GM Volt: Dream Car or Road to Bankruptcy? 34 comments
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It appears that GM (GM) has fallen in love. It is committing its future to a plug-in hybrid power plant, and its new beloved does look beautiful. It promises the dual benefit of virtually unlimited miles per gallon of gasoline if the owner drives only 40 miles before recharging plus offering a standard 300 mile range with refueling available with ordinary, universally available gasoline if so desired. Yes, if oil prices stay high and especially if they go much higher, the public will buy that proposition. So GM’s planned Volt, the first production model plug-in hybrid, is morphing into a whole range of vehicles that will virtually redefine General Motors, as described in this news item.
The only problem is that a lot of people outside GM - including the U.S. Department of Energy - say that the lithium-ion battery on which the Volt is based cannot be produced at a cost the public would be willing to pay. Others say that with volume production, the battery cost will soon come down. So is GM betting the company on the unproven economics of an unproven battery? Or is it putting forth a dream so attractive that the U.S. government will be seduced into giving GM a cheap loan to fulfill it? Will the taxpayers own GM after the Volt - and its offspring - take over the company but fail to make a profit?
Maybe the real deal is that GM knows it has to go bankrupt to escape the uneconomical legacy costs that it cannot shed any other way. And maybe management is simply designing the most elegant possibly way of going into bankruptcy - by producing a dream car that America will also fall in love with and want to finance, thus giving political cover to the Congress that will have to authorize the take-over of GM.
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This article has 34 comments:
In addition, the Volt will only be produced in limited quantities,i.e., 10,000 the first year, 60,000 in the second year. The reality is that they will make little or no money on the Volt, at least in the first few years until the volume can reduce the cost of the battery. Compare these quantities to the total of 4,000,000 other vehicles....do the math. By the way, the same is true for the Prius, compare the Prius' volume vs total Toyota and you come to the same conclusion...it is an image product.
Further, they did it at a time when they were designing, producing and marketing a series of award winning new products such as the Aura, Malibu, Enclave, Tahoe Hybrid, CTS, etc.
As far as the legacy costs, the current GM leadership has negotiated a significant change in it's contract with the UAW forming a VEBA that removes the health care obligations from it's books in 2010. As part of that same agreement, a second tier wage agreement was made as well as changes in the JOBS bank that, in reality, almost eliminates it. Does this sound like a company trying to spend it's way into bankruptcy (another preposterous suggestion in itself)??
In total, GM has eliminated $9 billion of structural cost in the past two years, over and above volume related reductions.
What you end up with is a company that simply runs out of money some time next year, as the burn rate of a billion will significantly increase based on double digit sales losses for the foreseeable future.
The word BRANDING can be debated at GM is debated every day. But the GM Brand’s do not carry a positive thought in many American consumers eye. Turning around the GM brand’s will require a tremendous amount of creative marketing and money neither of which they have today.
Think about REASON TO CHANGE YOUR AUTO BRAND AS A CONSUMER? American foreign car buyers love their cars and continue to repurchase Asian and German brands. One only has to look at the beer wars between 1979-1990. Anheuser Busch spent billions of dollars to convert young Miller, Stroh, Coors drinkers, they were successful, but it took selling to a new generation and converting an existing consuming generation and 11 years to work.
What you end up with is a company that simply runs out of money some time next year, as the burn rate of a billion will significantly increase based on double digit sales losses for the foreseeable future.
The word BRANDING can be debated at GM is debated every day. But the GM Brand’s do not carry a positive thought in many American consumers eye. Turning around the GM brand’s will require a tremendous amount of creative marketing and money neither of which they have today.
Think about REASON TO CHANGE YOUR AUTO BRAND AS A CONSUMER? American foreign car buyers love their cars and continue to repurchase Asian and German brands. One only has to look at the beer wars between 1979-1990. Anheuser Busch spent billions of dollars to convert young Miller, Stroh, Coors drinkers, they were successful, but it took selling to a new generation and converting an existing consuming generation and 11 years to work.
I believe you and your commenters are all correct. But perhaps I'm a bit more cynical than you all are when it comes to GM.
To begin, they KNEW they were producing JUNK for years before they tried to do anything about it. And they KNEW the UAW contracts they
were signing in those days virtually GUARANTEED their future fiscal INSOLVENCY, short of some sort of Divine intervention.
As for the Volt, they KNOW EV's can only be at best "boutique" vehicles for the next several years. It's a decent effort from a concept standpoint, but it's a technological nightmare waiting to happen on the road in the real world.
