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Former GM and BMW Executive Warns Apple: Your Car Will Be a "Gigantic Money Pit"

Posted by samzenpus on from the throwing-good-money-after-bad dept.

An anonymous reader writes: With rumors that Apple is not only moving ahead on its electric car initiative, but trying to accelerate its development, a former GM and BMW exec is giving a few words of warning. Bob Lutz appeared on CNBC and expressed his doubts that Apple has a fighting chance to make any impact on the auto industry. "And when it comes to actually making cars," Lutz said, "there is no reason to assume that Apple, with no experience, will suddenly do a better job than General Motors, Ford, Volkswagen, Toyota or Hyundai. So I think this is going to be a gigantic money pit, but then it doesn't matter. I mean Apple has an embarrassment of riches, they don't know where to put the cash anymore. So if they burn 30 or 40 billion dollars in the car business, no one's going to notice."

36 of 535 comments (clear)

  1. That's what Nokia, Moto, and Microsoft said by mveloso · · Score: 5, Informative

    That's exactly what Moto, Microsoft, and Nokia said about the iPhone. Where are they now?

    1. Re:That's what Nokia, Moto, and Microsoft said by UnknownSoldier · · Score: 5, Insightful

      Agreed!

      I also don't buy that argument -- otherwise how the hell did Tesla jump start into an already saturated market? If Apple was smart they would just buy Tesla to save them years of experience. :-)

      Just because a company is_currently_ not in an existing market doesn't imply that they won't be hiring people who can lay the foundation.

      Impossible? No. Hard? Yes.

    2. Re:That's what Nokia, Moto, and Microsoft said by pixelpusher220 · · Score: 3, Insightful

      If Apple throws as much money at a car as Tesla did, perhaps they can, but they aren't likely to do that. It will be just a small part of the ecosystem.

      Apple thrives on selling cheap hardware by putting well tested software on it that really works well...and selling that package for a hefty premium. Cars aren't cheap to build and they won't be building them in China.

      --
      People in cars cause accidents....accidents in cars cause people :-D
    3. Re:That's what Nokia, Moto, and Microsoft said by gweilo8888 · · Score: 5, Interesting

      Tesla's impact on the market, thus far, is squat. Volkswagen brands alone sold 10.14 million vehicles in 2014. Even if you ignore Tesla's fiddling of the numbers (with nonsensical claims about sales being low because customers "were on vacation"), they sold a grand total of 35,000 cars in 2014. VW's marques managed that many in 30 hours, 15 minutes.

      I know it's the done thing around these parts to fellate Mr. Musk at every opportunity, but the fact is that in the automotive world, he's a flea. He's completely insignificant and his toys for rich kids -- subsidized by yours and my taxpayer dollars, natch -- have not changed the market even one iota. Of the nearly 90-million cars and commercial vehicles sold in 2014, Elon captured a spectacular 0.04 percent of the market at best.

    4. Re:That's what Nokia, Moto, and Microsoft said by Yunzil · · Score: 5, Insightful

      Apple knows how to make computers. An iPhone is just a small computer that happens to be able to make phone calls. A car is an entirely different kettle of fish.

    5. Re:That's what Nokia, Moto, and Microsoft said by AK+Marc · · Score: 4, Interesting

      Hyundai got started for a lot less than that. For the projected losses, Apple could buy GM, take the best 1% from GM, then shut down GM, writing off the whole thing, and still end up ahead. The sentiment is wrong, the math is wrong, and the reality is wrong. He's just proven that even idiots can make millions as a CEO.

      And yes, I know many don't like Hyundai, but from their bad start with the Elantra in the US, they've improved to be better than GM at this point (from a satisfaction and quality standard).

      --
      Learn to love Alaska
    6. Re:That's what Nokia, Moto, and Microsoft said by quantaman · · Score: 4, Insightful

      Agreed!

      I also don't buy that argument -- otherwise how the hell did Tesla jump start into an already saturated market? If Apple was smart they would just buy Tesla to save them years of experience. :-)

      Just because a company is_currently_ not in an existing market doesn't imply that they won't be hiring people who can lay the foundation.

