Government Motors Chevy Volt is a Lemon

[fossten]

New York Times

July 29, 2010

G.M.’s Electric Lemon

By EDWARD NIEDERMEYER
Portland, Ore.

GENERAL MOTORS introduced America to the Chevrolet Volt at the 2007 Detroit Auto Show as a low-slung concept car that would someday be the future of motorized transportation. It would go 40 miles on battery power alone, promised G.M., after which it would create its own electricity with a gas engine. Three and a half years — and one government-assisted bankruptcy later — G.M. is bringing a Volt to market that makes good on those two promises. The problem is, well, everything else.

For starters, G.M.’s vision turned into a car that costs $41,000 before relevant tax breaks ... but after billions of dollars of government loans and grants for the Volt’s development and production. And instead of the sleek coupe of 2007, it looks suspiciously similar to a Toyota Prius. It also requires premium gasoline, seats only four people (the battery runs down the center of the car, preventing a rear bench) and has less head and leg room than the $17,000 Chevrolet Cruze, which is more or less the non-electric version of the Volt.

In short, the Volt appears to be exactly the kind of green-at-all-costs car that some opponents of the bailout feared the government might order G.M. to build. Unfortunately for this theory, G.M. was already committed to the Volt when it entered bankruptcy. And though President Obama’s task force reported in 2009 that the Volt “will likely be too expensive to be commercially successful in the short term,” it didn’t cancel the project.

Nor did the government or G.M. decide to sell the Volt at a loss, which, paradoxically, might have been the best hope for making it profitable. Consider the Prius. Back in 1997, Toyota began selling the high-tech, first-of-its-kind car in Japan for about $17,000, even though each model cost $32,000 to build.

By taking a loss on the first several years of Prius production, Toyota was able to hold its price steady, and then sell the gas-sippers in huge numbers when oil prices soared. Today a Prius costs roughly the same in inflation-adjusted dollars as those 1997 models did, and it has become the best-selling Toyota in the United States after the evergreen Camry and Corolla.

Instead of following Toyota’s model, G.M. decided to make the Volt more affordable by offering a $350-a-month lease over 36 months. But that offer allows only 12,000 miles per year, or about 33 miles per day. Assuming you charged your Volt every evening, giving you 40 miles of battery power, and wanted to keep below the mileage limit, you would rarely use its expensive range-extending gas engine. No wonder the Volt’s main competition, the Nissan Leaf, forgoes the additional combustion engine — and ends up costing $8,000 less as a result.

In the industry, some suspect that G.M. and the Obama administration decided against selling the Volt at a loss because they want the company to appear profitable before its long-awaited initial stock offering, which is likely to take place next month. For taxpayers, that approach might have made sense if the government planned on selling its entire 61 percent stake in G.M. But the administration has said it will sell only enough equity in the public offering to relinquish its controlling stake in G.M. Thus the government will remain exposed to the company’s (and the Volt’s) long-term fate.

So the future of General Motors (and the $50 billion taxpayer investment in it) now depends on a vehicle that costs $41,000 but offers the performance and interior space of a $15,000 economy car. The company is moving forward on a second generation of Volts aimed at eliminating the initial model’s considerable shortcomings. (In truth, the first-generation Volt was as good as written off inside G.M., which decided to cut its 2011 production volume to a mere 10,000 units rather than the initial plan for 60,000.) Yet G.M. seemingly has no plan for turning its low-volume “eco-flagship” into a mass-market icon like the Prius.

Quantifying just how much taxpayer money will have been wasted on the hastily developed Volt is no easy feat. Start with the $50 billion bailout (without which none of this would have been necessary), add $240 million in Energy Department grants doled out to G.M. last summer, $150 million in federal money to the Volt’s Korean battery supplier, up to $1.5 billion in tax breaks for purchasers and other consumer incentives, and some significant portion of the $14 billion loan G.M. got in 2008 for “retooling” its plants, and you’ve got some idea of how much taxpayer cash is built into every Volt.

In the end, making the bailout work — whatever the cost — is the only good reason for buying a Volt. The car is not just an environmental hair shirt (a charge leveled at the Prius early in its existence), it is an act of political self-denial as well.

If G.M. were honest, it would market the car as a personal donation for, and vote of confidence in, the auto bailout. Unfortunately, that’s not the kind of cross-branding that will make the Volt a runaway success.


Edward Niedermeyer is the editor of the Web site The Truth About Cars.

