Featured Gas prices/Truck sales benefit hybrid technology?

This is sort-of what former GM CEO Bob Lutz said last month, that he feels the GM Bolt EV cannot be profitable and the monies must be coming from SUV and trucks sales. Lutz pointed to several upper end vehicles have inexplicably gone from from $40k to $80k price.

 

Lutz is not and was never CEO of GM. He was vice chairman of global product development. In that role he worked with CED rick wagoner in killing the ev1, under investing in hybrids, and bankrupting gm. The federal governments bailout of gm protected him from being individully sued. Lutz retired from gm in 2010, and many believe he and wagoner should have been subject to claw backs of their pillaging of GM.

My guess is Lutz who consistently talks about how he doesn't believe in ghg climate change, just wants to tar the bolt. He has admitted that killing the ev-1 was wrong, but he is an angry old man, and if the bolt is successful, it just shows that if he had not botched his job, gm could have had it much sooner, and not been so far behind tesla.

 

OK Lutz was not CEO, but I don't see him as an angry old man. if you're resorting to personal attacks, it implies to me his statement re: Bolt was correct. The NPR inference seems to be corroborating.

 

RODRIGUEZ: When we were looking for inspiration, it goes back to that Greek mythology. And we really wanted to play that out with this truck. And, like, the front end of the truck is actually designed from me watching all these movies, like "300," "Spartacus," "Gladiator," "Troy." And, like, that helmet, it just really looks tough and menacing, and that's really what we wanted to put on the front end of this truck.​

Works for me.

Bob Wilson

 

The NPR piece isn't corroborating what Lutz said. In order to develop any new product, a company needs money coming in the fund the R&D. The ancient body on frame design off most trucks, with laxer safety, emission, and fuel economy standards, just means they can have a make higher profits on them. But the accounting doesn't differentiate which source of profits goes to which R&D project or paying stock holder dividends. The truck profit can just as easily be paying for the R&D of the next new truck.

Lutz wasn't speaking about R&D, but claiming that truck profits were being used to subsidize the Bolt, because he couldn't believe GM could be making any money at the price they've released. It is possible GM can be taking a very slim margin, selling it at cost, or even a small loss. If so, it is to capture market share, and is seen as a short term investment as initial start up production costs drop.

So it likely won't be a big money maker for GM, but the Bolt isn't some compliance car that they are forced to sell at a loss, and had to raise prices on trucks to pay for as Lutz implies. In light of how he defended the Volt making money over cost against the articles erroneously accounting the R&D costs, this does make him sound like a bitter, old man.

 

this is the same logic the pharma ceo used, when he purchased and jacked up the aids pill from one dollar to $750.

 

And there is a counter to that logic in the pharma industry, that is political.

 

I'll have to review what Lutz said, but it's not too much of stretch to add development costs into the implications of what he said.

Having said that, that is what for-profit companies do is fund R&D out of profits. But potentially more complex issue in this case with mandates etc.

 

As a whole every car company's profits has to pay for everything. That means that if a car line is not profitable and not hitting the target markers its going by way of the AX but in this case if it's a line of EV and Green vehicles theres some problems here. They cannot can these cars because of the perception that the car makers is not concerned about the environment. The publics perception of a 4x4 Silverado tearing up the desert is NOT what the general public perceives as a company wanting to be kind to the earth. lol!

But this is not EV-1 days anymore. ALL car makers will at least attempt to market some kind of Hybrid as a minimum to put in their car portfolio as a given. Better an EV vehicle but the general reluctance of being 'tethered' still resounds. Hopefully with Lithium-Ion batts this notion will gradually fade away along with quick chargers that even may be free.to charge. I can see free WIFI in the world but charging? We will see on that.

 

The original headline against the Volt state something to the effect that GM was losing $80k on each car. That's because the article did the math wrong. They split the entire development cost among the few cars sold up to that point when they should be spread out over the entire production run of the Volt, and other product spin offs; which include the ELR, gen2 Volt, and even the Malibu hybrid.