However, now they're clearly using the Volt to curry favor with Pelosi & Co. for a Congressional bailout. Why else would they be spending SO many precious ad dollars on a car that WON'T EVEN EXIST for at least the next two years, in lieu of promoting high mileage compacts they need to sell NOW to stay in business?
I liked it when GM's CEO testified before Congress last week and they asked him, what if they only "loaned" (right!) GM and Ford $25 billion, instead of the $50 billion they were asking for? Without batting an eye he quickly responded he thought that would be "Alright!" NO sh--!
(It's difficult to figure out who's dumber, him or the Democrats!)
But the worst part is all this is going on while OTHER car companies are introducing 50-60 mpg conventional models here, and GM isn't even selling their successful (40+ mpg) world compacts in the U.S. Not to mention the NGV's they sell worldwide (19 models from various car companies in Canada alone!), which Boone Pickens has lined up a MILLION customers for.
So I don't need to hear about "poor" GM anymore. If they're the best we can do in America, we need to let them go away and start over!
.
I've done my homework on this issue, how about you?
Tax gasoline and diesel at $5/gal right up front, permanenly!! (It is amazing what even $2 tax would do - but let's provide the real emphasis, as if it were an embargo only the fuel is still available).
Tax diminishes as consumption declines.
Tax gets applied to:
1) ELECTRIFYING the existing RAILROADS (eliminate the diesel in diesel-electric; and no, don't convert ANY engines to NG) and,
2) building ELECTRIED inter/intrastate FERRIES in/alongside/above the existing right-of-ways, which is also where the BEEFED-UP ELECTRICAL GRID also belongs, and which will be close enough to connect nearby solar and wind farm power and take the power from the countryside to every major city, DUH!!!!!!!!!!!!!!!.
Now that's good policy AND PLAN.
And 3), so that you don't forget the best HYBRID - push the home-grown biofuel injected burner (with no moving parts) encapsulated with solid-state direct conversion to electric waste heat devices (which capture 80-90% of the energy) powering the 20-40 hp ChorusMotor with the only onboard storage device being the 5 GALLON GRASS TANK which we fill at 1/3 of the existing fueling stations because we get 3-4x the current fuel economy (while we subsidize the homegrown biofuel industry by using the existing $billions of subsidies given to farmers to do NOTHING with their land in CRP programs).
Now, there's win-win-win: energy independence by taking 21 mbd crude to ___ (doesn't matter, because as soon as our consuption drops more than 1 mbd the world will be awash in crude. Flooded, all the way to ZERO BURNING of hydrocarbons, for the right reason, not the liberal greenie reason.
GM Volt video player at www.hybrid-car-show.co...
the comment reminds me of a story titled "SATURN".
deja vous all over again? let's hope not.
Please stop slamming GM based on old hearsey data. Take a look a the current data. Look at Consumer reports on Hybrid payback time: GM 3 of top 7. Look at the JD Power resutls for Malibu - better than Camry, Ultima and Accord. Look at the real fuel economy numbers with more models over 30 mpg than anyone else.
We have a GM plant in our area and they are great taxpayers. They do a lot for our communite, they are our friends, family and neighbors. Please stop kicking them and start supporting them - open your eyes and give the home team a chance (like most other countries do).
Personally, I havent bought an American made car in a VERY long time. I'm tired of seen American manufactured vehicles in Europe getting 60+ MPG and the same model here only gets 25-35.
I say let 'em fail so an actual innovative company has some room to grow.
year and model of Toyota owned in 1994?
answer/reply of historical importance
Please don't get the idea Americans don't wish for GM to succeed. But there's a difference between pointing out their obvious warts and simply cheerleading.
For instance, I have a good idea that the myriad of government standards and mandates they must comply with has a good deal to do with why they aren't more successful. But you never hear GM tell their side, and ask for the help of interested consumers. Rather, they seem to want to always "go along to get along," which CANNOT be a successful business strategy.
One thing we've always practiced in America is an economic axiom known as "creative destruction." This means inefficient producers MUST be allowed to FAIL, so they can be replaced by more savvy competitors. The problem comes when it's the U.S. companies who are the ones that need to be re-invented.
So let me ask you, do you believe GM can re-invent itself into a profitable and going concern? (It would be nice to see more evidence of this than their ads touting the Volt, which is two years away from production.) If they can't, wouldn't it be better for them to go into reorganization now, rather than string out their pending demise?
In the longer view, wouldn't this really also be better for your community, friends, neighbors and America's taxpayers, as well?
On STAR is a telephone company. Opal has moderate success. The rest of GM is a joke with no place in our new world market.
Maybe a Southern California Design Team and a Colorado solar company and a Anaheim fuel cell design company could do a better product than the VOLT.
