Bob Lutz on the real cost to make the Chevy Volt, Reuters article "preposterous"

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In case you read the Reuters article that it cost GM $89,000 to produce a Volt, better read the article.
On Monday, Reuters published an article claiming that each Chevy Volt cost GM $89,000 to manufacture, meaning that GM was eating $49k per Volt sold. That article cited a report prepared for Reuters by an “analyst,” and it set off a firestorm of criticism of GM, the Obama Administration and the Chevy Volt. Both GM and Bob Lutz have weighed in saying the Reuters report was wrong, with Lutz spelling it out in great detail with a Forbes blog posting.
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The Reuters report cited “independent analysts” who claim the R&D cost GM spent to develop the Volt added up to the $1-1.2 billion range. Dividing that amount by the 21,500 Volt’s sold so far means $56,000 per Volt was spent in R&D costs. Further, other analysts have estimated the cost of materials to build the Volt is in the $20-32,000 range making for a total cost of $89,000. Because the Volt’s MSRP is just shy of $40,000, this line of reasoning says GM is eating at least $49,000 of loss for each Volt that is sold.
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This line of reasoning must appear logical to some, considering the number of articles and blog posts repeating these numbers verbatim. However a moments of thought and one realizes this line of reasoning is, as Bob Lutz wrote, preposterous. It is the sort of flawed reasoning that led to the “report” last winter claiming the Government had subsidized GM to the tune of $250,000 per Volt. Both claims contain the same kind of flaw. examiner.com/article/bob-lutz-on-the-real-cost-to-make-the-chevy-volt-reuters-article-preposterous
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Jim
 
All said and done, the taxpayers will eat the cost. Doesn’t matter if you cite Reuters or Bob Lutz. I would not drive nor ride in one of these on the highway. It is a death trap. It belongs on a go-cart track.🙂
 
Graubo3 said:
All said and done, the taxpayers will eat the cost. Doesn’t matter if you cite Reuters or Bob Lutz. I would not drive nor ride in one of these on the highway. It is a death trap. It belongs on a go-cart track.🙂
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What’s the source for your information that the Volt is a death trap?

Jim
 
The Volt, I would imagine, is subsidized both by the purchasers of other Chevrolet products, as well as by we taxpayers. The Prius is subsidized by the purchasers of other Toyota products. No one would buy a Prius for the actual cost of manufacture. Same with the Volt - except that US taxpayers are unwitting and perhaps unwilling investors. The true problem has yet to be realized: the cost of replacement batteries. $3,500-4,000 for a Prius.
 
po18guy said:
The Volt, I would imagine, is subsidized both by the purchasers of other Chevrolet products, as well as by we taxpayers. The Prius is subsidized by the purchasers of other Toyota products. No one would buy a Prius for the actual cost of manufacture. Same with the Volt - except that US taxpayers are unwitting and perhaps unwilling investors. The true problem has yet to be realized: the cost of replacement batteries. $3,500-4,000 for a Prius.
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Well, being we the taxpayers are the investors, you’d think we’d all be talking it up, rather than trying to knock it down?

Jim
 
JimR-OCDS said:
Well, being we the taxpayers are the investors, you’d think we’d all be talking it up, rather than trying to knock it down?

Jim
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Did we have a choice in the matter? GM has gone the way of the state-controlled auto manufacturer. But, there is precedent for this idea: Renault. Yes, I had one. Once. 😦
 
po18guy said:
Did we have a choice in the matter? GM has gone the way of the state-controlled auto manufacturer. But, there is precedent for this idea: Renault. Yes, I had one. Once. 😦
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At this point in time, it doesn’t matter, we own the stocks now and the best way to get our investment returned is to have the company be successful.

Jim
 
Bob Lutz is correct that the Reuters story is nonsense. It assumes that the development costs have to be amortized over just the vehicles sold so far, and that GM will never sell another one. No one knows what the total loss on the Volt will be. It is highly probable that the car will never turn a profit and that the government’s investment in GM will be under water for decades to come.

However, the GM ads trying to convince you to pay $40k for a car comparable to a 20k Chevy Cruze are just as crazy. No one will ever recover the initial cost difference in gas savings. It is believeable that the woman on their ad forgets how to put gas in her car. She is the same one who thinks she can vacation in Hawaii on her gas savings.😉
 
JimR-OCDS said:
At this point in time, it doesn’t matter, we own the stocks now and the best way to get our investment returned is to have the company be successful.

Jim
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It does seem odd that people would be practically rooting for American companies and their products to fail, doesn’t it? At least not until one man loses his job…:rolleyes:
 
JimR-OCDS said:
At this point in time, it doesn’t matter, we own the stocks now and the best way to get our investment returned is to have the company be successful.

