Does GM Need Saving?
This topic nearly word for word has been scrutiny of automotive journalists and other transportation stock analyst and pundits ever since it was announced that GM would once again do an electric car.
GM, Ford and Chrysler arrayed a huge number of lawyers and much cherished Washington lobbyists to go after California after it decided to introduce a zero emissions rule on part of all car fleets. While GM was fighting California, it was also building an electric car, 10 years ago called the EV1. The state lost, GM breathed a sigh of relief and promptly destroyed all EV1's and sold the patents.
Yep, sold the patents to a MIT. Just kidding. If the patents had been sold to MIT, the car would have been rebuilt and the Toyota Prius hybrid would never have been created. Whoever bought the patents wasn't interested in building an electric car. There is enough anecdotal evidence to suggest the battery patents were purchased by Texaco who has done tremendous work with them since ( NOT ).
Some might say, that was a wise business move to recoup costs, but most of the public would in acute dismay exclaim "Why would oil companies be interested in automotive patents that would/could eventually diminish their own returns ?"
So much for the history lesson, this week, we are back at square one watching a video interview with GM's Chief Designer as he discusses the new GM Chevy Volt.
GM has almost entirely "bet the boat" on the new technologies going to market in the electric Chevy Volt. We are sure that GM Detroit Management exactly didn't plan it this way, but their European operations must have seen the writing on the wall many years ago as gas hit 3+ dollars per gallon in europe and continued on through the equivalent $4 dollar mark. With the global credit crunch, increased gas prices and declining sales of the big cash SUV's GM is feeling the pinch like never before. The Volt must become iconic.
The car is also GM's gambit to outpace foreign competitors like Toyota (TM) and Honda (HMC). Unlike conventional hybrids-including the best-selling Prius-the Volt is essentially a plug-in electric car with an onboard gas-burning engine that can recharge the vehicle's batteries. This enables the Volt to travel some 40 miles before the driver turns on the gas.
Because most daily commuters in the U.S. don't travel that far, GM says many drivers will not have to use any fuel at all, simply recharging the vehicle via a regular outlet at home overnight. GM is still wrangling with the Environmental Protection Agency over the vehicle's efficiency, but executives say the final number should be north of 100 mpg for both types of power.
On the surface, unless you have significant shareholder shares in an oil company, we all want a Volt. The dream of being able to cross Europe or United States basically on plain cheap electricity without having to pay between 3 and 5 dollars a gallon for gas is a like a dream come true.
So will or can the dream car Volt save the General?
To answer that question, perhaps we should ask - Does GM need saving?
In May 2005, Business week estimated GM's Cash Reserves to be 45 Billion. However, for the first 6 months of 2008 the BostonHerald estimates that both Ford and GM burned through an average of a Billion dollars a month each, with accelerating burn rates towards the end of the year as sales in highly profitable vehicles like SUVs were down an improbable 18%.
Detroit News writes in an article on Oct 14th 2008
GM had access to about $21 billion cash, $5 billion in available credit lines and is raising $5 billion through asset sales and borrowing.
Cost-cutting associated with the aforementioned 10 Billion in cuts, intensified when GM announced it was closing plants in Grand Rapids and Janesville, Wis. 2500 workers are affected by these measures in plants that produce sport-utility vehicles and parts for pickups/SUVs.
So, since 2005 to 2008, GM and it's fat cat, top heavy management burned thru 25 Billion in cash and part of that was during 2 years of strong sales. The rumour is, that GM is eyeing the cash reserves of Chrysler ( estimated 11 Billion ) to help it through to 2010 when the Chevy Volt and Cruz are expected to help effect a rescue
So, what are our expectations for the Volt? GM says its expecting to sell about 10,000 Chevy Volts at between 30-40,000 USD each in 2010. So, that's about 3-4 Billion dollars in gross sales with a net of about a 800 Million dollars annually at an estimated 20% profit per car.
So, is this innovative car of the 2010 year - Volt just a little, just too late?