      Impossible? No. Hard? Yes.

      Tesla didn't enter an already saturated market. They entered an untapped sub-market that traditional auto-makers aren't ready to enter (Telsa can afford to make major screwups and have limitations that an established auto-maker can't get away with).

      Similarly Apple didn't enter a saturated phone market, they entered a very new smartphone market. A market they were one of the best positioned players to enter..

      If Apple wants to make another Mercedes they've got a very tough battle ahead. But if they want to make a self-driving car, electric car, or if they have some other idea that traditional car manufacturers haven't done for some reason, then they've got a shot.

      --
      I stole this Sig
    7. Re:That's what Nokia, Moto, and Microsoft said by TomGreenhaw · · Score: 5, Interesting

      For what ts worth, speculative investors don't agree that Tesla is insignificant. Tesla's Market Cap is in the neighborhood of $33.8 billion whereas GM is $47.5 billion.

      --
      Greed is the root of all evil.
    8. Re:That's what Nokia, Moto, and Microsoft said by es330td · · Score: 4, Insightful

      Speculative investors are often quite foolish.

    9. Re:That's what Nokia, Moto, and Microsoft said by ShanghaiBill · · Score: 3, Insightful

      Tesla didn't enter an already saturated market.

      Tesla entered a market that was perceived by their competitors to be saturated.

      The iPod and iPhone also entered markets that were perceived to be saturated.

    10. Re:That's what Nokia, Moto, and Microsoft said by ShanghaiBill · · Score: 4, Insightful

      Apple knows how to make an aluminium shell, in which they stuff a bunch of components

      Isn't that how you make a car?

    11. Re:That's what Nokia, Moto, and Microsoft said by mlts · · Score: 4, Insightful

      What Tesla brought to the table was making electric cars good looking, cool, fast, and fun to drive. Before that, we did have electric cars. However, they looked like the ZAP Sparkee, cute, little, underpowered bubble things with a range of footsteps. Tesla brought interstate travel to the table for electric cars. They also got places to install electric charging stations, and legitimized people plugging into the wall at stores and such [1], which was considered theft previously.

      Tesla definitely doesn't sell cars like Toyota... but for what they offer sets a standard for other automakers to follow. Things like vehicle updates that add features, even for vehicles several years old, decent service (even in areas where they are forbidden to sell vehicles), a very good safety record, and excellent customer service. Plus, when you pop the hood of a Tesla Model S, it is awesome -- another place to toss suitcases and other items.

      [1]: Well, except for Alaska where stores and other places have outlets to plug into to keep vehicle heaters going.

    12. Re:That's what Nokia, Moto, and Microsoft said by larryjoe · · Score: 4, Insightful

      Apple specializes in selling to the hipster market, so their hipstermobile will probably have more in common with a Smart Car than a traditional automobile. Basically a golf cart with doors. It will cost $4,500 to manufacture, be marketed as saving the world, cost $19,999 at retail, and sell like hotcakes to a certain demographic.

      Yes, but manufacturing a car with 75% gross margins will be a bit tricky, since typical auto gross margins are less than 20% with large volume.

      And the $4500 manufacturing cost will be equally challenging. There are no car foundries or car part vendors that Apple can impose one-sided manufacturing or sourcing agreements with.

      And Apple would have to contend with the same logistic and legal distribution hurdles that Tesla is facing.

    13. Re:That's what Nokia, Moto, and Microsoft said by MightyYar · · Score: 5, Insightful

      My mom, dad, and step-mom have iPhones. They are generally called "boomers". I don't think your worldview is correct. I'd be surprise if iPhones were counter-culture enough for a hipster. A Blackberry (with keyboard) or Razr seems more appropriate, or even a full-on 80s brick phone.

      --
      W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
    14. Re:That's what Nokia, Moto, and Microsoft said by Anonymous Coward · · Score: 5, Insightful

      Apple thrives on selling cheap hardware

      Cheap hardware? Pretty much every time someone tries to match another company's hardware with the build quality/specs of Apple hardware ("because PCs are cheaper" mythology), the other company's hardware ends up AT LEAST as expensive as the Apple hardware.

