The Volt

| 5 Comments

Russ Roberts got me thinking about the Volt; here are some random thoughts:

1) I think we need to see this as one of the results of the increasing competition and opportunities brought about by globalization.

2) GM is taking an absolutely breathtaking risk -- the sort of risk I once believed only governments are willing and able to bear.

3) Massive private R&D projects do exist -- think Boeing 787 and Airbus A380. While they routinely fail to meet cost and schedule and performance, the private companies themselves must pay the penalty for failure.

4) But GM's situation is very much unlike a prime contractor in a military R&D project, in which a sensible profit rate is guaranteed, schedules routinely slip by years, costs can double or triple, and desired performance characteristics are flexible. If GM fails in any of these areas by wide margins, the brand will be badly, perhaps irreparably, damaged.

5) Both legacy and new media have greatly confused the COST of research, development, prototyping, testing, and initial lots of production of the Volt with the PRICE the market will bear. And GM managers -- even Bob Lutz -- are keeping their mouths shut about expected sale PRICE.

5 Comments

Even the Prius sells at a loss. After spending all these billions on R&D on the VOLT, I imagine they'll be selling them for a loss for a few years until the production techniques improve so that they can get to a reasonable price point.

re 3): don't I keep reading Boeing 787 and "KC-767"protagonists telling me that Airbus is sponsored more or less totally by European governments' subsidies...?

I've not seen a good study of the level of subsidy Toyota and subsidiaries/affiliates obtained for battery R&D...

Regardless of the level of direct and indirect subsidy for Boeing and Airbus, they cannot survive if they don't deliver aircraft to their commercial customers near the promised spec.

GM would not be taking this risk, unless they had a reliable prototype, that was working, and roughly costed out.

GM shares have taken a beating, as many investment advisors have predicted GM's demise.

This new technology is a game-changer, for the auto industry. If it works, the car business will never be the same again.

If it works, people who invested in GM shares, or shares in the company that will make the batteries, will profit from it.

If the technology is successful, and gas prices stay high, and the public embraces this new technology, and it's reliable, then GM would sharply expand this technology to it's other vehicles, radically altering the automobile industry, and gas comsumption patterns, worldwide.

If it works, it could be the big story of this decade.

Should be interesting to see if it will work.

"...2) GM is taking an absolutely breathtaking risk -- the sort of risk I once believed only governments are willing and able to bear...."

In a broader sense, probably not. Without the Volt, is there any reasonable expectation that bankruptcy is not in GM's future? OTOH, even if the Volt is wildly successful, it cannot possibly generate enough profit to support GM at its current scale. Bankruptcy will still be the effective result, with the Volt providing some possibility of survival and an excuse for government subsidies/bailouts.

Just my opinion.

Regards, Don

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This page contains a single entry by Kevin published on July 31, 2008 9:30 AM.

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