volt costs truth

http://www.forbes.com/sites/boblutz/2012/09/10/the-real-story-on-gms-volt-costs /
Forbes September 10, 2012 by Bob Lutz
I was surprised to read Ben Klayman’s piece on alleged
astronomical per-unit losses on the Chevrolet “Volt.” Ben is usually a solid professional who checks his facts.
Let me provide a look at how a car company tracks profitability of a product program: measured are material cost and labor, and these are deducted from the selling price. The positive difference is called “gross margin.” Then, one allocates per-unit “fixed cost” (advertising, general overhead, etc.) plus per-unit depreciation and amortization of the initial investment, based on the TOTAL NUMBER TO BE PRODUCED OVER THE LIFETIME of the product. If the margin, after all deductions, is still positive, then we call it a “fully accounted profit,” and the car is a winner.
The Volt “variable cost” (labor and materials, without revealing any confidential GM information), looks very roughly like this: A Li-Ion battery today runs about $350 per KWh. The Volt’s is 16KWh, so that’s roughly $6000. Add $4,000 for the battery pack structure, the cooling, the high-voltage wiring, the motor and the power electronics. So, that’s the electric portion. Add about 20 hours of assembly labor which we’ll round to a very generous $1000. The dealer net price is, say, $37,000. We now have $26,000 left for the rest of the car, which, cost-wise, is about equal to a Chevy “Cruze” which sells for around $22,000 retail! (And the Volt has no costly conventional transmission.) Thus, the “Volt”, by my estimate, is either close to “variable break-even” or may be on the cusp of a positive gross margin. Deduct the per-unit allocation for all fixed cost, depreciation and amortization and it is, surely, still “under water”….but not by much, and less and less so as the volume builds and other, higher-margin GM cars, like the Cadillac ELR, piggy-back off of the Volt’s initial investment.
Maybe the Volt, a first-generation technology masterpiece and the most-awarded car in automotive history, will never make a really decent profit.
But succeeding generations of the same technology will.
Full article at link.
Reply With Quote Reply With Quote The Following 2 Users Say Thank You to ne_one For This Useful Post:
Canuck (Today),tomcat_cool17 (Today)
Sponsored Links Remove Advertisements GM Inside News Advertisements     
Today, 10:42 AM #2 Olds88 Olds88 is online now 7.0 Liter LS7 V8 Olds88's Avatar
Join Date May 2007 Location Chicago Posts 4,471     Thanks 28 Thanked 50 Times in 32 Posts
Re: Bob Lutz: The Real Story On GM's Volt Costs
Great article, thanks for sharing it.
2010 Chevy Avalanche 30k | 1989 Cadillac Brougham 140k
Quote Originally Posted by yamahr1 Hyundai has a knack for designing cars that look like they've already been in an accident.
Reply With Quote Reply With Quote Today, 10:49 AM #3 megeebee megeebee is online now Chevrolet VOLT megeebee's Avatar
Join Date Feb 2005 Posts 10,032     Thanks 95 Thanked 63 Times in 40 Posts
Re: Bob Lutz: The Real Story On GM's Volt Costs
I'm not in love with Bob Lutz as so many are but I'm very gratified to see that he will still stand up "yellow" journalism on GM's behalf. That, and I know he has a lot of personal capital tied up in Voltec. I think he wants it to define his career and I would if I were he. I'm convinced that, as it develops, Voltec will spread through many vehicle lines and finally make a sizeable dent in the amount of oil being used, both here and in other nations. A proportionate reduction in CO2 emmissions into the atmosphere can't hurt either, no matter what as individual thinks of global warming. That can't be bad.
Last edited by megeebee; Today at 10:54 AM.
...When you go home to your shining galaxy, say that what you learned from this dead and barren place, is to beware the righteous ones.”
-Phillip Appleman
Reply With Quote Reply With Quote Today, 10:56 AM #4 MonaroSS MonaroSS is online now GMI Contributor
Join Date Aug 2004 Posts 7,061     Thanks 0 Thanked 125 Times in 62 Posts
Re: Bob Lutz: The Real Story On GM's Volt Costs
Bob is just saying what any first year economics student knows....
...and any journalist reporting on economic subjects worth their salt should know... and do in fact know... but choose for their own reasons to ignore.
Reply With Quote Reply With Quote Today, 11:06 AM #5 AMcA AMcA is online now 6.2 Liter LS3 V8 AMcA's Avatar
Join Date Jan 2004 Location Chicago Posts 3,556     Thanks 6 Thanked 31 Times in 20 Posts
Re: Bob Lutz: The Real Story On GM's Volt Costs
Volt is a funny spot. The enviro-left hates it because it's not a pure electric, and for no better reason that it's a GM product, and decades ago GM built the Corvair and was mean to that nice Mr. Nader.
The right hates it because of the perception - arguable, but probably not correct - that it was built as a sop to the left in exchange for the bailout of GM and the favoritism shown UAW in the bankruptcy.
And now Reuters is channeling all of that anger through an economically illiterate reporter whose method of calculation bears no resemblance to economic reality. Indeed, his way of thinking would damn any product that requires heavy up-front investment in engineering and production capital.
The good news, though, is that Volt despite its perception handicaps, is slowly winning in the marketplace over its pure electric rivals. And it's expanding to European models and Australian models and to a global - we hope - Cadillac model.
Reply With Quote Reply With Quote Sponsored Links Remove Advertisements GM Inside News Advertisements     
Add pictures here
âś–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
On 9/11/12 12:13 PM, Tom wrote:

http://www.forbes.com/sites/boblutz/2012/09/10/the-real-story-on-gms-volt-costs /
Bob Lutz?
Yawn.
Add pictures here
âś–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
On 9/11/2012 4:45 PM, Jim_Higgins wrote:

must hurt the volt is starting to do good, of course you loved the leaf, volt currently outselling leaf 10 to 1
Add pictures here
âś–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
On 9/11/12 5:04 PM, Tom wrote:

