OLD Media Moves

Reuters vs. GM: Who is right?

September 10, 2012

Posted by Chris Roush

This morning, Reuters published a story that began with this lead:

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, according to estimates provided to Reuters by industry analysts and manufacturing experts.

Cheap Volt lease offers meant to drive more customers to Chevy showrooms this summer may have pushed that loss even higher. There are some Americans paying just $5,050 to drive around for two years in a vehicle that cost as much as $89,000 to produce.

And while the loss per vehicle will shrink as more are built and sold, GM is still years away from making money on the Volt, which will soon face new competitors from Ford, Honda and others.

General Motors has responded with this statement:

Reuters’ estimate of the current loss per unit for each Volt sold is grossly wrong, in part because the reporters allocated product development costs across the number of Volts sold instead of allocating across the lifetime volume of the program, which is how business operates. The Reuters’ numbers become more wrong with each Volt sold.

In addition, our core research into battery cells, battery packs, controls, electric motors, regenerative braking and other technologies has applications across multiple current and future products, which will help spread costs over a much higher volume, thereby reducing manufacturing and purchasing costs.  This will eventually lead to profitability for the Volt and future electrified vehicles.

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.  The Volt is no different, even if it takes longer to become profitable.

GM is at the forefront of the electrification of the automobile because we are developing innovative technologies and building an enthusiastic – and growing – customer base for vehicles like the Volt.

Here is our interpretation: Reuters does state high up in its story that the cost to produce a Volt will reduce over the lifetime of its production, which is GM’s point in its statement. So we’re failing to see the point GM is trying to make about the story.

Plus, the U.S. auto industry has not had a good track record in achieving what it has said it would achieve in the past 30 years, and the Reuters story does amply quote GM executives telling their side of the story. In addition, GM declined to respond when asked specifically about the cost to make a Volt. It had its opportunity to set the record straight.

UPDATE: Former GM executive Bob Lutz also weighs in with a blog post on Forbes.

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