Lets play out the GAME .
Diegojames
Porter Ranch , California
Long BHP< TCK <OXY<LIHR<AA&...
Trust me I worked for GM. They are doing really terrible today. Bluffing their way, with their silly ads. They have no chance for survival whatsoever. I’ll give it till December before they declare bankruptcy.
1. Will GM have to go bankrupt or can its non-US operations salvage it? I have not done my homework on that but my reading says an awful lot of people who say they have done the homework think a bankruptcy is inevitable. More to the point, why would they be asking for a govt. bailout if they were not on the edge of insolvency? Bottom line: my suggestion of a likely GM bankruptcy is not unreasonable.
2. Will the Volt and its siblings work economically: as I said, it depends on the ultimate battery cost. There are mixed views. Clealy right now the li-on battery is too expensive, but things change with volume production and new technologies. Maybe GM is smarter than we give them credit for and maybe they can make money from the Volt at some point. I hope so, but a lot of people believe the bankruptcy will come before the Volt profitability does.
3. So, as Paul asks, why all the ads for the Volt since it won't be here for a couple of years and then not in enough volume to make much difference? I don't think it's unreasonable to speculate (which is the point of my article) that the real reason GM is hyping the Volt now is to give Congress the cover it needs to bail GM out from a likely bankruptcy by making sure everyone in America knows GM's future could be a lot more interesting and worthwhile than its miserable past. If Americans have a reason to keep GM alive other than to line the bulging pockets of top management, they will be a lot more foregiving of the Congress that wants to do just that. The Volt may be GM's hope for that reason that Americans might want GM to be saved.
In other words, the Volt is now as much about politics as it is about business. Sure that's just a guess on my part. But it seems not unreasonable and generally consistent with most of the commentary above.
1. Not interested in your opinion if you haven't done the homework.
2. I seriously doubt if GM expects to make money on the Volt for many years....just like Toyota. There's isn't a single hybrid that has a quick payback for the manufacturer with the exception of the mild hybrids. To buy one based on economics from a customer's view point also makes very little sense, again, not a fast payback. The only rational approach is to buy one for it's benefit to the environment or to diminish our dependence on foreign oil. Both worthwhile considerations.
3. The Volt was conceived several years ago. To suggest that it is for cover for loans doesn't fly. Equally silly is to suggest that the 100th anniversary of GM, which is what the media flurry was about, was staged for cover for loans.
Of course GM is touting the new technology, Toyota has made a ton of association money on the Prius which is nothing more than an image car. If you compare the EPA mileage for other comparable models of GM v Toyota, you will see that there is no difference contrary to media and public opinion. If you are going to compare the Prius to a GM car with a tradional ICE, it's like comparing the Sequoia to a Tahoe Hybrid, the Tahoe kills it (in fact the Tahoe Hybrid gets the same city MPG as a 4 cylinder Camry).
1. the management is sincere, open for discussions and wise
2. they MUST change their business model, which in the current conditions is not profitable.
3. the cars and trucs made by GM must be more fuel efficient, reasonnably priced and good looking in order to attract more customers and thus generate more sales
4. cut all underperforming production units immediately
5. find cheap financing which is so important for the financial survival in the next 2 or 3 years.
First : GM must find a new location to build cars where there is no UNION. Period. With the Uinon, GM will die no matter what.
Second: GM must kick out all those stupid old designers and hire new people with new ideas. The dealerships too, most of them are rude and treat customers like dogs.
The dealer whom I bought my Toyota from treated me like a King. Exellent service, friendly, and care. GM & Ford must learn from these people.
Over the last 30 years GM (like Ford and Chrysler) were less innovative and much more risk averse in terms of new technology than Japanese and especially European makers. Even the Koreans are more agile than the US car managers.
It's hard to understand that the big 3 completely overslept the fuel cost crisis which started to become obvious after 9/11 with constantly rising fuel cost. Now all of them, including GM are paying the price while the rest of the world has a complete line-up of models which, compared to US cars can be described as fuel efficient.
Don't get me wrong. I love American cars and most of the time I was owning one or more makes from GM or Ford (US). It would be bad and a loss to the world of cars should any of the NA makers disappear from the market.
Regarding the Volt I am convinced that the first time ever in 20 years GM has made a radical and brave decision at the dawn of the 2nd car revolution... and even taking leadership (and hopefully keep it!).
True Enterpreneurship is driven by vision, courage for innovation and execution. All big 3 were lacking these attributes most of the time. I truly wish GM a lot of success with the Volt and for sure I will buy one, once available in Europe.