GM CEO Akerson dismisses price factor with building 60,000 Chevy Volts in 2012
It is not unusual for CEOs to get snookered by their own marketing team. And I’m afraid General Motors (NYSE: GM) CEO, Dan Akerson, may be one of them, as he seems to buy-in to rhetoric that has no basis in common sense or understanding how much people are suffering economically today.
The issue for me is not over the Volt technology, the style of the car or even the safety. No, the issue is over the cost, no less than it is for many other potential customers who take a test drive, fall in love with the car, then get shocked when they see the sticker and the monthly lease. While I tend to believe GM is OK with offering a cheaper Chevy Cruze, that is still considered by the public as a marketing ploy that puts a fowl taste in the mouth.
As an early retiree about to receive social security, I find the Volt’s propulsion technology too cool to ignore. Since my drive miles are nowhere near what I used to require when I was working full time driving from Clinton Township to the GM Tech Center in Warren, Michigan, plugging-in would leave me with little choice but to drive extra just so the gasoline doesn’t go stale, or buy Stabil for the gas tank. Point is, owning and operating the Volt would be ideal for my driving style and needs.
Yet, when I combine the cost of the car with the savings on gasoline, I still find no grand economic advantage.So, why buy a Volt? In my case, I would be paying a severe premium to be partially green, considering that Detroit Edison still uses coal in many of its power plants. And economically it is barely a wash. So when I drive less, I’m still paying out more.
At least if I choose a small IC engine vehicle like a Chevy Cruze with a cost around $210 per month, the economics are far better, even with higher gasoline prices. Sure, if I drive a lot, the total monthly cost would approach the cost of the Volt. Nevertheless, when I do choose not to drive, I would surely save gasoline and still not have to make the high lease payment as I would with the Volt.
Looking at it from a pure dollar perspective, I do not a find a $400 per month lease to be palatable for me or for the masses, no matter what shade of green the Volt is perceived, or how many MPGe it gets. Fact is, the Chevy Volt is just plain too expensive to justify the expense.
Perhaps GM is counting too much on first adopters. For sure it is far too dependent, in my opinion, on federal subsidies to the tune of $7500. Who pays that? We, the taxpayers, of course. There is no free lunch no matter how many ultra-liberals you can count on the head of a pin.
What will GM do when the federal subsidies run out? My guess is, sales will fall like a rock; unless, that is, unless they reduce the cost significantly.
In my opinion, the Volt needs to be priced no higher than $28K for starters; or no higher than a Toyota Prius. Otherwise, GM simply has another car that is desired, but with insufficient customer funds available to buy on their own; and note I wrote, “on their own”; meaning without help from taxpayers.
In my opinion, to have any significant economic impact, the lease rate has to be palatable for the masses, more tot he tune of $300 per month max. Then GM would sell Volts like hot cakes.
Sure, I understand that lithium-ion batteries are expensive. And I understand the development costs have yet to be paid in full. Then again, that is the nature of product development. Those costs have to be expensed over many years, much like when customers buy their products over time. Yes, time is important, but profits dictate a mighty stress on corporations.
In many cases, the need for profits under a government mandate to build more EVs wastes everyone’s precious capital in the form of delivering, not what people can afford, but what the corporation must build to keep political face. And I find that a display of poor corporate character. I know that word, because I invented in in 1997 with my own book. “Perfecting Corporate Character” before Enron, before the tech wreck, before the housing crash and before GM went bankrupt.
Point is, GM has built cool cars before but priced them out of the range of affordability. Recall the Chevy SSR truck? It was cool, every guy including me wanted one. Yet, what did GM do? Limited production and placed a $42K price tag on it.
All GM had to do was make it a truck with cool style, then place a reasonable price tag. That, too, would have sold like hot cakes; ok, chocolate hot cakes!
With all respect to Mr. Akerson, he needs to lead GM toward making products that are affordable. If he doesn’t, then the Chinese will soon eat GM’s lunch. And don’t be surprised if that is the reason behind that new tech center in China.
My next concern would then be, what happens if China kicks GM out by 2020? I’ll address that possible scenario next time.
Full Disclosure: At time of publication, Sherosky, creator of the auto sector charts for TN, is neither long or short with the mentioned stocks or futures, though positions can change at any time. None of the information in this article constitutes a recommendation, but an assessment or opinion.
About the Reporter: After 39 years in the auto industry as a design engineer, Frank Sherosky now trades stocks, futures and writes articles, books and ebooks like, "Perfecting Corporate Character," "Awaken Your Speculator Mind", and "Millennial World Order" via authorfrank.com. He may be contacted here by email: [email protected] and followed in Twitter under @Authorfranks
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