GM Loses Money On Every Volt Built 471
thecarchik writes "Doug Parks, vehicle line executive for the 2011 Chevrolet Volt, GM's range-extended electric vehicle, confirmed Tuesday that the company loses money on every Volt it sells. The expensive 16-kilowatt-hour battery pack, which likely costs GM somewhere between $8,000 and $12,000, is clearly too expensive to let the company build hundreds of thousands of Volts right away. Just 10,000 Volts will be built in 2011, though GM is working to increase that number. GM plans to chip away incrementally to lower the costs of the specialized components in the Volt, especially the power electronics. The price of consumer lithium-ion cells has fallen 6 to 8 percent annually since their 1989 launch; the large-format cells in automotive packs seem likely to follow the same curve and as costs are lowered the Volt may stop being a loss for the company."
This is only temporary (Score:5, Insightful)
This is only an issue in lower volume production runs.
Although they can never overcome the cost penalty associated with each vehicle, they can make it up in volume.
Not Surprising (Score:5, Insightful)
So why is this news? (Slashvertisement anyone?)
Price vs gasoline. (Score:5, Insightful)
Re:And computers used to cost millions of dollars (Score:5, Insightful)
It stinks that GM is losing money on these, but they're putting the effort into it, and I have to applaud them for it. Then again, didn't the PS3 and Xbox 360 cost more to make at launch time than they were selling for? Maybe GM is on to something...
(emphasis mine)
Oh, they're on to something, alright. GM is "too big to fail". This makes it easy for them to start risky, costly ventures, because they'll either succeed and make GM rich, or the gov't will bail GM out with more loans until GM is profitable again.
Re:Not Surprising (Score:5, Insightful)
But it's the taxpayers that bailed them out (Score:1, Insightful)
After you "borrow" billions of dollars from taxpayers you kind of have a responsibility to use your second chance wisely.
They have a proven track record of running a business which cannot support itself.
It's just a loss leader... (Score:4, Insightful)
In some situations, those early losses will be spun back into R&D costs on the budget and targeted as profit that has to be made on future units.
Hopefully they'll stick with it and start driving costs down so that the technology can be made cheaper and is more efficient, rather than pulling the plug (no pun intended) and giving up on it.
This no big deal (Score:5, Insightful)
It's a well known fact that all hybrids lose money at first. Toyota lost something like $5000 on each early model Prius. This will all work out.
Re:That's fine... (Score:4, Insightful)
Yes, and no. While most production have economies of scale, without more information we can't be certain if this one does. This requires technology specific information, and business specific information, as to whether they're setup to have economies of scale.
Given this is a new process, it is entirely possible that they are not setup for this.
Without more information, we won't know. However, given they are a desired car, this car has benefits for the rest of the company, and GM has competent management, then we can assume they know all this, and would scale up production if possible.
So, in all likelihood they're telling the truth, or they are really stupid.
Re:Not Surprising (Score:5, Insightful)
Yes, but that's not what "loses money on every Volt it sells" means. That phrase means that they're taking a loss on each marginal unit completely ignoring the fixed costs. What you're describing is, "GM hasn't yet recouped its development costs."
Re:GM loses money? (Score:5, Insightful)
The electricity has to come from somewhere, and the same tree huggers who like to see these 'friendly' vehicles are also the same tree huggers demanding that the filthy smoke belching evil coal burning plants be closed - with no real viable alternative methods of producing electricity for their electric cars.
Um, yes, because coal plants are nasty too. The awesome thing about electric cars is that you can have them powered by coal today for a modest improvement in environmental damage, and then if the coal plant is replaced with something better, then your car automagically becomes "greener". Without having to replace the entire vehicle fleet again.
And sure some tree huggers are against them, but this tree hugger thinks fission is a very viable method of producing electricity.
But even in the meantime, electric cars are better. And the tree huggers do not have the power to shut down coal plants if there is nothing to replace them. So I'm not sure why you're worried.
Re:That's fine... (Score:4, Insightful)
GM versus Sony (Score:5, Insightful)
Not Temporary, Microeconomics is stubborn (Score:4, Insightful)
You're misreading the difference between constant costs (overhead) and variable costs (production costs). Volume only works if you can get the variable costs (the costs of producing each item) below the profit of selling each item.
Economies of scale (making each item cheaper to produce by producing more) doesn't work for the Volt: the batteries have a constant cost and making more only makes them MORE expensive if anything. This is because the resources to make them are limited and increasing demand causes prices to increase.