I leave that answer up to you, but if I had to make a serious bet with odds, I know which way I would be betting. - 23311
GM, Ford and Chrysler arrayed a huge number of lawyers and much cherished Washington lobbyists to go after California after it decided to introduce a zero emissions rule on part of all car fleets. While GM was fighting California, it was also building an electric car, 10 years ago called the EV1. The state lost, GM breathed a sigh of relief and promptly destroyed all EV1's and sold the patents.
Yep, sold the patents to a MIT. Just kidding. If the patents had been sold to MIT, the car would have been rebuilt and the Toyota Prius hybrid would never have been created. Whoever bought the patents wasn't interested in building an electric car. There is enough anecdotal evidence to suggest the battery patents were purchased by Texaco who has done tremendous work with them since ( NOT ).
Some might say, that was a wise business move to recoup costs, but most of the public would in acute dismay exclaim "Why would oil companies be interested in automotive patents that would/could eventually diminish their own returns ?"
So much for the history lesson, this week, we are back at square one watching a video interview with GM's Chief Designer as he discusses the new GM Chevy Volt.
GM has almost entirely "bet the boat" on the new technologies going to market in the electric Chevy Volt. We are sure that GM Detroit Management exactly didn't plan it this way, but their European operations must have seen the writing on the wall many years ago as gas hit 3+ dollars per gallon in europe and continued on through the equivalent $4 dollar mark. With the global credit crunch, increased gas prices and declining sales of the big cash SUV's GM is feeling the pinch like never before. The Volt must become iconic.
The car is also GM's gambit to outpace foreign competitors like Toyota (TM) and Honda (HMC). Unlike conventional hybrids-including the best-selling Prius-the Volt is essentially a plug-in electric car with an onboard gas-burning engine that can recharge the vehicle's batteries. This enables the Volt to travel some 40 miles before the driver turns on the gas.
Because most daily commuters in the U.S. don't travel that far, GM says many drivers will not have to use any fuel at all, simply recharging the vehicle via a regular outlet at home overnight. GM is still wrangling with the Environmental Protection Agency over the vehicle's efficiency, but executives say the final number should be north of 100 mpg for both types of power.
On the surface, unless you have significant shareholder shares in an oil company, we all want a Volt. The dream of being able to cross Europe or United States basically on plain cheap electricity without having to pay between 3 and 5 dollars a gallon for gas is a like a dream come true.
So will or can the dream car Volt save the General?
To answer that question, perhaps we should ask - Does GM need saving?
In May 2005, Business week estimated GM's Cash Reserves to be 45 Billion. However, for the first 6 months of 2008 the BostonHerald estimates that both Ford and GM burned through an average of a Billion dollars a month each, with accelerating burn rates towards the end of the year as sales in highly profitable vehicles like SUVs were down an improbable 18%.
Detroit News writes in an article on Oct 14th 2008
GM had access to about $21 billion cash, $5 billion in available credit lines and is raising $5 billion through asset sales and borrowing.
Cost-cutting associated with the aforementioned 10 Billion in cuts, intensified when GM announced it was closing plants in Grand Rapids and Janesville, Wis. 2500 workers are affected by these measures in plants that produce sport-utility vehicles and parts for pickups/SUVs.
So, since 2005 to 2008, GM and it's fat cat, top heavy management burned thru 25 Billion in cash and part of that was during 2 years of strong sales. The rumour is, that GM is eyeing the cash reserves of Chrysler ( estimated 11 Billion ) to help it through to 2010 when the Chevy Volt and Cruz are expected to help effect a rescue
So, what are our expectations for the Volt? GM says its expecting to sell about 10,000 Chevy Volts at between 30-40,000 USD each in 2010. So, that's about 3-4 Billion dollars in gross sales with a net of about a 800 Million dollars annually at an estimated 20% profit per car.
So, is this innovative car of the 2010 year - Volt just a little, just too late?
I leave that answer up to you, but if I had to make a serious bet with odds, I know which way I would be betting. - 23311
About the Author:
Dino Delellis writes on a number of interesting topics. To see more of the Dino personal journals hop on over to musings of Dino Delellis and catch his strange views on the world in a nutshell.
posted by Mr. Forex at
7:52 AM
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home