Lutz on Fast Money: Dodging questions on Volt viability?
The Vice Chairman at his bestLast night Melissa Lee of Fast Money asked Bob Lutz how many units of the Chevy Volt GM expected to sell. Instead of answering, Lutz switched the conversation to how much better the Volt is than the competition. Fine. Maybe it is on a technological level.
Lee then followed up by asking when consumers can expect to reap the benefits of the Volt. After a $7500 tax credit, Lutz claimed at $32,500 the Volt wasn't too much more expensive than Toyota Prius. Still, he never explained how long it would take the Volt to recover its additional expense compared to a Prius or a similarly sized conventional vehicle.
Yet, what happens when tax credits run out? Moreover, recently it was reported that even at $40,000, GM is still losing money on every Volt sold, as the first Volts will be sold below cost. On top of that, GM eventually - someday - needs to start recovering the $1 billion plus spent on production costs.
Thus, tax payers - now owing 60 percent of GM - are selling the Volt at a loss, at a time that the Volt program is already $1 billion+ in debt, and taxpayers are also going to provide a $7500 tax credit to help sell a vehicle that can't help GM's bottom line for at least a decade?
And, not too much more expensive than the Prius?
I don't know. $10,000 + a $7500 tax credit sounds a little expensive to me, especially considering that the Toyota Prius is already a tough sell for the far majority of Americans. Most Americans want an even faster payback, an even cheaper clean and green option.
And, while I agree with Lutz's sentiments about petroleum-free driving, without enticing a majority of Americans, EVs will have no effect foreign oil dependency even if they achieve 1,000,000 mpg.
In 10 or 15 years, the Volt might have a chance of becoming a profitable, top-selling vehicle in America. In the interim, competitors will be developing a plethora of Volt competitors. Yet, none of them mean anything until millions of reliable and cost-effective battery packs can be produced per year.
Until then - even as early as next year - Toyota could be selling 1 million hybrid cars+ per year.
So which car, the Prius or the Volt, will offer the greatest reduction in petroleum over the next decade?
Labels: Chevy Volt electric vehicle concept, Foreign Oil Dependency, plug-in hybrid vehicles, toyota prius
posted by Dahcredyns at
2:11 PM
11 Comments:
Well Said. If only Americans could think about other things then whats right in their faces.
We as Americans had to start somewhere, in order to move forward. I agree saving GM is a black hole but ANY president would have saved it for political reasons and nothing more.
It permanent demise would have created a loss of about 3.5 MILLION jobs indirectly and along with the still continuing monsterous housing mortgage meltdown, that 'combo' WOULD have created a REAL great depression not seen since 1932 and lasted for 5+ years if not longer. Even now the hundreds of BILLIONS in housing 'toxic assets' are LEGALLY allowed to be written of the 'books' for financial institutions- its an illusion but has to be done to keep any confidence in US markets still breathing.
So like it or not, the government had no choice unless it wanted 1 in 6 people unemployed for YEARS.
It would have meant a major political meltdown if the 'average joe' runs out of unemployment insurance and is walking the street to try to find food for his kids.
So its off the subject slightly, but actually its the point about why GM will be able to continue to be a 'black hole' for another 2-3 years - at taxpayer expense - as the consequences of not doing so, would be unimaginably catastrophic to the average worker (left still) in the USA.
well said, anon.
BTW, can I just point out two more things about the Volt's unprofitability.
One, GM probably couldn't make a conventional Volt profitably! They just are not good at making small cars profitably. Will the Cruz be profitable?
Two, GM based the Volt on the Delta platform that will be used with the Cruz, true, but it is a brand new platform. So, the platform itself hasn't developed economies of scale. And, the platform was just not good enough to support a electric drivetrain and had to be highly customized for the Volt, including a whole new supply chain.
My point is that the Volt's unprofitability is exacerbated by GM's inexperience with small cars and hybrids. In other words, if Toyota tried to build a Volt, the Toyota Volt would be MUCH lower cost. That's not to say Toyota should build a Volt or that the Volt technology is superior, just that Toyota probably could do it more economically than GM has.
I remember not long after 9/11 GM rolled out a new line of gas-guzzlers as Toyota ramped up Prius production.
Ok. That's the old GM.
The new GM claims its cost-ineffective Volt is better than the competition because it provides more oil-free driving while offering range.
