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

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

9/11/2012

AP

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.