Is that before or after bankruptcy #2? Now? After bankruptcy #2?
Add pictures here
âś–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
On 9/11/2012 5:14 PM, Jim_Higgins wrote:

it takes a smart man to root for the failure of an american company thatsupports 10s of thousands of jobs in this country. i have lunch with a bunch of retired gm auto workers every couple of months this friday is one of them YOUR INVITED
Add pictures here
âś–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
On 11/09/2012 3:04 PM, Tom wrote:

That is pure bu11sh1t and you know it.
Leaf has outsold Volts by over 40 times and still does.
Prius outsells Volts by over 200 times.
China manufactures more vehicles in a 8 hour shift than GM has ever sold in Volts.
Of 80,000,000 vehicles produced per year, less than 20,000 are Volts. Market share is less than 0.025%.
And every Volt sold costs the US/Canadian taxpayer money. Yet Leaf and Prius make money.
China now produced more than twice as many vehicles as does the USA, as they don't have corrupt government, incompetent GM management and greedy unions to worry about.
Even the Ford Edsel did far far better in sales and market share.
Bottom line, Volt is the biggest loser in Detroit's history. But hey, it is "Government Motors" efficiently wasting taxpayers wealth and grand kids debt.
--
Liberal-socialism is a great idea so long as the credit is good and
other people pay for it. When the credit runs out and those that pay
  Click to see the full signature.
Add pictures here
âś–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
On 9/15/12 3:29 PM, Canuck57 wrote:

leaf dosnt outsell volt check figures again pirus plugin does not outsell volt check figures again prius plugin cost 39K+ and only gets 15mi on a charge China dosnt have a corrupt govt you better move then Show me where the cost of the volt is paid for by taxpayers the same rebates also apply to leaf volt and other manuf. also. when you make up shit to prove a point it ends up being a pile of shit. You should seek treatment before you harm yourself
Add pictures here
âś–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

What is that number? If you plan to sell 10 million of the product and you do, the "fully accounted profit" is realistic. What happens when reality strikes and you sell only 1,000 of them? Seems to me then you have a "full accounted loss". Nice accounting procedure though; keeps the investors baffled for a while.
Are these numbers real? http://www.csmonitor.com/Business/In-Gear/2012/0911/Chevy-Volt-GM-s-green-guzzling-green-car But overall, Chevy is still a long way from meeting its projected 45,000 target for this year, with year-to-date figures around the 13,500 mark.
And, says Reuters, GM could be losing as much as $49,000 on every Volt it makes.
Based on the above, about 20,000 may be sold this year. Target is 45,000. Let's use 5 years lifetime. At current rates, that is 100,000 sales against 225,000 projected. That more than doubles the amortized cost of tooling, engineering, etc.
I have no idea if the $49k is right or wrong, but they certainly are not meeting projections and I doubt they are meeting financial expectations. Yes, the electric car may be the future and this may be a good first step, but lets cut the BS and get GM to use real numbers for the stockholders.
Would I invest my money into the Volt? Hell no. Not unless I was willing to invest now for earning a decade or so from now. We'll see.
Add pictures here
âś–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
Den onsdagen den 12:e september 2012 kl. 03:02:01 UTC skrev Ed Pawlowski:

A pluginhydrid like the Volt may be interesting but it is too expensive.
The costs gm uses to motivate the price are not real.
The fabricate what ever they like to put on it.
They have over inflated costs on everything and they will die again.
Add pictures here
âś–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
On 12/09/2012 1:32 AM, snipped-for-privacy@gmail.com wrote:

Correct. THe archilles heel of Government Motors mentality is economics, the same economics that bankrupted them in the first place. While liberal-money for nothing idiots run the show, it is no surprize the Volt is a loser.
I did a TCO of a Volt versus a F150 V8 with all the options, A/C and heat that works, tow hitch and all. Fuel, insurance, battery lifetime, engine maintenance, oil changes, electricity, all accounted for.
It came down to this, no mater how you drive, be it 100,000 miles per year or as a local grocery run at 5000 miles per year, F150 is much more economical in every way imaginable, and a much more comfortable vehicle to drive in cold or in hot weather.
People who buy Volts are stupid, with more money than brains. Only reason to buy one is delusional ego, to say you own one. But it is assured to cost you much more. A BMW is a much better deal too.
--
Liberal-socialism is a great idea so long as the credit is good and
other people pay for it. When the credit runs out and those that pay
  Click to see the full signature.
Add pictures here
âś–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

Related Threads

    Motorsforum.com is a website by car enthusiasts for car enthusiasts. It is not affiliated with any of the car or spare part manufacturers or car dealers discussed here. All logos and trade names are the property of their respective owners.