      I know I'm _sort_ of conflating purchase price and build price, but not completely, since if it really were cheap, then some other company could/should be able to build it cheaper.

    15. Re:That's what Nokia, Moto, and Microsoft said by LordLimecat · · Score: 4, Insightful

      Cheap hardware? Pretty much every time someone tries to match another company's hardware with the build quality/specs of Apple hardware ("because PCs are cheaper" mythology), the other company's hardware ends up AT LEAST as expensive as the Apple hardware

      No, it only appears that way because of the slanted metrics that are always used in these comparisons.

      I could post equivalent hardware to the latest Mac that had a slightly slower SSD but better processor, RAM, and screen, for half the price-- but the complaint would be that the Apple has a better SSD (which is clearly what matters!)

      I could post something costing ~$100 more than the latest mac, and was superior in every metric-- but the complaint would be that it cost more (which is clearly what matters!)

      I could post something superior in every tech spec for the same price-- but the complaint would be that it wasnt in aluminum (which is clearly what matters!)

      The fact is the apple markup is real and is generally ~50% or more. Its been true for years, and people trying to justify the tag dont want something better than an Apple or cheaper than it, they want something that IS an Apple regardless of specs, price, or build.

    16. Re:That's what Nokia, Moto, and Microsoft said by T.E.D. · · Score: 3, Informative

      Apple knows how to make computers. An iPhone is just a small computer that happens to be able to make phone calls. A car is an entirely different kettle of fish.

      Not so much anymore. Particularly with EV's, where the engine and drivetrain are actually quite simple, aside from the computerized bits. What you have with those may very well just be "a large computer that knows how to move a big box."

  2. Tesla not on that list? by Lab+Rat+Jason · · Score: 4, Insightful

    I know I'll be accused of being a Tesla fanboy, but it's interesting to me that Bob Lutz failed to mention both Tesla and Pontiac (and Saturn) in that list... like he's an expert on what works and what doesn't?

    --
    Which has more power: the hammer, or the anvil?
  3. Experience is critical to anything so complex. by hey! · · Score: 4, Insightful

    But like any other commodity experience can be purchased.

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  4. Wishful thinking by Anonymous Coward · · Score: 5, Insightful

    Apple has, repeatedly, entered a market with a better product than most or all of its competition. I don't know if they'll do it again with cars or not, but then again neither does Bob Lutz.

    And frankly, I hope it's a flop - I don't like Apple, the way they treat customers, or their lock-you-in ecosystem. But their car won't fail just because I want it to, any more than it'll fail just because Bob Lutz holds a bunch of stock in GM and BMW.

  5. Billions. by Anonymous Coward · · Score: 3, Insightful

    Apple literally has almost $200 Billion in cash reserves. I might hate Apple, but they're entirely equipped to fight the long war.

  6. Re:Car only compatible with iStuff by Anonymous Coward · · Score: 4, Funny

    Don't forget about the pentalobular lug nuts.

  7. Money Pit by thevirtualcat · · Score: 3, Insightful

    Getting into a new industry is always a big money pit. Especially industries with firmly entrenched players with interests to protect.

    Doesn't mean it's impossible, though. Just hard. They just have to throw enough money into the pit to fill it, and do it quickly before the shareholders get cold feet.

  8. Hilarious on many levels by sootman · · Score: 4, Insightful

    1. "PC guys are not going to just figure this out. They're not going to just walk in." -- Palm CEO Ed Colligan, 2006, on Apple's prospects with their (at the time) rumored phone.

    2. One of the guys in charge of GM during its recent bankruptcy is going to give financial advice to the most valuable private company in the world? I'm sure Tim Cook will give it all the consideration it deserves.

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  9. Re:Car only compatible with iStuff by eth1 · · Score: 5, Funny

    And the radio won't get any reception when you hold the steering wheel at the 9 & 3 o'clock positions.

