The high cost impact of choices made for the GM Volt hybrid vehicle

An article by Reuters (September 10, 2012, http://www.reuters.com/article/2012/09/10/us-generalmotors-autos-volt-idUSBRE88904J20120910) describes General Motors as losing $ 49,000 on each Volt it builds. The costs are due to developmnt and tooling costs, number of unique parts in the battery pack and motor as well as cost penalties by suppliers for low volumes below thresholds. While the federal tax credit of $ 7500 helps, it is far from the $ 75000 it costs. So while GM incents customers with lease rates of $ 199 per month to grow volumes, it continues to drain the coffers. Should GM plan its hybrids like Boeing – using a program accounting approach to spread costs over a longer duration ? Is this initial cash drain a necessary part of new technology introduction i.e., should be be considered as an investment to learn about technologies that may dominate the industry int he future and impact all car models ? Or should GM shift to more standard components to lower costs now, even if it sacrifices performance ?

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About aviyer2010

Professor
This entry was posted in Operations Management, Supply Chain Issues, Sustainability and tagged , , , , , , , , , . Bookmark the permalink.

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