Chevy stops Volt production (temporarily ...)

And then the 30% discount paid for by the Japanese government by holding the YEN at 110 for exporters puts the Prius at $40k+.

 

"analyst" = someone who doesn't understand generally accepted accounting practices (GAAP).

 

Not that anyone cares, GM has a clear path:

• universal auto-stop - applied across all of their current models, it won't deliver much but it will deliver more than if left on the shelf.
• fix Volt engine - low hanging fruit, direct injection, regular gas, and improved control laws such as run the engine at idle early, especially when cabin heat is requested.
• trim battery pack - EDN has a fairly extensive analysis of the Volt battery pack. Loss of one bay to give another seat or more room in the rear seat is low-hanging fruit.
• fix Volt transmission - with computer control and a motorized idler, it should be able to 'hot shift' without a clutch across a wider range of speeds for engine assist at higher speeds with an efficient engine.

This would a game-changer Volt and serious competition to the Toyota/Ford family. The beauty is both the engine and transmission technology scales well across all models . . . reducing weight, improving mileage, and little or no cost impact. But today's Volt is the NHW10 of its time.

Bob Wilson

 

I agree you had some good point.. and maybe I should have acknowledge them more explicitly.

My point was, and still is, that if the per unit gross margin is > zero, then halting production does not reduce losses, it increases them. Your analysis was estimating break even point, including R&D, but that is a separate (though still interesting) question.

If one accepts the production costs estimated in the article of 20-32K, then margins appear positive. However in Lutz forbes article
The Real Story On GM's Volt Costs - Forbes
He suggests they are just about break even. Given the article slant I would think they overestimate but given Lutz inside information I'd go with him on costs

 

Here's what I'm hoping for out of this thread and this site:

1. Valuable, useful and accessible information about the Prius for those who are owners, considering ownership, or just curious about the car;
2. Discussion among members that encourages and advances the first point, builds community and makes it fun to stay part of PriusChat; and
3. Truthful and respectful interplay, especially when there are deeply-held beliefs and passions involved, so that, even when one party is incorrect he or she is not vilified but encouraged to acknowledge other points of view and/or accept fact as fact.

You got me a bit heated by missing what I was saying, and especially by suggesting I said one thing when I said another. It took me a couple of posts before I understood the main objection you had to the Reuters article.

I offered my apology for being too dense to see what was bothering you about the article, and it got me interested in digging more deeply into the situation. I'll take your recent post as an apology for missing and unintentionally misrepresenting my points.

The bottom line on the Volt finances may never be known, but if GM is saying they are losing money on the car right now, I think I'd have to accept the statement. Why would they "admit" it if it weren't true?

Toyota lost money on the Prius for many years. It didn't abandon the project, and I don't think GM will abandon the Volt project unless and until they are convinced there never will be a large enough market to justify continuing development and production. They may have lenders who tell them otherwise, but that is another story.

This brings me to my last point. There is quite heated debate on this site and elsewhere about Volt's costs. Why is this so, and why is it any different that discussion about the costs of developing and building the Prius? I don't know that it is politically driven, perhaps that is a part of the equation. I don't think it is a division on unions, though that also could play into it. I believe it is simply because nearly everyone of us is a stakeholder in GM. No because we want to be, but because we have to be. The bailout happened. As a taxpayer and lender, I want to be certain the money is spent wisely and in such a way as to optimize the opportunity for payback.

If I'm simplistic for saying this, and I'm being conned by the left or the right, so be it. Point me in the direction of information that will give me a better understanding and wish me well.

 

This is an important point:

How many car companies can survive fighting for what looks to be at best, 2.5-3.0% of the car market?

Subsidies are not enough and even if made 'for free' (aka., the Ford experiment), there is something going on . . . some barrier to increased hybrid sales and this remains a problem.

Perhaps it is simple arithmetic, the hybrid premium, but I think it is also part of:

• FUD - a decade of anti-hybrid claims and rumors
• still too new - perhaps only a very small fraction of the car market are those willing to risk innovation
• changing life-style - are the past, younger buyers actually going 'virtual' with smart-phones and pads instead of real trips
• gas still too cheap - we aren't paying full market price with various subsidies still in the tax code

Regardless of the causes, our hybrid market has plateaued since 2006 -07 when the supply of Prius and other hybrids finally met the demand. That was when the Prius dealer market-up finally tapered off. The market share still seems to bounce between 2.5-3.0%.