 

[brentalan]

"In short, the Volt appears to be exactly the kind of green-at-all-costs car that some opponents of the bailout feared the government might order G.M. to build. Unfortunately for this theory, G.M. was already committed to the Volt when it entered bankruptcy. And though President Obama’s task force reported in 2009 that the Volt “will likely be too expensive to be commercially successful in the short term,” it didn’t cancel the project."

The point of the Volt is a halo car. Toyota didn't make money on the Prius to start either. It gave them this great green image that worked to create a favorable image of the Toyota brand. GM has an image of Hummers, trucks and Suburbans that they need to lose in order to improve their image with the public.

"Instead of following Toyota’s model, G.M. decided to make the Volt more affordable by offering a $350-a-month lease over 36 months. But that offer allows only 12,000 miles per year, or about 33 miles per day. Assuming you charged your Volt every evening, giving you 40 miles of battery power, and wanted to keep below the mileage limit, you would rarely use its expensive range-extending gas engine. No wonder the Volt’s main competition, the Nissan Leaf, forgoes the additional combustion engine — and ends up costing $8,000 less as a result. "

The Nissan Leaf sucks because it has no additional combustion engine. You can only go so far on a charge before recharging, I think only 100 miles. The Volt can do a cross-country trip no problem and be used like any car you drive now.

"In the end, making the bailout work — whatever the cost — is the only good reason for buying a Volt. The car is not just an environmental hair shirt (a charge leveled at the Prius early in its existence), it is an act of political self-denial as well.

If G.M. were honest, it would market the car as a personal donation for, and vote of confidence in, the auto bailout. Unfortunately, that’s not the kind of cross-branding that will make the Volt a runaway success."

As this very article stated, the volt was in development long before the bailout. This car is halo car, a marketing tool to improve GM's image. I think there are some altruistic environmental concerns too. This is a first generation of something that can make money down the road.

 

[fossten]

"In short, the Volt appears to be exactly the kind of green-at-all-costs car that some opponents of the bailout feared the government might order G.M. to build. Unfortunately for this theory, G.M. was already committed to the Volt when it entered bankruptcy. And though President Obama’s task force reported in 2009 that the Volt “will likely be too expensive to be commercially successful in the short term,” it didn’t cancel the project."

The point of the Volt is a halo car. Toyota didn't make money on the Prius to start either. It gave them this great green image that worked to create a favorable image of the Toyota brand. GM has an image of Hummers, trucks and Suburbans that they need to lose in order to improve their image with the public.

"Instead of following Toyota’s model, G.M. decided to make the Volt more affordable by offering a $350-a-month lease over 36 months. But that offer allows only 12,000 miles per year, or about 33 miles per day. Assuming you charged your Volt every evening, giving you 40 miles of battery power, and wanted to keep below the mileage limit, you would rarely use its expensive range-extending gas engine. No wonder the Volt’s main competition, the Nissan Leaf, forgoes the additional combustion engine — and ends up costing $8,000 less as a result. "

The Nissan Leaf sucks because it has no additional combustion engine. You can only go so far on a charge before recharging, I think only 100 miles. The Volt can do a cross-country trip no problem and be used like any car you drive now.

Then why buy it? It would take 21 years to make up the price difference in gas savings, and most cars have at least a 340 mile range, so why would I want it? Hell, based on the tax money put into it, who knows what the actual cost of this car is. And it's not like the Volt is some badass muscle car or something. It looks like a Prius. It seats 4 people. It has less room than the Cruze.

Either way, I predict that when the tax credit goes away, so will the car.

GM's image isn't bad because of muscle cars - it's bad because they don't last beyond 5 or 6 years without something big like the tranny blowing out.

If it weren't for artificially high gas prices and punitively high cafe standards, the public wouldn't give a rat's ass about a car like this.

 

[brentalan]

People that buy it are usually the people that like the bleeding edge tech and are environmentally conscious. It's a step in the direction of getting rid of foreign oil. It's not cost efficient yet. It's just like with computers, the huge 30" LED displays costed a fortune a few years ago few people bought them. As the technology matured the costs came down. GM knows that they won't sell a lot of them and the first two years of production are so limited that it will likely be hard to find one as they will sell out immediately.

I've driven the Volt and there is plenty of room. I was able to stretch out comfortably. Yes, it seats only 4 but there is a nice trunk space in the back with the hatch.

