September 12, 2012

EXCERPT FROM THIS ARTICLE:  It would be cheaper for the company to quietly ask potential Volt buyers if they would take a $40,000 check just to go away.

Two weeks ago

This is getting redundant.

If you want investment losses for tax purposes, Barack Obama is your guy.

Now, if the country could only figure out how to write off the five trillion dollars we’ve lost during his presidency. As the man said: A billion here and a billion there, and pretty soon were talking about Barack Obama.

Readers of my column know that there are few things that I dislike more than the Chevy Volt. I don’t like the inflated claims that government-corporate elites make about it; I don’t like that it costs more than a normal car to keep it driving; I don’t like that European journalists gave it the automotive equivalent of the Nobel prize for engineering; I don’t like that it catches fire; or that the Volt’s voltage puts first responders at danger at accident scenes because engineers didn’t think about safety for first responders.

No, instead they only considered Obama’s desire to put one million electric vehicles on the road no matter what the cost.

Today, I’m very pleased to announce that I have a new reason to dislike the Volt.

And it’s probably the best reason of all..

The Chevy Volt costs close to $90,000 to manufacture while it retails for $40,000 according to information gathered by Reuters.

“Nearly two years after the introduction of the path-breaking plug-in hybrid,” writes Reuters, “GM is still losing as much as $49,000 on each Volt it builds, according to estimates provided to Reuters by industry analysts and manufacturing experts.”

“Cheap Volt lease offers meant to drive more customers to Chevy showrooms this summer may have pushed that loss even higher,” the wire service says. “There are some Americans paying just $5,050 to drive around for two years in a vehicle that cost as much as $89,000 to produce.”

Ok. So here’s the math that GM (GM) faces on the Volt: 10,666 Volts were sold in the first seven months of 2012. At an average loss of $49,000 per vehicle that’s a loss of $522,634,000.

A $523 million dollar loss on a car that won’t sell 20,000 units in 2012?

To put this in perspective, the company has probably shaved at least $4 billion off its market value by squandering money on the Volt. Right now the company is trading at about 8.31 times it’s earning. Assuming GM didn’t produce the Volt at all and just held on to the cash savings, the $523 million in cash multiplied by the market value of 8.31 times earnings comes out to $4,343,088,540 in lost value for the shareholders.

Those shareholders are you and me.

It would be cheaper for the company to quietly ask potential Volt buyers if they would take a $40,000 check just to go away.

Two weeks ago GM was bragging that Volts were selling at a record pace. Now it appears that it may be years and years and years before the company makes money selling the Volt’s old technology as something new.

“We’re really seeing momentum continuing to build,” Michelle Malcho, a GM spokesman told the press a few weeks back according to the Detroit Free Press. “As people see their neighbors have one and as they start to understand the technology and are able to drive it, they put it into their consideration.”

Can we stop the momentum please? Like so many of Obama’s plans, the momentum in this one is killing the company.

So far the company has lost over one billion dollars by it’s investment in the Volt.

“GM’s quandary is how to increase sales volume so that it can spread its estimated $1.2-billion investment in the Volt over more vehicles while reducing manufacturing and component costs” says Reuters, “which will be difficult to bring down until sales increase.”

And why doesn’t it surprise me that so many of those neighbors reside in California?

“Californians are buying one-third of GM’s supply of Volts,” reports Freep.com, “but Malcho said other markets are showing strength too. Michigan is one of the vehicle’s strongest regions.”

Great news:  Assuming those Michigan sales are largely in the Detroit area, we can safely say that “robust” Volt sales are coming from areas of the country that seem to have a terminal case of financial mismanagement.

Because did I tell you that while Obama made a gift of most of the money and tax breaks he has given General Motors, the company still owes American taxpayers at least $25 billion that Obama converted into shares of the company?

That’s true. But that not the worst of it.

The shares are trading so low that selling now at current market prices would bring a loss of $14 billion, according to bailoutcost.com.

The $523 million the company lost on production of the Chevy Volt in the first seven months equals losses of $896 million over the whole year.

That money would make a heck of a dividend to American taxpayers, wouldn’t it?

Oh, that’s right.

It’s the Obama policy on investments: No dividends, no refunds and no exchanges for you.

Only losses.