Choosing a car at dealership. Thoughtful grey hair man in formalwear leaning at the car and looking away
Sept. 2012 — REUTERS — 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.
The Reuters item went out on the agency’s news wire, labelled “Insight,” offering further proof that although we’ve now settled into the serious days of fall we’re not quite done with summer silliness.
The item above is based on dividing the Volt’s development costs by current total sales at the time each story is written. So, all five are nonsense.
Volt sales are below GM’s expectations and it’s reasonable to examine why. Accusing fingers wag at the $41,000-plus sticker price. But to assign all its development costs to early sales, then dismiss it as an expensive flop, makes even less sense than another recent story about stick-on bumps that improve a car’s aerodynamics.
GM’s rebuttal: “The Reuters’ numbers become more wrong with each Volt sold.” Of course, because the share of development costs attributed to each one shrinks: which makes the financial reality exactly opposite what Reuters’ story suggests. In fact, the more built, the lower the per-car development cost. Sell enough and the expense becomes trivial.
Reuters did explain this, in a vague way, toward the end of its lengthy “Insight;” which only begs the question: Why write the story at all? I charitably suggest incompetence — mind-boggling, since three reporters and several editors contributed — rather than any political motive.
Still, political it is.
Media everywhere picked up the story and despite its flaws and the later insertion of GM’s response, the $49,000-per-car loss is now gospel. More to the point, it’s ammunition against U.S. President Barack Obama, who engineered the GM-saving bailouts and, critics say, dumped rivers of taxpayers’ cash into the corporation’s signature white elephant.
Here’s a sample from the esteemed Rush Limbaugh:
“There’s not one thing (Democrats) can point to that’s working. The Chevrolet Volt? They’re losing $49,000 on every car! … And Obama’s out talking about the auto industry being revived and rescued? It’s a lie! It’s an absolute crock!”
What was wrong with rescuing GM? Another conservative commentary complains the plan, in essence, slowed the middle-class race to the bottom: “Instead of allowing major auto manufacturers to shed their unaffordable union contracts in a standard bankruptcy reorganization, this administration intervened to essentially nationalize the companies — turning over part ownership to the unions at the expense of investors. How can Chevy now refuse to keep offering a Volt no one wants?”
Critics also leapt at news that Volts comprise most of the 1,500 plug-in vehicles to be purchased by the U.S. military over the next few years.
“The Chevy Volt . . . plagued by sluggish sales and mounting losses . . . has one deep-pocketed customer,” Fox News reported with a smirk.
It’s far too soon to predict the Volt’s fate.
It’s faring better than the now successful Prius did early on. But it faces an obstacle unknown to Toyota’s hybrid: While Prius pioneers were often the butt of jokes — “It’s a Prius. It emits smug.”— the Volt is more likely to incite vitriol.
It’s no longer just about green transportation.