I have to disagree about reliability, my '88 Caprice has had no major issues. My grandparents bought it new in 1987 so I know the complete history of the car. 22 years and no engine or tranny rebuilds at all. Every car company has some reliability issues with some cars, even mighty Toyota lately. GM falls right in the middle of all of the reliability surveys, they are industry average. The Caprice I have has been exceptional, but the example shows that they do have some great, reliable cars.

Full disclosure my brother is an engineer on the Volt team so yeah I'm a little biased but I truly believe it's a good idea.

Think of it almost like an ad campaign. If they spent several million dollars on an ad campaign, no one would argue, that's how you improve your image. Instead of that, they invested the money into a product that shows they can compete with cutting edge technology and yes, they are showing it off before it's economically feasible. This approach already worked for Toyota, so we know it works. It generates positive interest toward the company. They are not risking the business by doing it because they are limiting the production to an affordable number of vehicles.

The only risk is staying mediocre and not innovating. There will not be another bailout.

 

[topher5150]

I wouldn't call the electric car cutting edge technology...it was one of the earliest cars invented

 

[brentalan]

yes, a simple electric car is not hard to do but, trust me the technology that goes into this thing is unlike anything done yet. There are tons of computers that have to manage the state of charge, temp of the battery, brake regeneration and the seamless transition from the generator to the battery.

The early electric cars had no range, the batteries had to be replaced often and those cars weighed nothing. This is a fully reliable daily driver that will last 10+ years while carrying the weight of all of the safety devices we have today. Comparing this to that is like comparing a ZR-1 to a Model T.

 

[fossten]

People that buy it are usually the people that like the bleeding edge tech and are environmentally conscious. It's a step in the direction of getting rid of foreign oil.

The premise that fuel efficient cars get rid of foreign oil is a false one. The oil will be sold to somebody, even if we don't buy it. The best way to get our dependence off foreign oil is to encourage local production - something the current regime has demonstrated they DO NOT WANT. We're practically drowning in oil, so the only real explanation for the regime's actions is that they want control and power. Keeping prices high and availability low keeps Americans from moving around. Easier to control us if we stay put.

Brent, put your money where your mouth is and sell your Mark and buy a Volt. Tell us how good it is 5 years from now.

 

[brentalan]

Yeah, I suppose it is true that others will buy the foreign oil. I still think it's best that we get off of it, I agree we should encourage local production. I don't really think that there is a conspiracy to control us, I think the environmentalists are quick to protect things like ANWR. I don't see the problem with ANWR if it can be done cleanly and responsibly. People are understandably on edge and will overreact after the BP disaster.

I would very much like to buy a Volt, not necessarily because of what it is but because my brother is an engineer on the project. I'm proud of the work he's done on it. I would not sell my Mark I would own both vehicles. I use my Mark on weekends only even now. The Volt for me would make a great commuter car; I drive 94 miles round trip daily. I'd keep those miles off my Mark VIII and drive the Volt daily.

This probably won't happen soon because as I said earlier, the Volt is extremely limited in production. The first year is only 10,000 units and I suspect it will be a pain to get one. I will have it at the top of my list in the second year of production if I really need a new car at that time. See, I look great with the Volt LOL!!!

 

[fossten]

I wonder how hard it is for the Volt to produce heat for cold weather considering the typical car uses heat from the combustion engine.

 

[brentalan]

The battery uses an electric heat pump to heat the interior. This pump heats the same coolant that the ICE uses. Then when the ICE does turn on the coolant is warmed the same way any other car warms it. Heated seats also play a big role. The battery itself must also be kept warm during winter months to achieve maximum efficiency. This will obviously reduce your E.V. range unless you are plugged in. If you are plugged in the car will keep the interior warm for you while plugged in and top off the battery simultaneously. This way you have the full range and a warm car.


I understand we are here as car enthusiasts and a car like this isn't exciting to drive. I drove it and while it drives well, it's definitely no replacement for a car like a Mark VIII. Driving with no noise except tire noise is eerie. I would like to have the thing for commuting or what not but I would not want this as my only car. Hopefully the price will come down with economies of scale and it can replace all those Corollas we see buzzing around while bringing jobs back over here. In the short term, it can generate interest amongst people looking for fuel-efficient cars like the new Chevy Cruze which should hit 40 mpg on the highway. This is the same net effect we've seen with the Prius upon Corolla sales.

 

[fossten]

The Value of a Volt

posted at 10:50 am on August 1, 2010 by Doctor Zero

How much is a new Chevy Volt electric car worth?

