Chris Koerber (@chriskoerber) September 10, 2012
This morning, Reuters published a devastating article on the astronomical price of
Government General Motors insistence on propping up a dud. Two years after the Chevy Volt was introduced, dismal sales are doing nothing to offset the high costs of production. GM may be able to unload at least one more Volt this November, but that’s unlikely to make too much of a dent. According to Reuters, GM has invested an estimated $1.2 billion into production and is losing as much as $49,000 on each Volt. The investment clearly isn’t paying off:
The lack of interest in the car has prevented GM from coming close to its early, optimistic sales projections. Discounted leases as low as $199 a month helped propel Volt sales in August to 2,831, pushing year-to-date sales to 13,500, well below the 40,000 cars that GM originally had hoped to sell in 2012.
A Chevrolet dealership that is part of an auto dealer group in Toms River, New Jersey, has sold only one Volt in the last year, said its president Adam Kraushaar. The dealership sells 90 to 100 Chevrolets a month.
The weak sales are forcing GM to idle the Detroit-Hamtramck assembly plant that makes the Chevrolet Volt for four weeks from September 17, according to plant suppliers and union sources. It is the second time GM has had to call a Volt production halt this year.
So, the costs of GM’s investment are more than just financial; jobs are being affected as well.
The Volt, which has been on sale for nearly two years, carries an official sticker price of $39,995. Through August, GM has sold a total of 21,500 Volts. That’s well short of the figure GM hoped to sell. It originally estimated that by this year, it could be selling as many as 60,000 Volts annually worldwide (a version of the Volt is also sold as the Opel Ampera).
But the sticker price doesn’t begin to cover the original investment for Volt, which GM puts at $1 billion, and which some analysts say is probably closer to $1.2 billion. Nor does it reflect production costs for the Volt, which has expensive technology including lithium-polymer batteries, and sophisticated electronics, plus an electric motor as well as its gasoline engine, Reuters says.
“It’s true, we’re not making money yet” on the Volt, Doug Parks, GM’s vice president of global product programs and the former Volt development chief, told Reuters. The car “eventually will make money. As the volume comes up and we get into the Gen 2 car, we’re going to turn (the losses) around,” Parks said.
The economic ramifications of GM’s poor decision-making are huge, yet GM’s response to the Reuters report clearly demonstrate that GM is in denial:
Our core research into battery cells, battery packs, controls, electric motors, regenerative braking and other technologies has applications across multiple current and future products, which will help spread costs over a much higher volume, thereby reducing manufacturing and purchasing costs. This will eventually lead to profitability for the Volt and future electrified vehicles.
Every investment in technology that GM makes is designed to have a payoff for our customers, to meet future regulatory requirements and add to the bottom line. The Volt is no different, even if it takes longer to become profitable.
No word on just how long taxpayers are supposed to wait.
Citizens are rightly disgusted — and not surprised:
GM loses $49MM on every Chevy Volt it sells. What a business model.—
Allen Hunt (@AllenHunt) September 10, 2012
GM didn't have to be bailed out. They could have filed bankruptcy like everyone else and would have been back on their feet in no time—
WAR (@WarEverlasting) September 10, 2012
GM says estimate of $50,000 loss per Government Volt is grossly wrong. It's much more?—
(@zerohedge) September 10, 2012
I didn't buy a Chevy Volt today. This saved GM $49k, and therefore the federal government $13k. Where do I pick up my reward?—
David Burge (@iowahawkblog) September 10, 2012
One Twitterer found himself experiencing a bit of déja vu:
W/GM losing $46K on each Volt, are we now like the Soviet Union, where products of state owned firms were worth less than the raw materials?—
(@PubliusNV) September 10, 2012