If Lutz is applying the same math as was applied by that Volt article, it would be more proof of him flipping position when the car isn't one of his projects.

An issue with what Lutz said is that he implies that it is a mandate forcing the companies to make plug ins, and that they are jacking up the price on trucks to do so. I think it is the low price of gas, and the market's desire for fancy SUVs are what is actually pushing up the price. Tesla doesn't have any ICE truck profits to fund their new model development.

California may have pushed the traditional companies into making plug ins, but Tesla is showing them that there is a market that desires these cars. Ignoring it now is ignoring potential profits there in the future. GM already had a popular compliance BEV with the Spark EV. If that was their only concern, they could have improved upon it, or gone with a slightly longer ranged Sonic EV for lower investment. Instead they went with a 200+ mile range car, that is assembled in the US, and will go nationwide. The Bolt isn't just compliance to some mandate. It is a serious answer to what Tesla will have.

One final thought, I think Lutz didn't consider what the Bolt will mean for GM's CAFE rating. Some of those truck profits went to the Bolt R&D, but each Bolt sold will let GM sell more trucks without fines.

 

Calling Lutz old is not a personal attack, his 84th birthday is a few days away. That is an objective fact, uless you want to be politically correct, something maximum bob would never do, and call him 84 years young. The press loves bob, because he says things like the prius doesn't make any sense (2004) or global warming is a crock of sh*t (2008), anything to get attention. It doesn't matter if its right or wrong bob belives it, and he will tell you.

GM: Hybrid compacts don't make economic, environmental sense - Jan. 6, 2004
Bob Lutz: Global Warming 'a Crock of Sh*t' and Hybrids Don't Make Sense | WIRED

That and the fact that he seems to hate bevs and had a hand in cancelling the ev-1 might give you pause. He has more automotive industry experience than years most people in the us have been alive. Maybe angry is the wrong word, but he doesn't have a great track record at predicting tech futures for cars. 1) GM should cancel the EV1, 2) don't invest much in hybrids - in his books he has admitted both of these were mistakes. 3) volt will sell well but tesla will go bankrupt - we will have to wait and see on this but likely wrong, 4) via motors can make money converting gm vehicles to phevs - almost certainly wrong.

So yes, I have a personal dislike of mr. lutz mainly for leaving america holding the bag on the bankrupcy he was instrumental in causing. I also have a distrust of his opinions on bevs. Granted he looked good on paper when he joined gm, but he was already 70 and set in his ways.
Lutz's 6-Month Report Card | News & Analysis content from WardsAuto

Let's objectively look at the statement though, they came here
Six superstars ponder the future of an 'irrational' auto industry
but are more easily digested here.
Bob Lutz: 2017 Chevy Bolt Won't Be Profitable (I Think) −

Given that price of batteries and that LG chem is doing the heavy lifting, the bolt could be profitable in its first generation. It probably won't be but the losses at gm won't be high, if there are heavy losses it will be at lg chem. I doubt Lutz tried to do the math, but that looks more likely to profit than the volt was when he greenlighted it and everyone knew it would lose money in the first generation. This generation is likely to be profitable, but won't likely pay back the investment on the first generation.

I find it very unlikely that gm and ford are hiking their prices to pay for the future bolt. That just doesn't pass the smell test. Perhaps they are raising their prices because people are willing to pay, and that is contributing to profits on these cars that gm is using to offset losses in Europe.

What everyone at the round table talked about was the cost of regulation and compliance. That cost is indeed high, and low gas prices in the US make it even higher (people don't want to buy efficient cars, but regulators demand they sell them and provide loopholes, once they buy them if gas prices are low they drive more miles making the cost even higher per barellel of oil not imported). Here maximum bob is in favor of a higher gas or oil tax instead of so many regulations and I agree with him, but ... not because of his reputation for being loud.

