The Chevy Volt and the end of Government Motors
You've come a long way babySo, GM repaid the final $5.8 billion owed in government bailout loans. That's great. Of course, it might have been a bit nicer had GM returned the people's money with actual profits, rather than a government escrow account, but the perception of Government Motors is undoubtedly holding GM back. Paying off this debt helps remove that ugly blemish.
Nevertheless, $5.8 billion is pocket change. GM's real debt to America is ....
Finish: The Chevy Volt and the end of Government Motors
Labels: Chevy Volt electric vehicle concept, GM, toyota prius
posted by Dahcredyns at
3:10 PM
11 Comments:
well... how many folks say that GM was broke because they were no longer a viable company - and thus the bailout money was going to be thrown away... bad money after good?
Sounds like they are still viable after all.. eh?
With all the complaints about corporate bonuses and higher deficits, the bailouts (including GM) did their job and did not increase the deficit as much as initially estimated due to so many loans being paid back......
well if GM is still a viable company.. then it is starting to look like that they had a cash flow problem - and the Govt bail out kept them from going under...long enough for them to recover and keep on going.
Which is interesting because the conventional wisdom that was expressed was that GM was a bloated beast not nimble and not able to adapt to the market.
They might still go broke.. who knows... but I'm sure that all 3 American companies are holding private parties to celebrate Toyota being taken down a peg or two...
larry-
no doubt GM was bloated and the bankruptcy allowed them to shed a good chunk of fat that would have been difficult to trim without bankruptcy.
as long as their isn't a serious a gas spike in the next 5 years, i think gm will get their balance sheet in order, even their pension shortfall.
however, if such a spike were to hit, it would be terribly devastating.
and you are right. toyotagate was about the best thing that could have happened to gm and the big 3 which has left me quite suspicious. there are a lot of overlapping angles that could have led to a lot of collusion amongst various groups.
in the auto industry, it is well known that perception can be greater than reality. for instance, I often thought of gm as a marketing company that also sold cars.
you like at the history of GM's marketing and how they helped shape the consumer to value gas-guzzling, despite the facts, despite inferior quality, etc. and the last several decades of the US auto industry are really quite pathetic.
i know i've said it before, but there is a great Frontline documentary on PBS about SUV rollover. sure it's about SUV rollover, but it gets into the politics and marketing that power the not just the big 3, but a significant part of american politics.
honestly, it's repulsive. it makes toyotagate look like child's play.
anyway, we needed to bailout gm. there was no choice. but we're still on the edge of a very dangerous precipice, one that both nature and outsiders could push us off and into the abyss.
like financial regulation, we're still just tinkering around the edges. a plethora of non-partisan economists and many major investors claim that the bulk of the loopholes that caused the crash are't even a piece of the current financial package.
likewise, america is still being held hostage to subsidized foreign oil and it will take very little for a long time for that to lead to extreme pain.
if i were a betting man, which i am, i'd be hedging my bets a bit. there is light at the end of the tunnel, but a little oil is all it takes to push us back into the darkness.
Just saw my first GM commercial since the payback.
CEO says We repaid our debt to the government, in full and with interest, 5 years ahead of schedule.
This is the new GM.
Sounds a bit like old GM. Truthfully, the government is still into GM for $50 billion, as well as many billions more in recent loans and grants to increase fuel economy.
No doubt GM wants to portray itself as confident, strong and trustworthy. A little blatant honesty, however, would go a long way towards selling the belief that the new GM is actually different.
well GM has a long tradition of making automobiles .. and selling them... and GM was one of the forces that changed the way that people are mobile.. part and parcel of the interstate system ...beltways... commuting.. and to a very real extent the rise of the middle class who now could work at a factory and live in a nice home far from the smokestacks.
There are multi-generations of families whose ancestors bought Chevys and continued the tradition until those impertinent rice burner 'toys' rudely intruded....
There's another irony ... in the minds of many they believe that "buy American" means buy American even if the foreign company has built a plant in this country.
it's sort of back door connection to the idea of buying overseas oil.
So if Chevy sells a car made in America by an American company that burns American-produce electricity.... instead of foreign oil or foreign cars.. then do they have a "winning" American strategy?
"So if Chevy sells a car made in America by an American company that burns American-produce electricity.... instead of foreign oil or foreign cars.. then do they have a "winning" American strategy?"
Not necessarily, at least outside of marketing.