The sticker price is $41,000. However, with federal subsidies, you could pay as little as $33,500. Additional subsidies provided by the state of California could knock it down even lower, for residents of the Golden State. So what’s the price?

$41,000, of course. The subsidies just mean you don’t pay all of it. The utterly bankrupt federal government takes money from other taxpayers, and uses it to discount your purchase. Since California is teetering on the edge of total collapse, and may well require federal bailouts in the near future, taxpayers across the country could end up paying additional sums to support Volt purchases that happen to occur within the state of California. These transfer payments are mixed into the thickening concrete surrounding the American economy, making it just a few inches deeper.

But wait, there’s more. Almost four hundred million dollars in federal subsidies were pumped directly into the design and production of the Volt. The initial production run consists of just ten thousand units, with 45,000 more planned for 2012 if sales are good. This would add just over $7200 more in taxpayer subsidies to each Volt produced over the next two years. Since 2012 production will be scaled back if early sales are disappointing, it might be more logical to add the subsidies to the first 10,000 units only, which would leave early adopters outside of California paying $33,500 for a car which actually costs $81,000 per unit, with taxpayers picking up the remainder. It’s actually even worse than that, because GM expects to lose money on every Volt sale. Those losses will be spread among other GM products, or perhaps wiped out with further taxpayer subsidies.

The Volt would not exist at all, if the government had not performed an elaborate voodoo ritual which involved burning $50 billion in taxpayer cash and sprinkling the ashes over the United Auto Workers union. This raised General Motors from its free-market grave, and placed it at the service of those who killed it. How much of this fifty billion should be divided among the Volt production run to calculate its true, final value?

There was no great consumer demand for the Volt. Toyota has been doing quite well selling the Prius, and Nissan has its own electric car, the Leaf, on the way. The purpose of seizing money from taxpayers to finance the Volt was preserving the jobs of union members politically connected to the Democrat Party, a point President Obama underlined in a recent speech in Detroit:

“If some folks had their way, none of this would be happening,” Obama said, as Chrysler workers booed his reference to Republicans who voted against the bailout. “Just want to point that out. Right? This plant and your jobs might not exist. There were leaders of the ‘just say no’ crowd in Washington. They were saying, ‘Oh, standing by the auto industry would guarantee failure.’ One of them called it ‘the worst investment you could possibly make.’”

[note the DIVISIVENESS!]

The folks who would have prevented this glorious moment in State engineering would be you, the taxpayers, who would never have agreed to pay almost fifty grand apiece to underwrite the production and sale of a little fleet of tiny cars with laughable battery cruise ranges… and overall fuel efficiency that would take decades to equal the cost of purchasing and fueling a more attractive, existing vehicle that didn’t require massive government subsidies.

Obama is lying through his teeth when he refers to the GM bailout as an “investment.” Politicians love to throw that word around, because they think it makes them sound like savvy businessmen. Investments are voluntary acts, conducted with the expectation of return. You were compelled to pay for the development of the Volt, and unless you’re one of the tiny percentage of the public who purchase one, you will receive nothing in return for these payments. You paid to preserve the jobs of rich and powerful labor unions, and provide a handsome discount to the few buyers who find the emotional satisfaction of saluting Green dogma to be worth $33,500. Virtually no onewould be willing to pay the true price of $81,000 for that satisfaction.

Subsidies and mandates based on ideology hopelessly distort the value of products, confusing the marketplace in the same manner as consumer fraud and theft. It’s as if car dealers were in the practice of routinely stealing automobiles from other states, and reselling them at steep discounts. The ability of the consumer to assess value and make rational purchases, expressing their demands and allowing the distributed intelligence of the markets to allocate resources efficiently in response, is destroyed.

Worst of all, consumers never see the opportunity costs of enforcing political mandates on the economy. They never see what could have been done with all the money taken from them to provide subsidies to the politically connected. They’ll never know what other auto manufacturers would have done to win over the market share released by the richly-deserved death of General Motors, or how many jobs would have been created by the production of goods the free people of the United States actually want.

The number of Chevy Volts desired by those free people is zero. By government decree, there will be up to 55,000 of them gathering dust in the far corners of three-car garages by 2012. The government didn’t subsidize this boondoggle. The “government” doesn’t subsidize anything. You do.Imagine what the taxpayers of America might have done with the billions taken away from them to produce those cars, divide that lost value by 55,000, and you will begin to comprehend the true cost of a Chevy Volt.

Cross-posted at www.doczero.org.