Therefore they can't overcome the cost penalty by making it up in volume. This move only makes sense for GM if the practice and market establishment of selling now will later be useful for them when making the cars is profitable. There's another explanation: the owners of GM are pushing this for political reasons. Considering the rhetoric about making them make cleaner cars [whitehouse.gov] when the bailout occurred, it would be a conspiracy theory to NOT believe that the government had a hand in this.
Then again.... I'm an idiot.....
Re:This is only temporary (Score:4, Insightful)
Reminds me of the joke about two guys that selling watermelons on the side of the road. They buy them from farmers for $1, and sell them to customers for $1. The one guys says to the other, "We aren't making any money doing this, you know what we need?" The other replies "Yea, a bigger truck."
What the Volt is about (Score:1, Insightful)
Let's face it. The Volt is about Obama's vanity, the UAW's greed, and the green lobby's delusions. GM will be ruined again in 5 years. I should say the shareholders. The slugos who work there have the full backing of the US government. If you own the new GM stock you are a fool.
Re:This is only temporary (Score:5, Insightful)
You mean the rules that the top 1 percent of white men made and the rest of us are supposed to abide by?
Tell me, AC, which transnational corporation does play by your "rich white man's rules"?
Re:Wait for it ... (Score:2, Insightful)
Re:Not Surprising (Score:2, Insightful)
Because it gets the anti-US government teabaggers all a-hootin' and a-hollerin', and thus it is considered "news".
Of course they will lose money on each Volt sold.
When Apple came out with the iPhone, it was "losing money" on each one sold, too. Then, after a while, it wasn't.
Same thing with every new drug that hits the market. Same thing with the Kinect and the PS3 and the XBox, and.. well it's the same thing with every new product that comes out. Do you think that the first iPad that was sold covered the cost of Apple's R&D? Well, maybe that's a bad example because Apple didn't really do any "R&D", but it certainly did cover the cost of that went into the shiny design.
Re:And computers used to cost millions of dollars (Score:4, Insightful)
And anyone who can't identify which of the politicians are enabling this situation is deaf, dumb and blind.
Listen to yesterday's interview with Vermont's Senator Bernie Sanders. He's not part of the problem. Now go listen to the statement yesterday by Kentucky's Senator Mitch McConnell about how they're going to hold everyone hostage until they can get tax breaks for people who don't need them, don't deserve them, and in many cases don't want them. Now check their voting records. Now tell me all politicians are the same.
Re:Not Temporary, Microeconomics is stubborn (Score:5, Insightful)
Re:Not Temporary, Microeconomics is stubborn (Score:4, Insightful)
MANY businesses and product lines lose money at first.
Re:This is only temporary (Score:5, Insightful)
It's simply amazing how much stupid there is that's been moderated up!
GM isn't a government agency. In case you weren't paying attention, it's being restructured in what really amounts to a form of bankruptcy. It's close to paying back every dime it borrowed, and it's now almost certain that the taxpayers will ultimately pay very little for saving GM. So much for your implied "gubbmint sucks", huh?
Further, not only is GM losing a bit of money on each one sold, this is a good thing! GM is behaving EXACTLY like a start up, delivering an innovative product at a time when it's potentially very useful, and worrying about profits after marketshare and supply channels get streamlined. This is how Amazon became Amazon, how Tesla became Tesla, how Google became Google, how EBay became... you getting the idea yet?
For any virtually ANY truly innovative product, there is always an income gap between initial development and profitability that's usually measured in at least months, and often years. This isn't surprising, it's pretty much a requirement, and if it's not the case, then there's a strong implication that the thing being produced isn't innovative at all!
With the Volt, GM is staking its future on the clean, energy efficient, non-polluting car of the future. Go GM!
Re:This is only temporary (Score:5, Insightful)
FWIW, the US government wasn't buried in debt or routinely running massive deficits until Reagan/Bush Sr. Then Bush Jr. came along and for the first time ever the government was stupid enough to start wars (which are really quite expensive) with not only no plan to pay for them, but while cutting taxes at the same time. Today, the same people who voted for the likes of Dick "deficits don't matter" Cheney are screaming bloody murder about "Obama's deficit spending" with no apparent comprehension of how surreal this and their other behaviors are.
Meanwhile, Congress (at the behest of the party of "fiscally responsibility") is deciding whether to saddle us with $3.6T or $4.2T of further debt by extending the Bush tax cuts for the next 10 years. The same titans of responsibility absolutely refuse to consider the idea of paying off our debt with taxes, but can't seem to name anything that consumes more than
(I consider the modern Republican party to be nothing more than a scam that seeks power for the explicit purpose of perverting the United States into some combination of theocracy and corporate plutocracy. I hold the Democrats in marginally less contempt; At least they generally offer the people a reacharound while they're screwing us)
Re:This is only temporary (Score:4, Insightful)
Ok now a word from somebody who actually looks at the numbers... I am a quant and run my own money.