The most important part of the Volt is the battery pack, which is foreign made from foreign materials. Eventually, the packs will be assembled in America, but still from foreign parts. Regardless, according to experts, about 70 percent of battery value is found in cell production - not battery pack assembly - something that is essentially non-existent in the US. So, we've moved from foreign oil to foreign lithium manufactured into cells in foreign countries. Both of which are the keys to plug-in profits.
Likewise, according to what I've read, by 2020 GM still might be selling less than 100,000 Volts per year in the US, and still losing money.
Again, I think GM will, minimally recoup this money via marketing. Moreover, if the Volt isn't the next big thing, developing the Volt will help GM move in the right direction.
Still, is that a winning a strategy? I'd simply call it a small step in the right direction at this point in time.
However, let's take a different angle for a second.
Let's say, as the experts are predicting, that we do have an intense hurricane season and oil rigs in the Gulf are considerably damaged, and oil prices top $4.00 per gallon for 6 months.
GM will have few profits to stand on and might again need to be bailed out.
Likewise, if gas prices hit $5.00 next year for whatever reason, GM would probably again go into bankruptcy. Add up all their loans, pension responsbilities, etc. and we're getting up towards $80 billion lost without another bailout, and that's just direct, obvious costs, but that's still, essentially, what GM owes America.
They have not paid us back in full with interest, and in my opinion, to suggest otherwise is disingenuous.
Thus, it's way to early to call GM, or the bailout of GM, a success story. For instance, in no way, despite the Volt, is GM ready for a sustained period of $4.00 gas.
I think you could make the "where do we get the raw materials" argument for virtually every product made in America though and a ton that are not... the computer you and I are tapping away on and the cell phone you and I likely use as well as your Prius... your big screen TV, etc the relevant perspective being.. what will Americans be able to make to give them jobs....
If GM will give American jobs and produce cars PERCEIVED to not run on foreign oil... then they will be deemed worth keeping around.
That's was the decision with respect to the bailout.
and their pension responsibilities... that's a responsibility they still perform as opposed to a lot of companies who bailed and turned over their retirees to the US govt (other taxpayers, right?).
We do have a serious issue with what American will be able to make - to earn money to buy things...like cars.. plug-in or Conventional.
I have a different theory on gasoline and SUVs.
People who have kids an boats, campers, trailers, etc are not going to dump their SUVs because of gas prices.
They might cut back on driving the SUV every day but I do not think they're going to sell all their toys.. stuff the kids in the back of a Prius and stopped going on vacations with their toys....
Some might. Most won't.
five dollars gasoline will very much harm our economy.
and I still don't think it will drive people to plug-in cars if a conventionally-fueled 40 mpg car is available for 5K less.
In fact, I would argue that $5 gasoline will so harm our economy that people won't be buying new cars of any kind except for the most low end econo-boxes ... for those who still have jobs and commute.
others will start riding vanpools and buses to work, etc...
I'd even wonder if $5 would pretty much do away with plug-ins until the price came down substantially...
not trying to be negative about it.. just pragmatic...
when gasoline goes up.. it hurts the economy in general.
even the price of food goes up because transportation costs are embedded in it.
those Food Lion/WalMart 18-wheelers won't be plug-ins for a long, long, long time...
sorry, larry, it's a long response.
that's true about foreign materials, but lithium is particularly critical because it's the key to profitability, especially in plug-in vehicles. if GM, or any other automaker, is serious about making plug-ins a mainstream solution, this has to be a major focus. ALL the Asian automakers have taken this seriously for years, the US has lagged, quite seriously, and seems to be still be doing so.
anyway, that's not what really bugs me. to this date the sense i've gotten from GM is that a perfect storm pushed them into bankruptcy. it, on the other hand, had nothing to do with their past decisions.
while there is much truth to that line of thought, it still conveniently ignores decades of well-documented mistakes.
go back to the beginnings of this blog - many years before bankruptcy - and i was a very big GM critic, a much bigger critic than I am today. my criticism of GM has NOTHING to do with the bankruptcy, which i supported.
my criticism began when I heard Bob Lutz say things like GM could have beat Toyota to the Prius by diverting a fraction of one year's marketing budget to the project.
a fraction of just one year's marketing budget.
