GM contradicts reports Volt is money-loser

Reuters / Rebecca Cook
General Motors says reports that the automaker is losing $49,000 on each plug-in hybrid Volt sold is ”grossly wrong”.

The car maker said the news agency Reuters incorrectly "allocated product development costs across the number of Volts sold instead of allocating across the lifetime volume of the program, which is how business operates."

On Monday Reuters reported GM's $39,995 plug-in hybrid was a big money-loser. GM has spent an estimated $1 billion on the car's development. GM has sold more than 13,000 Volts this year, which is about half the volume it had expected, and plans to idle the Detroit-Hamtramck assembly plant for four weeks starting later this month. Although Volt sales are lower than expected, the company is staying afloat amid the crisis.

GM reported revenue of $1.5 billion in the second quarter, and while that was $1 billion less than for the same period a year earlier, analysts attribute the drop to a global slowdown due to a recession in Europe, rather than Volt sales in the US.

Analysts say problems with its European operations are a much bigger concern to the company than whether the Volt program makes a profit. GM lost $747 million on its European operations including Vauxhall in Britain last year, as recession hit car sales in the region.

Last week, Morgan Stanley analyst Adam Jonas wrote that GM's German-based Opel division has lost $16 billion over the last 12 years and that its losses over the next dozen years could be even greater. Opel will cut the hours of several thousand workers at two of its four plants in response to a drop in demand for cars in Europe.