1) For the government to come out break even the GM stock price has to hit around 56 (stock has to almost double here).
2) GM behaving like a startup? Excuse while I barf. GM is not behaving like a startup. They are behaving like a financial institution. Look at who is running the show? Look at how they are selling themselves to the financial community. Wait I forgot GM is a car maker!!!
3) Only in the case of GM is there an income gap. Most other companies tend to not have such a huge gap. This is a play by GM to put on a good face that they are "clean" when in fact they are not. Look at the model lineup. They have 4 economical fuel efficient cars. YET they have 5 different Corvette models. Yeah a company that has its priorities straight.
4) GM is not staking its future in clean technology. Look at point 3, and look at their line up. Ford is staking a part of their future on clean cars. Ford is doing the right things. GM is once again putting lipstick on a pig!
Having said all this, it is not impossible to re-engineer GM, but GM has never shown a willingness to do so. GM thinks this little happening as a blip introduced by the market and not by them. Right now GM thinks that they have done everything they and it is smooth sailing from this point on. RIGHT... WRONG! What bothers me is that Ford did real change... They did not take money from the government, and they are going to get hit again below the belt by GM. I just hope the next time GM is let to collapse.
80% of that energy is lost by burning (Score:2, Insightful)
80% of that energy is lost by burning. So you have to reduce the power available in a gallon of petrol by 80%.
Then you have to realise that one reason for 150bhp engines is so that when your engine is at idle and you want to start off, you have enough torque without revving the engine massively to actually start the car. 50bhp is plenty to get to any legal speed in the US or most of Europe. The remaining 100bhp is so the car can actually move from standing still. An electric engine doesn't need that 100bhp because it can have maximum torque from 0rpm.
Which means you don't need as big an engine, nor all that complex and heavy gearing and transmission.
Also, when you brake, your engine doesn't create petrol to put in your tank. So you have to reduce the power in that gallon of gas again unless you never brake until you get to your destination...
When will people realise this?
Never, because they have a hard-on over hating anything ecological because they're trained to think it communistic.
Re:And computers used to cost millions of dollars (Score:4, Insightful)
Listen to yesterday's interview with Vermont's Senator Bernie Sanders. He's not part of the problem. Now go listen to the statement yesterday by Kentucky's Senator Mitch McConnell about how they're going to hold everyone hostage until they can get tax breaks for people who don't need them, don't deserve them, and in many cases don't want them. Now check their voting records. Now tell me all politicians are the same.
Both parties want tax cuts that Americans don't need or deserve. Claiming that Americans need the Bush Tax Cuts can be disproved by looking at the fact that Americans were able to live prior to the Bush Tax Cuts.
Do most Americans want tax cuts? Sure. Just like most children want to stuff their faces with candy and ice cream. Sometimes you need a parent to say "No, you can't have that, you've had too much of that already and more would be bad for you."
In a democracy, where do you find the parents? While the Republicans are the more irrational and irresponsible party today, the Democrats aren't exactly full of mature and wise statesmen who are making responsible fiscal policy for the best long term interests of the country. The Bush Tax Cuts were passed when the CBO did a 10 year projection of massive surpluses, and so the Republicans said the government should cut taxes because times were so good. Now the Dems and Repubs are saying that the tax cuts are needed because times are so bad.
Taxes go up next year, it will hurt. Living with a 32 inch TV instead of a branch new 50 inch, or driving a $15k car instead of a $30k car, or renting an apartment instead of buying a house is not life-ending. Take the pain, such that your children's children don't have to suffer (as much) for your excessive consumption.
Re:This is only temporary (Score:5, Insightful)
(I consider the modern Republican party to be nothing more than a scam that seeks power for the explicit purpose of perverting the United States into some combination of theocracy and corporate plutocracy. I hold the Democrats in marginally less contempt; At least they generally offer the people a reacharound while they're screwing us)
The Democratic Party exists to occupy the space that would otherwise be taken by a real opposition party. They're like the placebo thermostat building maintenance installs in the office so the workers can think that they're adjusting the temperature and quit complaining.
Re:This is only temporary (Score:2, Insightful)
If I take a loan and use it to pay off my loan it doesn't mean I still need to pay back the loan. The way you interpreted the way GM paid back the $7 billion loan implies that I would.