Instead, GM put that money into ad campaigns promoting its biggest line of gas-guzzlers, which they decided to upgrade AFTER 9/11.
then, many of us in the alternative auto community, including ex CIA leaders, began predicting the inevitability of a gas spike. a spike that a GM engineer told me several years ago - a full year before bankruptcy - had been predicted by an internal GM study as a likely possibility.
yet no preparations were taken. instead, new lines of gas guzzlers were pushed forward.
even the volt....for years bob lutz, the father of the volt, has publicly stated that the Volt is being built only for the 5 percent of the population that is willing to pay extra for such a vehicle.
he's said that within the last year. certainly not everyone thinks that way at GM, but this guy helped drive the entire Volt concept all the way through near production.
and truthfully, that's largely what most studies say is possible in the next 10 years.
while the Volt is a volume vehicle, it's powertrain is not, nor ever will be, compared to the gasoline powertrain. the volt was designed, from the beginning, to be a marketing vehicle NOT GM's key powertrain technology for the future.
contrast that to toyota's hybrid plan. by the mid-2020's toyota believes they could be more than 50 percent hybrid.
marketing. perception. reality. change. i want real change. not the perception of change. in reality, reality catches up. perception can only be temporary.
i don't want to be led to perceive that GM has changed. I want to KNOW they have changed.
anyway. sorry to go off on GM's corporate honesty. it's just something I've been very connected to for a long time. maybe too long.
anyway, in a long, winded way, i did get back to your great and final point, and something we've discussed in the past.
without question, the studies suggest exactly what you propose: higher gas prices, ironically, do decrease interest in plug-ins because as costs increase, consumers are willing to spend less on automobiles.
in all likelihood, cheaper cars will become ever more important, particularly since the emerging world is going to become critical to volume and mass-production. likewise, gas crunches, etc. will probably push americans into cheaper vehicles.
even hybrid technology might end up being too expensive if a serious breakthrough in algae-based biofuels or cost-effective hydrogen production is achieved.
I can see where the views are not lightly considered and deeply held.
I'm much more of pragmatic person believing that at the end of the day, any corporation has to confront the reality of what the market wants - even if that market changes dramatically due to gasoline prices.
GM's basic problem is not GM culture per se but the inevitability of any larger multinational corporation that has a wide range of products they sell.. in a very competitive market that virtually requires that the company risk it's assets daily to keep up.
GM went down not because they were making SUVs.. ALL companies were making SUVs including Toyota... and making profits off of them.
GM in America had become so invested institutionally in it's many different brand offerings that it could not seem to extricate itself until their very existence was threatened and they were forced to change.
Keep in mind that GM is, in fact, a very large, multi-national who competes well in other countries around the world by ALSO providing what those markets want.
perhaps part of the angst is an expectation that GM was once a powerful icon of America and now it's a bit tarnished ...
I don't really care if GM survives or not.. some company will make the cars that people want but I did care if GM was going to fail in a way that it could drag the entire country into a depression... so we kept that from happening.. not because we love GM nostalgically but simple pragmatism..
If this country recovers and gets back to it's economic vitality and GM goes belly up again.. it's going to go away... and should.
the reality is - that cars are now designed by computer and built by robot and cheap labor and those kinds of jobs are no longer the vital sustenance of the American Economy in my view.
The Hybrid is going to thrive especially once they start right-sizing specifically designed and optimized ICE backups....
the interesting thing....
sorry about the long response
the interesting thing.. is that we've had diesel electric "hybrid" locomotives for years and years and many new ships are now using electrically driven azipods rather than shaft/ICE systems.
the world goes on...with or without GM...
in some form GM, or parts of it, will be around a long time. GM China, for instance, has serious short to midterm value, although long term, betting on communist China is a bit of a leap, but unquestionably worth the risk.
the upside potential is just sooo huge.
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anyway, yesterday, I caught Jim Cramer's interview with the CEO of HP, the "Greenest Big Company in America" according to Time. you can check it out on yesterday's MadMoney at CNBC if interested.
anyhow, based on that interview - more precisely based on my intuition brought forth by the interview - i'd bet that if the HP CEO became the CEO of GM, the first goal he would set is to make GM the most fleet fuel efficient automaker in the US, then the World, without question.
Seriously, I bet he would put that line in the sand to his shareholders and managers and dare to go after it.
And, ironically, i'd bet that if GM became the most fuel efficient fleet in America - city and highway and without contention (i mean for reals!) - they'd also become the most profitable.
Honestly. Excellence in efficiency will drive future profits.
'The Most Money for your Buck' Buick. We don't just mean it. We guarantee it.
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