GM is more worried about keeping the doors open, paying for the Volt, and finding a way to comply with CAFE regs 10 years from now...one would have to be brain dead to not think Kappa is on life support. The "cool" GM who takes risks on exciting product that we have know the last five years or so is gone. I am fully convinced we would not have a Camaro if gas prices spiked 18 months sooner than they did.

 

Nope. Pretty sure that's not going to happen now.

 

That's not exactly a 1:1 comparison, though.

First off, Kappa is truly an individual platform - designed and built from the ground up for a low volume 2 seat roadster. There is no passenger car absorbing any of the Kappa development costs whereas Camaro shares architecture with other higher volume cousins.

Secondly, you can feasibly have a Camaro as your only car. The Solstice/Sky is essentially a toy. I'd guess that for most owners it is a second or even third car. You're always going to limit your sales when you have a car that's not practical as your one and only. Solstice and Sky combined actually outsell the Miata by a few thousand units - and that's a car that's far more practical (since it has an actual trunk) so it's not the volume thats likely as much a problem as the expense.

 

10k loss per Kappa sounds like a huge exaggeration to me unless they're including development and tooling costs and other fixed costs for the program that only reduce as sales increase and go along.

I really was considering a Saturn Sky Redline but after seeing the interior on that car for 30k I didn't even bother to take it for a test drive. I've never seen such hard/cheap looking plastics in a vehicle over 20k made in this decade!

 

The 4th gen was made this decade

 

Suppliers certainly didn't like the lower-than-projected sales. Most would have quoted the program at very uncompetitive prices originally, and then would have come back with some nasty price increases as the volume dropped off.

Fixed, non-recurring costs still need to be factored into the profitability of any program. If we all judged success on gross margin, there'd be a lot more high-fiving in Detroit and at suppliers.

 

Just curious, but what were you seeing that was so expensive?

 

Yes I would consider the upcoming Solstice GXP targa as an alternative to a new Camaro, but only assuming an interior update was coming at some point. I'd say there's no chance of that anymore.

 

The original goal of these cars was stated to be free advertising or a showroom halo effect.

The problem is that once they're a few years old, nobody really cares any more. There's no publicity or traffic generated except by the small number of people actually buying them. If they can't demonstrate a marketing reason for keeping the cars, it makes no sense to take a loss making them.

 

Yes... that's true but when judging the value of pulling the plug on a program I don't think it's appropriate to quote the fixed costs as a part of the actual loss per vehicle because it's not like once the plug is pulled that all of a sudden those already-spent fixed costs go away. Then you just have to find some other way to account for them.

 

You can only recover those fixed costs if the program is making money. If it's a loser, then your best bet is to bow out as soon as possible.

GM already wrote off the development costs of this vehicle. That was probably buried in some billion-dollar cash outlay several quarters ago.

 

As long as they're covering their variable costs, then it makes sense to keep producing them. But as you noted earlier, we don't know what the $10k loss per vehicle includes. My guess is that it includes the fixed costs of the program, as a $10k loss per vehicle in variable costs alone would mean it costs ~35k in parts, labour, and support to makes the Kappas. I just can't see that.

I also doubt the fixed costs are already written off. There's accounting rules that define how quickly you can amortize fixed costs ... companies generally want to do it as quickly as possible but the taxman won't let them. GM would not be allowed to simply write off an entire program in any quarter they choose.

 

Hypothetical question:

Would it kill the Solstice/Sky if GM were to switch it over to a FWD platform?

 

The whole idea of the Solstice was to have a pure roadster. If you ever hang out with a Miata owner who is a true enthusiast, you will quickly see that they see these cars as driving cars. Kinda like the club racers and Austin Healey's from back in the day. A FWD platform simply will not work if you have these intentions.

That being said...I don't know that the Kappa cars have the true enthusiast base of say a Miata.

 

By "written off", I didn't mean that the company was bundling them up into a single-quarter loss - but those costs have already been accrued and accounted for as an expenditure.

It'd also be interesting to see how much of those costs ended up as reimbursements under the federal R&D tax credit.