Jim
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The taxpayers get nothing. You would have to invest as a private investor in Government Motors in order to realize any financial gain. Better to let GM fail and reorganize, like every other failing business has done. Lessons are learned and hard decisions are made following that route. Pouring my family’s cash into a failing business for the sake of political expedience is a poor business model, IMO. Clearly, you see it differently.
 
Trader said:
Bob Lutz is correct that the Reuters story is nonsense. It assumes that the development costs have to be amortized over just the vehicles sold so far, and that GM will never sell another one. No one knows what the total loss on the Volt will be. It is highly probable that the car will never turn a profit and that the government’s investment in GM will be under water for decades to come.

However, the GM ads trying to convince you to pay $40k for a car comparable to a 20k Chevy Cruze are just as crazy. No one will ever recover the initial cost difference in gas savings. It is believeable that the woman on their ad forgets how to put gas in her car. She is the same one who thinks she can vacation in Hawaii on her gas savings.😉
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By avoiding the purchase price of the Volt altogether, she can cruise the world at her leisure.
 
Seeker1961 said:
It does seem odd that people would be practically rooting for American companies and their products to fail, doesn’t it? At least not until one man loses his job…:rolleyes:
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Corporate greed lead to union greed, which lead to uncompetitiveness, which lead to failure. Who excels in auto making? The Japanese and Koreans. Those companies treat their employees better in the first place, leading to a more content workforce that is not engaged in an acrimonious and adversarial relationship with their employer. Simple. Too simple for America.
 
po18guy said:
The taxpayers get nothing. You would have to invest as a private investor in Government Motors in order to realize any financial gain. Better to let GM fail and reorganize, like every other failing business has done. Lessons are learned and hard decisions are made following that route. Pouring my family’s cash into a failing business for the sake of political expedience is a poor business model, IMO. Clearly, you see it differently.
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Well get back if the stock price returns to the price the government paid for them.

Hope GM fails is flawed logic from an investment point of view, and from a concern for the workers at GM and the US in general.

Jim
 
JimR-OCDS said:
Well get back if the stock price returns to the price the government paid for them.

Hope GM fails is flawed logic from an investment point of view, and from a concern for the workers at GM and the US in general.

Jim
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I hope GM succeeds. I want them to do it the old fashioned way, by producing products and services that people are willing and able to pay for without additional subsidies. Producing an electric vehicle that cannot be sold for its cost of production is not helpful just because some people in government feel that they should.
 
po18guy said:
Did we have a choice in the matter? GM has gone the way of the state-controlled auto manufacturer. But, there is precedent for this idea: Renault. Yes, I had one. Once. 😦
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Hahaha. You remind me of the movie Johnny Dangerously. “My mother shot me once Johnny…Once.”
 
JimR-OCDS said:
Well get back if the stock price returns to the price the government paid for them.

Hope GM fails is flawed logic from an investment point of view, and from a concern for the workers at GM and the US in general.

Jim
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Hello? No one “hopes” that GM fails. GM has been failing for decades. It is now limping along on SSI. But, government bailouts are corporate welfare, reward poor decision making, redistribute tax dollars to the investor class, and ultimately weaken the competitive nature of the core business. Oh, they also ensure an extremely high percentage of liberal union votes for the incumbent political party. We have a new class of legal racketeering: the government/corporate/union syndicate. And, it’s all legal!
 
Trader said:
I hope GM succeeds. I want them to do it the old fashioned way, by producing products and services that people are willing and able to pay for without additional subsidies. Producing an electric vehicle that cannot be sold for its cost of production is not helpful just because some people in government feel that they should.
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GM is producing fine products and you’re statement about the volt not being sold above the cost of production is flawed, as the article posted in the OP points out.

The thing is, electric powered automobiles is new technology and as technology goes, once companies like GM get involved with it, it will improve and eventually become the norm.

If we look back in the beginning days of gas powered automobiles when the first assembly lines were built, if we included the initial cost for building the factory and designing the product, the first auto’s produced would not return the cost. However, over the course of time, the products returned a profit in high numbers. Also, the R&D that went into future autos, evolved to the type of automobiles we have today.

All the auto manufacturers are developing electric cars and eventually they will be a product in high demand.

FYI, Gov Brown of California, just signed a piece of legislation that is going to move California into the driver-less automobile technology. I won’t see it, but imagine riding in an electric vehicle along a highway at 105mph and not having to drive it, but instead, you can be on the internet arguing in this forum instead. 😉

Jim
 
While we’re complaining about the government bailing out GM, keep in mind that China heavily supports new technology in various areas, especially in solar energy, to the point that they destroyed US solar power manufacturing and development.

Using the arguments here, China should not be investing in new technology of private industries.

However, their success tells a different story.

Jim
 
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