Tuesday, July 27, 2010

They're Called 'Government Motors' For A Reason

From CNN:

General Motors announced the final price of its Chevrolet Volt electric car Tuesday afternoon, but it's the lease rate that will probably be most interesting to consumers.

The purchase price for a Volt will start at $41,000. The vehicle qualifies for a $7,500 federal tax credit, for an effective price of about $33,500.

So that's bad enough. Taxpayers already have to foot the bill for $7,500 per sale on these turkeys. That's $75 million of your money if somehow GM were to manage to sell all of them the first year. Fat chance, but it gets worse:

Pricing for the Volt isn't a terribly critical business decision for GM, [auto analyst] Toprak said, since the car is expected to lose money, anyway, during its initial run. It's really an image-making "halo car" for GM.

Yeah, that makes perfect sense for a company that's billions in the red and effectively bankrupt--bet heavy on a money-losing car!

You do know who picks up the tab these days when GM loses money, don't you? Go look in the mirror if you're not sure. But it'll make the small number of decidedly-on-the-wealthy-side greenies who buy these glorified golf carts feel oh so much better, and that's priceless.


If you're stupid enough to buy GM stock in the fall IPO, I heartily suggest that you dump it before November 2.

UPDATE: "Yes," you say, "but Will, they obviously want to lease these cars, not sell them."

M'kay, let's do the math. They're advertising $350 a month for 36 months, plus $2,500 due at signing. That adds up to $15,100 per car. At that rate, GM loses $18,400 per vehicle off the subsidized sale price. Assume they manage to lease 90% of the 10,000 initial run...

... and GM--meaning you--loses $165.6 MILLION on the first year of the Volt.

They ain't called Government Motors for nothing.

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