Naturally, then, one would assume that oil-based driving is then bad. Yet, the competition will achieve more oil free driving for many more years as GM creates the perception that their products - at least product - is better at reducing oil dependence.
GM is free to try to create any perception it wants, such as that gas-guzzlers are about freedom, even after 9/11. However, when they are using my tax dollars to create an oil dependency-fighting perception, I have to balk.
I want much more than perception. I want reality.
The Volt will have no impact on oil dependency for more than a decade. That's fine, it's a futuristic product, but if oil dependency is so important, then I expect GM to do much more in the interim.
For decades GM used fuel cell vehicles as an excuse not to do more in the interim. Now its the Volt. Certainly, the Volt offers more realistic potential, but it still an unproven technology and future cost-effectiveness is an unfounded assumption. Moreover, by the time the Volt is cost-effective, other technologies might be even more cost-effective and just as oil-free.
Ultimately, if you're going to make oil-dependency your mantra, it has to be about more than just marketing and hype, otherwise it doesn't seem very genuine. The Volt, while a great piece of technology, feels like a marketing tool that enables GM to delay any real action on oil-dependency while pretending they are doing more than the competition on oil-dependency.
Putting off until tomorrow what can be achieved today has been a failed policy at GM in the past. Why should it be any different this time around?
Without doubt, in the real world, Honda and Toyota are doing more to reduce foreign oil dependency than is GM and that will almost certainly be the case for many, many more years, if not forever.
I find that offensive, especially when GM is using my tax dollars to hype and spin their perception into something much more noble.
Walk the walk.
well... GM makes what folks want - as long as gas is cheap...
Look around you on the roads and you'll see lots of GM SUVs, Tahoes, Yukons, Blazers, etc.
they produce what people want.
Toyota and others also produce SUVs but they just don't sell like the American SUVs do.
keep in mind that GM (and Ford) sell cars WORLDWIDE - and as far as I know - at a profit...
and they sell to what those markets want also.
the basic problem with GM is their "legacy" retirement costs for health care...
they are "upside down" on their working vs retired workforce and I seriously do not think that even if GM could produce and sell a Volt for what a Prius costs - that it would change much for their corporate health.
Look around you at the PERCENTAGE of hybrids to non-hybrids.
A company that produced and sold ONLY hybrids would go broke in months.
Toyota would not survive is they did not sell Tundras and Tacaommas, ForRunners, etc.
In this blog - we seem to not get it right because the theme seems to be that GM would do just fine if they produced more fuel-efficient cars....
and I think that ignores these other realities....
FORD is doing better.. by doing more like GM than Toyota - right?
FORD is not really offering anything THAT different from GM in my mind... in terms of fuel efficiency...
I think.. the situation is more than just offering what Toyota is...
there is some logic to your argument, Larry, but I think you're wrong on several counts.
first, toyota and honda, under your logic, became some of the biggest automakers in the world by focusing on vehicles that consumers don't want?
GM cherry-picked their market. for decades many, many americans have bought small and mid-sized cars that GM and the Big 3 gave up on.
during the carter administration, SUVs, especially in places like california, were almost made illegal except for farmers. GM lobbied strongly against that effort and succeeded. during that time, as SUV popularity was skyrocketing, SUVs were terribly unsafe and continued to be unsafe for many years. PBS did a great documentary on the SUV some years ago, I highly recommend it.
but consumers still 'wanted' these vehicles because of perception - because of the multi-billion+ ad campaigns the Big 3 used to sell the safety and freedom these vehicles provided. at the expense of real world safety and foreign oil dependency of course.
2nd, Ford and GM can make profits in other markets, but so to do other automakers, and the competition is growing. Buick for instance has been big in China, but VW is coming on fast. yet, the profits GM makes in foreign markets aren't enough to offset their losses in America.
still, that buick popularity is based on image. it's an iconic american brand that sells because of perception. i'll bet, however, that this Americana-angle doesn't last.
nonetheless, certainly, some of GM's American losses are a result of legacy costs - based on contracts management at GM agreed upon. so, when does management take some responsibility for poor decisions?
third, the toyota prius has been a huge financial bright spot for Toyota in the last few years according to a number of japanese financial analysts. and all toyota hybrids significantly helped Toyota versus GM in 2008.
last year i did a lot of car shopping during the gas spike. often toyota dealerships were just across the block from GM dealerships. toyota had customers, GM lots were dead.
so, i think toyota's long term view and hybrid focus has definitely paid off. now it's gravy time.