It does no good to have a Leaf cannibalize a Ford hybrid sale or TDI eat a Prius sale. This is just 'shifting the rubble' of a market share that is too small.

Bob Wilson

 

^^^maybe also add to the list that Toyota is a foreign company which faces some rejection in USA for personal preference reasons, so having GM/Ford with some competitive offereings is a good thing that might increase the 3% hybrid.

 

I find the argument that the market acceptance of the Volt can/should mirror that of the Prius very unpersuasive:

• Prius was completely novel technology, Volt is mostly a Prius copy with a battery
• Prius was launched in the years that petrol was much cheaper than the corresponding period for the Volt
• Volt has domestic political support in the groups most likely to buy the car. Republicans do not matter here, because they are a minor market.
• Volt has a $7500 tax credit, Prius had nothing during comparable time periods.
• Prius was faced with a well funded, massive FUD campaign. Looking at you, GM.

 

GM's campaign against hybrids back than was unbelieveable. Now, the situation and circumstances are quite different, yet some keep trying to portray it as if it's still the same. That's not constructive.

Toyota delivered a product designed for middle-market. GM clearly didn't... could have... but chose not to.

The pressure to deliver a configuration suited for mainstream consumers is building.

 

I asked `myself why I am a Volt detractor, aside from my intense dislike of GM. For me it comes down to aversion to hype and FUD, and the Volt is the king of both.

 

That's strange, I remember getting a pretty sizable tax credit on my 2005 Prius. It wasn't $7500 but IIRC it was far from "nothing".

 

Jeff,
The Prius launched in the US in 2000. This is why I wrote comparable time periods.

 

Fair enough. In the comparable time periods it was a $2,000 deduction not a credit. Not nearly as lucrative as a credit.

 

If we look at the OG (original gangsta) prius, you know the gen I, wasn't that like an upgraded echo? Hardly mid market. Here's a reminder. I kind of don't need it since a neighbor has one.
2001 Toyota Prius - Road Test - Car Reviews - Car and Driver

You may believe the gen I prius was quite different from how others saw it. Here is even one of the same things leveled against the volt.

Which makes me ask? Isn't the volt closer to mid market than the gen I prius. I mean it hits many things better. But better is not good enough these cars need a second generation to improve.

The Prius has tax deductions from uncle sam then tax credits, until toyota maxed out the federal credits during the second generation model. Its a mythology that some seem to like to make up. Toyota did this with no government money. Turns out there were large subsidies, and that was a good thing to advance technology.

 

Remember the japanese and american governments also gave toyota a big gift in exchange rates when the prius started being imported to america. Exchange rates now hurt the prius, unless toyota moves manufacturing to NA.

 

Lenders will have the final say on the future of the Volt.

DBCassidy

 

Can you explain that one? The volt only can help the bond rating, as it lowers cafe risk.

 

If GM tanks on the financial front, their only recourse is assistance from lenders to keep them going. Of course if their credit rating is not good, all bets are off.

DBCassidy

 

Sunk cost fallacy tells us to ignore what the Volt has already cost or hasn't cost. The question is simply this: Is GM served or not by making more of the Volt and selling it now, irrespective of what it cost to come up with? And the answer, based on that projected $20-32k production cost is, yes it's well served by continuing to make Volts, which it typically sells above that production cost.

Profitability of the Volt project itself is irrelevant to whether now making Volts is a good idea.

That silly article on Reuters failed to state the simple case that any new product is "made at a loss", since no new product has such a margin as to recoup R&D immediately. It's a silly article.

Now if indeed GM is still losing money now on a per-Volt basis, selling for less than production, the answer is murkier. They still ought to do it if it serves the greater picture of eventual profitability.

 

There is an exception to this approach. If the Volt sales were cannibalizing another GM vehicle with higher margins then it might make sense to throttle production.

I think this is one of the problems at the dealership end. When a salesperson has a buying customer in hand that may have come in the door for a Volt there is a strong incentive for the salesperson to switch them to another $30k-$40K vehicle for a significant personal $ award.

I experienced this with my own dealership visit and circumvented the issue by contacting an out of state dealership that had incentive to move Volts ($2500 per Volt for exceeding volume targets).

I had the same experience with my first Prius in 06.