement in the form of Susan Docherty (formerly of Buick/GMC fame) to become the new VP of US Sales…and then (according to Automotive News)
severed ties with Mark’s favorite ad agency Modernista two days later.

Hopefully they asked Ms. Docherty what the price of diesel was before they chose her for the job…it would be nice to see some of GM’s international, fuel efficient diesel lineup hit North American shores to compliment the Volt’s introduction

Source (GM)

Prabakhar Patil is the CEO of Compact Power Inc, the subsidiary of LG Chem that has been working with GM to produce the Volt’s battery packs.

What is the cost of lithium ion automotive batteries?
Is its risky or dangerous to quote direct numbers.

At the cell level, in consumer applications, 100% of the nominal capacity at the beginning of life is somewhere on the order of $350 per kwh.

First, we have to keep adding factors for in a vehicle application, when you look at it as a 10 year life and you have this 25% degradation, then your denominator goes down by 25%.

Secondly, if you’re not using all of the capacity, just the combination of those two factors will effectively cut the denominator in half in terms of usable capacity at the end of life as opposed to nominal capacity at the beginning of life. And that will raise the price in dollars per kwh, if you do it in terms of usable capacity at the end of life, by a factor of two

Third, if you add all of the other stuff you have to put in the pack, and it depends on what you consider inside the pack as opposed to outside, because that depends on vehicle architecture. So that’s why it gets very fuzzy and inconclusive to talk about gross level numbers unless you know specifically on how they are being defined.

The other perspective is that lithium ion in the 17 years since it was first introduced has come down by a factor of 14 in terms of dollars per kwh and it’s not done. It will continue to come down not at the same rate, but I fully expect over the next 5 to 10 years for the cost to get better by anywhere from a factor of 2 to 4 in terms of dollars per kwh as compared to where we are now.

One of the things that has nothing to do with the cell or any technology itself, is at the end of life if the battery still has 70 to 75% of its power and energy left.  Why throw it away when you can recapture it? If you could capture that residual value by effectively leasing the battery and putting it to work again in a utility application, at 50% of its initial value, it will cut the effective cost by a factor of two.

For the month, General Motors reported that sales nose-dived 45% on 156,673 vehicles sold, while Chrysler reported sales off 42%. Certainly some of these losses can be attributed to the vacuum left by the CARS program, but it is impossible to ignore the monthly sales of their peers.

Cross town rival Ford posted a much better than expected net loss of only 5% and ended this quarter up 2%.  Japanese rival Toyota was off 13%. The only major automaker to buck the trend this month was Hyundai and its sibling Kia, both offering smaller and inexpensive vehicles, reporting a increase of 27% and 24% respectively.

After the month of August only showed a drop of -20%, Mark LaNeve (VP of US Sales) was hopeful a turnaround was in the works saying, “…our momentum continues to build on the strength of our new cars” and touted the retail sales turnaround at GM. With the failure to make good on that prediction, along with a drop in retail sales of 46%, Mr. LaNeve conceded that August was “a more difficult month than we anticipated.”

Mr. LaNeve is no stranger to showing optimism when looking to the future, and offered this forecast, “Fortunately, the fourth quarter looks brighter and our year-over-year comparisons should look more favorable…we believe that our four core brands – Chevrolet, GMC, Buick and Cadillac – are well positioned with new products to generate enthusiasm with our 60-Day Satisfaction Guarantee and ‘May the Best Car Win’ marketing campaigns”

Inside the numbers, the hardest hit was GMC, widely considered to be GM’s most profitable brand, sales for the month were off 53%. Chevrolet was off 40%, Buick 33%, and Cadillac enjoyed a nice rebound on the strength of the new SRX’s introduction, off 9%.

If numbers like these persist, one has to wonder what the value of a anticipated summer IPO will be for GM, and what hope the government has to regain any of their considerable investment in this American institution. In the short term, with the continuation of poor results, a major executive shakeup seems inevitable.

At the time, Carlos Ghosn (Nissan’s CEO) told the media that the price of the car would be competitive with its peers, and that “the monthly cost to lease the battery and fill it with electrons will be less than an average month of fill-ups at the gas station,” but declined to ballpark that in actual dollars.

However, when speaking to Le Journal du Dimanche earlier in the week, Mr. Ghosn was again asked if Nissan’s electric cars would be more expensive than similar conventional cars? To which he answered:

“No. The electric car only makes sense if everyone can benefit. It must be for the customer at the same price as his gasoline equivalent in particular thanks to government aid. The battery will be leased for just under 100 euros ($150USD) per month. The cost of electricity consumption and the leasing of the battery will be lower than the cost of gasoline.” (translated from french)

In the United States the decision has not yet been made on whether the Leaf will be lease only on the battery, or if they will offer the car and battery as one package for outright purchase. When asked, a representative from Nissan USA said:

“We are considering the options to provide the best value to our customers. We will say more when we can. ” /big help

As for GM’s take on the subject, Andrew Farah (who is the Volt’s chief engineer) had this to say about the option of leasing the battery inside the Volt:

“We’re designing for the battery pack to have a 10-year life and there has been discussion of all sorts of battery business models, but we’re working from the perspective that it will be sold with the car.”

One thing is for sure, the merits of leasing over buying is a hotly contested debate in EV circles. Leasing of the battery itself puts the driver’s mind at ease when it comes to the long term reliability and performance of the battery, but does so at the cost of a never-ending monthly fee.

The Volt is a great first step, though as GM says it is a car for most people, not a car for everyone.  Even considering the wide swath of those for whom it will be ideal, production volumes are expected to remain relatively low; 10,000 the first year, and around 60,000 in the second according to reports.

Since the Voltec propulsion system is so flexible and scalable, it seems reasonable to believe GM will eventually use it in other vehicle types and sizes. We have seen the Cadillac Converj concept though the car has not be approved for production. We have also heard that GM is at least studying putting a Voltec drivetrain into the upcoming Orlando MPV.

Clearly GM is proceeding with caution largely due to the very high cost and likely, some uncertainty, not too mention the high initial price for consumers.  Recently it was disclosed that the Volt will likely start at $32,000 after tax credits.

GM vice-chairman Bob Lutz was recently asked in a webchat whether he believes GM will generalize Voltec technology.

“The Volt technology is very exciting, but costs will have to come down before it can become generalized,” he said. “And US fuel prices will have to rise to world levels, meaning $5 or $6 per gallon.”

Larry Burns, who has been GM’s chief of R&D at GM for 11 years, and will retire on October 1st put it this way:

It is important to recognize that first generation technology in the auto industry, or industry in general, is usually costly vs. the mature alternatives that it competes with. The key is to kick off a generation-by-generation learning cycle that allows the new technology to reach its mature, high-volume potential. GM believes that Lithium Ion batteries at maturity and in high volume will be cost competitive for personal mobility. This is why we are launching the Volt, to kick off the commercialization dynamic.

So how long will it take for technology costs to come down or gas prices to get so high, and do we have time to wait?