4th, while Toyota does need large vehicles to compete in the US, it offers a far more balanced portfolio of vehicles. more importantly, it HAS offered a far more balanced portfolio of vehicles for decades.
gm, and much of the big 3, put too many eggs in too few baskets. and while the big 3 have remained viable in the US, they did so via a huge lobbying effort for many years to keep CAFE requirements, etc. under control.
4th cheap gas.
that's a joke. why, for instance, does it cost the government 10's of billions every year to secure OPEC shipping lanes, yet those costs have never been recovered at the pump?
the US has been complicit with the oil and auto industries for years in subsidizing cheap gas because of the importance of the auto industry. essentially we subsidized complacency.
so, ultimately, GM makes what some folks want as long as the government continues its policy of manipulating the real world costs of foreign oil dependence.
fifth, if GM could make a Volt that costs as much as the Prius AND they could produce as many as the Prius, it would have a massive effect on GM. Why do you think GM has been hyping the Volt for years? Why is GM ALREADY using the Volt as a way to sell other vehicles?
finally, has GM and the big really been making what folks want - aside from the obvious pass on quality small vehicles the last several decades?
ultimately, it is undeniable that Big 3 quality sucked for decades, yet consumers still gobbled them up.
Why?
Perception. Protectionism. Zenophobia. But, not quality products.
My father, a unionist, bought shitty ford after ford after ford because it was the American thing - in his belief system - to do. And the Big 3 knew people like my father would keep buying and it took decades before they realized they might actually have to compete.
Speaking of Volt viability, I just read a comment by a reader on Lyle's website that was very enlightening.
The reader reminded everyone that Bob Lutz's original intent with the Volt was to compete with the Tesla Roadster not the Prius! This explains so many things.
One, price. GM doesn't seriously compete in the cheap, small car market that Hybrids are destined to compete in, and the Volt doesn't change that.
Two, the 5% market niche target. What I think Bob Lutz learned from Tesla is NOT what we learned from the Prius. What Tesla showed is that there is a small but significant market of well off people passionate about and willing to pay a big premium for an EV. For everyone willing to pay $100K for a Tesla roadster, Lutz probably figured there were 10+ people willing to pay $40K for a Volt. This is totally different from the $20K price range that Prius customers are looking for, and which Lutz was probably not thinking about with the Volt.
What is interesting is that GM has to a certain extent lost control of that message. Probably because they look similiar in size and roughly shape, the Volt is being compared to the Prius.
Now I can argue that Lutz was simply wrong to ever expect any different outcome than the Volt competing against the Prius. And I would agree with Dahc that making a car of such low volume and high cost does next to nothing for the country's energy problems.
Anyway, I was intrigued by that comment and the perspective it implies behind the Volt program.
Well, in late 2006, when the Volt was being devised, the Prius was a seller, but not that big of a seller. So, GM probably figured they could sell 50,000 Volts per year for a decade to counter the Prius while giving themselves a great vehicle for achieving the halo effect - something Lutz has addressed at great lengths.
My worry has long been that GM was more focused on the marketing and PR that the Volt could provide rather than GM's focus on addressing real world impact on fuel economy.
Lutz has always believed the Prius was purely about PR. In fact, he's often claimed that GM probably should have diverted a fraction of their ad budget into developing a Prius-like vehicle.
On the other hand, I think Toyota built the Prius because they believed it was a key product, or a key technology for the future.
To this day, Lutz still believes that neither the Volt nor the Prius appeal to the average consumer, but only a small segment of society.
And he's right, but will that bet work for another 5 years? 10 years?
If all goes as planned, Toyota will have the ability to begin producing 1 million hybrid cars per year next year. That doesn't sound like PR to me.
I agree that Toyota is serious about hybrids.
My opinion as to why is that Toyota sees hybrids competing for customers with the small, fuel efficient cars that Toyota relies upon. If hybrids will take away sales from Corollas, Toyota wants to be the one making those hybrids.
Also, Toyota were smart enough to just about corner the market for the hybrid supply chain and key patents, so now they have a clear path to dominate the hybrid market and possibly the future of the small car market if that market goes mostly hybrid.
well, i'd look at your small car analysis a bit differently.
gm is developing the cruze, for example, to steal small car share from toyota and honda. chrysler will have fiat. ford is also putting more into this space.
toyota and honda are taking this pace to the next level by ensuring they dominate fuel efficiency in the small car space.
Post a Comment
<< Home