I think he did, he just exaggerated how much each one's price would need to go up. Its classic bob lutz.

 

I was able to listen to the podcast this morning and in some areas Lutz was dead right:

• Original Scion xB was good - he correctly pointed out the first one, a Japanese delivery van with windows, worked and was a good seller. But Toyota was unhappy that there were not a bunch of youngsters buying the but older folks. So their 'design team' updated the car and sales tanked.
• New cars of younger buyers is a dead-end - he correctly points out that young buyers are looking for a used, affordable car and don't have a lot of cash to buy new cars. Trying to design cars for a younger crowd just doesn't work. It may be unfair but old buyers have the money to buy new.
• Fully explained how dictatorship in VW failed - apparently Fredinand Piech was fond of calling in everyone to his office and giving them an ultimatum to fix a problem 'in six weeks or I will fire all of you.' Under that kind of pressure, cheating makes sense to keep a paycheck until the next job can be found.

Now Lutz has made mistakes and he acknowledged them. In other area, we can have a difference of opinion (or he is just out right wrong because he disagrees with me.)

Bob Wilson

 

Not surprised Klutz, er, Lutz has mentioned the above.

DBCassidy

 

This may be a case of sour grapes. When you look at the top 10 brands for 18-34, gm and toyota have none of them. Mazda, Nisan, Subaru, and Honda all are included, but scion, Toyota, and Lexus never seemed to connect. You might ask how nissan and mazda were able to do it, but toyota was unable in scion or toyota brand. Lutz couldn't break into the demographic with chevy, buick, saturn, pontiac, cadillac, oldsomobile, saab, or hummer. You probably get the gist. Yes the used car market is bigger. Here in the top ten there is one toyota - the lexus IS. Obviously you can claim the market is small, but toyota has been doing a poor job appealing to this small market, and in the us the small market is much larger than the hybrid market. Notice this criticism has nothing to do with what lutz said that is pertinent to this discussion.

VW has done well with that 18-34 yo demographic. Unlike gm under lutz the diesel scandal did not kill anyone. The ignition scandal happened firmly under his watch, so how do you think leadership was at gm? VW is not a shining example, but I as an american taxpayer did not bail them out for piech or really wintercorn who was running the place during the scandal. I did have to bail out gm for lutz's mistakes.


So back on track. The quote I'm disagreeing with Lutz on is A)
“I don’t know if anybody noticed, but full-size sport-utilities used to be — just a few years ago used to be $42,000, all in, fully equipped. You can’t touch a Chevy Tahoe for under about $65 (thousand) now,” he stated. “Yukons are in the $70 (thousands). The Escalade comfortably hits $100 (thousand). Three or four years ago they were about $60,000. What this is, is companies trying to recover what they’re losing at the other end with what I call compliance vehicles, which are Chevy Volts, Bolts, plug-in Cadillacs and fuel cell vehicles.”

Link is above where I first placed it from a roundtable with maximum bob. Do you think an escade's price went up $40,000 because of the volt, bolt, and elr. Since bob lutz left spending on fcv dropped a great deal at gm, so we know its not that.

Here is my take. Low gas prices make it harder to sell hybrids. that means car companies may use their profits to lobby congress to lower cafe. Yes some do have more cash to invest on hybrids and plug-ins but they will say they can't sell them.

In the oil business low prices take care of low prices. When the price is low investment sinks, then you get shortages and then higher prices. High prices spur investment and then more production, and with saudi wanting to maintain OPECs monopoly, a big drop in prices. Cars though last a long time. The inefficient models purchased now, will still be around when opec gets pricing power again and spikes the price.

 

klutz still sounds bitter that he was wrong about alt fuel vehicles. isn't it possible that low mpg vehicles have gone up in price because they can?

 

Exactly.

 

Personally, I don't care how high the price of low-MPG SUVs go. Add to that the 'urban cowboy' crew cab pickups. <GRINS>

Bob Wilson