Loading…
Friday, August 22, 2014
Current Weather
Loading Current Weather....
Published: Tuesday, 9/11/2012

Sales of Volt on rise, but GM still taking big loss on vehicle

Analysis says automaker in red as much as $49,000 each

REUTERS

DETROIT — Gen­eral Mo­tors Co. sold a record num­ber of Chev­ro­let Volt se­dans in Au­gust — but that isn't nec­es­sar­ily a good thing for its bot­tom line.

Nearly two years af­ter the in­tro­duc­tion of the plug-in hy­brid, GM is still los­ing as much as $49,000 on each Volt it builds, ac­cord­ing to es­ti­mates pro­vided to Reu­ters by in­dus­try an­a­lysts and man­u­fac­tur­ing ex­perts. GM on Mon­day is­sued a state­ment dis­put­ing the es­ti­mates.

Cheap Volt lease of­fers meant to drive more cus­tom­ers to Chevy show­rooms this sum­mer may have pushed that loss even higher. Some Amer­i­cans are pay­ing just $5,050 to drive around for two years in a ve­hi­cle that cost as much as $89,000 to pro­duce.

And while the loss per ve­hi­cle will shrink as more are built and sold, GM is still years away from mak­ing money on the Volt, which will soon face new com­pet­i­tors from Ford Mo­tor Co., Honda Mo­tor Co., and oth­ers.

GM's ba­sic prob­lem is that "the Volt is overengi­neered and over­priced," said Den­nis Vi­rag, pres­i­dent of the Au­to­mo­tive Con­sult­ing Group.

And in a sign that there may be a wider mar­ket prob­lem, Nis­san Mo­tor Co. Ltd., Honda, and Mit­subishi Mo­tors Corp. have been strug­gling to sell their elec­tric and hy­brid ve­hi­cles, though Toy­ota Mo­tor Corp.'s Prius mod­els have been in in­creas­ing de­mand.

GM's quandary is how to in­crease sales vol­ume so that it can spread its es­ti­mated $1.2 bil­lion in­vest­ment in the Volt over more ve­hi­cles while re­duc­ing man­u­fac­tur­ing and com­po­nent costs.

But the Volt's $39,995 base price and its com­plex tech­nol­ogy — the car uses ex­pen­sive lith­ium-poly­mer bat­ter­ies, so­phis­ti­cated elec­tron­ics, and an elec­tric mo­tor com­bined with a gas­o­line en­gine — have kept many pro­spec­tive buy­ers away from show­rooms.

Some are put off by the tech­ni­cal chal­lenges of own­er­ship,mainly re­lated to charg­ing the bat­tery. Plug-in hy­brids such as the Volt still take hours to fully charge the bat­ter­ies — a pro­cess that can be speeded up a bit with the in­stal­la­tion of a $2,000 com­mer­cial-grade charger in the ga­rage.

The lack of in­ter­est in the car has pre­vented GM from com­ing close to its early 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 had hoped to sell in 2012.

The weak sales are forc­ing GM to idle the Detroit-Ham­tramck as­sem­bly plant that makes the Chev­ro­let Volt for four weeks start­ing Mon­day, ac­cord­ing to plant sup­pli­ers and union sources. It is the sec­ond time GM has had to call a Volt pro­duc­tion halt this year.

GM ac­knowl­edges the Volt con­tin­ues to lose money and sug­gests it might not reach break even un­til the next-gen­er­a­tion model is launched in about three years.

"It's true, we're not mak­ing money yet" on the Volt, said Doug Parks, GM's vice pres­i­dent of global prod­uct pro­grams and the for­mer Volt de­vel­op­ment chief. 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," Mr. Parks said.

"I don't see how Gen­eral Mo­tors will ever get its money back on that ve­hi­cle," coun­tered Sandy Munro, pres­i­dent of Munro & As­so­ci­ates, which per­forms de­tailed tear-down anal­y­ses of ve­hi­cles and com­po­nents for global man­u­fac­tur­ers and the U.S. gov­ern­ment.

GM said it al­lo­cates de­vel­op­ment costs across the life­time vol­ume of the pro­gram. Reu­ters cal­cu­lated the per-ve­hi­cle de­vel­op­ment costs based on the num­ber of Volts sold through the end of Au­gust.



Guidelines: Please keep your comments smart and civil. Don't attack other readers personally, and keep your language decent. If a comment violates these standards or our privacy statement or visitor's agreement, click the "X" in the upper right corner of the comment box to report abuse. To post comments, you must be a Facebook member. To find out more, please visit the FAQ.