Auto Outlook: GM says losses on Volt 'grossly wrong’

By AL SWANSON, UPI Auto Writer  |  Sept. 16, 2012 at 10:09 AM
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It's not often a passenger car is turned into a political football -- but that is what has happened to GM's gas-electric, plug-in hybrid, the Chevrolet Volt.

Nobody went after Toyota when it introduced the first-generation Prius in Japan. Fifteen years later, Toyota is on pace to sell more than 200,000 Priuses in the North American market.

The latest Volt argument is over how much General Motors loses on each one it sells. A recent published report estimated every Volt sold costs GM as much as $49,000 -- pretty high for a car that sells for $39,000 before green-car rebates from federal and state programs and subsidies that lower the cost of leasing.

Political opponents of the president derisively call the Volt the "Obamamobile." For his part, the president has said he wants to buy a Volt when he leaves office and drive it himself if the Secret Service lets him.

"The Volt as a brand has become politicized," Vice Chairman Jeremy Anwyl told the Los Angeles Times.

GM won't say how much it loses on each Volt but said the report incorrectly "allocated product development costs across the number of Volts sold instead of allocating across the lifetime of the program, which is how business operates."

After spending an estimated $1 billion to develop the gas-electric car, GM has sold nearly 13,500 Volts so far this year, just over half of the sales originally projected for all of 2012.

GM may be losing money on the Volt now -- just like Nissan is losing big bucks on its all-electric plug-in Leaf -- but the once staggered auto giant can afford it after posting 10 straight profitable quarters since reorganizing and earning $1.5 billion in the second quarter.

Nissan sold just 4,288 Leafs through August but the Japanese company also is earning near record profits -- and the state-of-the art technology used in both vehicles puts the companies in good shape to meet increased fuel economy standards of 54.5 mpg mandated by the federal government by 2025.

Ford sold just 169 of its all-electric Focus Electric cars through August, the Detroit Free Press reports.

Doug Parks, GM's vice president of global product program, said the Volt "eventually will make money" and predicts the second generation Volt will sell at higher volume.

"Every investment in technology that GM makes is designed to have a payoff for our customers, to meet future regulatory requirements and add to the bottom line," GM said in a statement. "The Volt is no different, even if it takes longer to become profitable."

At the Democratic National Convention in Charlotte, N.C., last month, Vice President Joe Biden sought to turn Republican criticism of the auto industry bailout into a positive by making the bumper sticker -- "GM alive, bin Laden dead" -- an Obama re-election slogan.

Republican presidential nominee Mitt Romney says GM should have been allowed to go through the traditional court bankruptcy process in 2009, but Democrats counter saying there was no private capital around then to help it reorganize because of the financial meltdown and banking crisis.

Treasury bailed out GM and remains a major shareholder with 500 million shares, 26.6 percent of the company. Former Obama administration auto czar Steven Rattner said it was simply wrong to suggest the administration held off putting GM into bankruptcy, The Detroit News said.

Honda, Hyundai and Ford have all introduced new hybrids, with the technologically advanced Accord sedan, which has a four-cylinder engine and two electric motors, the hybrid Sonata, and the Fusion electric and plug-in hybrid Fusion Energi and C-MAX hybrid.

"Toyota lost a lot of money in the beginning when it brought the Prius to the world," Thilo Koslowski, an analyst with Gartner Inc., told the Times. "This is particularly true for cars with new powertrain technology like the Volt."

The 2013 Volt can go as much as 38 miles on a single charge before its gasoline engine kicks on to provide electricity from a generator to power the car and recharge its batteries. By comparison, a Prius plug-in hybrid can go up to 15 miles on electric power alone.

Gas prices set to fall?

Gasoline prices may have peaked for the year.

That's the word from petroleum industry analysts who predict gas prices will moderate quickly as the summer driving season ends.

At a national average $3.84 per gallon, gasoline prices remain 19 cents higher than this time last year, but Gulf of Mexico refineries shutdown by the approach of Hurricane Isaac last month suffered no major damage and are coming back on line.

Of course, nature could throw a monkey wrench into production restarts if another storm develops in the gulf.

Robert Rapier, a guest blogger for The Christian Science Monitor, also points out winter-season blends of gasoline are cheaper than the pollution-reducing summer blends and he says higher crude oil prices have already been factored by oil companies into pump prices.

Good days at Flat Rock

Times are good at the former AutoAlliance International Plant in Flat Rock, Mich.

The plant, a joint venture that began assembling Ford Probes and Mazda6s in 1992, is now under Ford management and will begin building the all-new 2013 Fusion sedan next year.

The Fusion hybrid and Fusion Energi plug-in electric will be built in Hermosillo, Mexico.

Ford, which has sold most of its stake in Japan's Mazda, last week renamed the 2.9-million-square-foot facility the Flat Rock Assembly Plant. It is spending $555 million to update the Michigan factory and will add a second shift creating 1,200 jobs. Laid-off Ford workers will get first shot at the new jobs before new hires are recruited.

"It's (the plant) produced a lot of important vehicles for the two companies," said Mark Fields, Ford's president of the Americas. "We're proud of that past. We are even more excited about our future."

The next generation 2014 Ford Mustang also will be built at Flat Rock. Mazda still owns 50 percent of the plant, but its last car rolled off the Flat Rock assembly line Aug. 24.

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