During the Democratic National Convention last week, Team O took great pains to avoid the American Recovery Act of 2009 (aka Porkulus) which cost the American tax-payer upwards of $800 billion and which had little noticeable effect on the private sector economy and the health-care reform act (aka ObamaCare), instead choosing to focus on the killing of Bin Laden and the auto bailout of General Motors and Chrysler.
General Motors Co sold a record number of Chevrolet Volt sedans in August — but that probably isn't a good thing for the automaker's bottom line.
Nearly two years after the introduction of the path-breaking 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.
Cheap Volt lease offers meant to drive more customers to Chevy showrooms this summer may have pushed that loss even higher. There are some Americans 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, Honda and others.
GM's basic problem is that "the Volt is over-engineered and over-priced," said Dennis Virag, president of the Michigan-based Automotive Consulting Group.
They are over-priced even with the $7,500 tax payer-provided subsidy.
And no wonder people are leasing instead of buying. Who wants to fork over another 10 grand in 5-7 years when that battery needs to be replaced?
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 - which will be difficult to bring down until sales increase.
But the Volt's steep $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 Chevy 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 been speeded up a bit with the installation of a $2,000 commercial-grade charger in the garage.
Another $2,000 you can sink into battery technology whose price won’t decline appreciably in the near or mid-term as long as China has an effective corner on the lithium-ion and rare earths market that are essential for these batteries.
Oh, and the greenies haven’t shared with us how it is we are to dispose of these batteries.
Back to the article:
"I don't see how General Motors will ever get its money back on that vehicle," countered Sandy Munro, president of Michigan-based Munro & Associates, which performs detailed tear-down analyses of vehicles and components for global manufacturers and the U.S. government.
It currently costs GM "at least" $75,000 to build the Volt, including development costs, Munro said. That's nearly twice the base price of the Volt before a $7,500 federal tax credit provided as part of President Barack Obama's green energy policy.
Other estimates range from $76,000 to $88,000, according to four industry consultants contacted by Reuters. The consultants' companies all have performed work for GM and are familiar with the Volt's development and production. They requested anonymity* because of the sensitive nature of their auto industry ties.
Basic math, even that taught in California’s public schools, will tell you that selling a product for half the amount it took to produce it will not reap your company its intended profits.
With apologies to the voters of Michigan and Ohio, don’t expect to hear anything but happy-speak out there on the campaign trail when one doesn’t have to scratch too far beneath the surface to get to the ugly truth of the auto bailouts.
* Allow us to translate: As long as the U.S. Government still owns a large share of General Motors, we don't want those thugs in this administration knowing it was us sharing the bad news.