  10. Apple buys Volkswagen's assets.... by BenJeremy · · Score: 4, Interesting

    Apple buys VW/Audi and rebrands (since the brands will be taking a big hit very soon), and consumers forget about dieselgate. Apple gets the infrastructure to build cars, as well as an eager dealership network. They throw money at some new designers to oversee the existing engineers and make the vehicles they want to make.

    Book it, done deal.

  11. Lack of foresight by Anonymous Coward · · Score: 5, Insightful

    Former Palm CEO Ed Colligan, on Apple's prospects in the phone market: “We’ve learned and struggled for a few years here figuring out how to make a decent phone,” he said. “PC guys are not going to just figure this out. They’re not going to just walk in."

    Here's the fundamental mistake they're making by dismissing Apple: Apple didn't "just walk in" to the phone market - they worked on it for years before they shipped anything. A car that's "slated to ship in 2019" is not "just walking in" - that's 4 years away, it's already been in the works for a while now, and that 2019 date is "rumored." Which means it may just as easily be 2025, or 2030, before Apple decides that anything they're working on is ready to ship.

    1. Re:Lack of foresight by avandesande · · Score: 3, Insightful

      You could also claim that the IPOD was a prototype for a phone... if you think about it the iphone was just an IPOD that could make calls.

      --
      love is just extroverted narcissism
  12. Except GM and BMW executives dont know..... by Lumpy · · Score: 3, Insightful

    How to sell a premium brand that makes everyone want to buy it. I love driving BMW, but the prices of the upper models that I lust after, the M3/ M5 / M6 I will never ever afford as it's impossible for me to. GM, well they can't sell cadillacs to people that are dripping with money, so GM has zero clue.

    Apple on the other hand has figured out how to get poor people on FOOD STAMPS to buy their premium phones.

    Plus knowing apple, they wont try and make a giant sedan to appease everyone. they will make a city car that is small and fits in some kind of legal limbo hole like the 3 wheeled cars and golf carts that are legal to drive on the road. And people will buy the shit out of them.

    --
    Do not look at laser with remaining good eye.
  13. Bob Lutz. by jpellino · · Score: 5, Insightful

    The John Dvorak of the auto industry. Apple could not ask for a better endorsement.

    --
    "Win treats sysadmins better than users. Mac treats users better than sysadmins. Linux treats everyone like sysadmins."
  14. Lutz is an idiot by surfdaddy · · Score: 3, Informative
    Lutz is an idiot, a blowhard. IMHO he's highly overrated. He laughed at hybrids when Toyota came out with the Prius. A few years later GM was wildly scrambling to catch up with THREE different hybrid systems (two have failed and one is no market winner) - the "mild" hybrid a la Malibu, the "two mode" hybrid for big SUVs, and the Volt. The first two are already out of production.

    Lutz also led the development of the Pontiac Solstice and Saturn Sky sports cars, which looked great but were crap cars that also failed in the market.

    You can pretty much ignore whatever he says.

  15. leveraging existing state of the tech by SethJohnson · · Score: 5, Insightful

    If Apple throws as much money at a car as Tesla did, perhaps they can, but they aren't likely to do that.

    I fully agree with you, Apple isn't going to spend as much as Tesla did to ramp up production.

    At a significant expense, Tesla innovated many processes and designs for their electric cars. Elon Musk threw the patents into the public domain and asked other companies to leverage them. Apple will do that and then build on top of that with their own R & D investments.

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    1. Re: leveraging existing state of the tech by binarylarry · · Score: 3, Interesting

      They should just buy Tesla. Instant start, applefy the fuck out of it. One of the big three would probably go under in 5 years.

      They bought Dr Dre's shitty headphones?

      --
      Mod me down, my New Earth Global Warmingist friends!
    2. Re: leveraging existing state of the tech by JeremyR · · Score: 4, Insightful

      Two of the "Big Three" already went under, six years ago...

  16. Nobody ever called my mother-in-law a hipster by SethJohnson · · Score: 5, Insightful

    ....and sell like hotcakes to a certain demographic.

    Do you really think Apple became the richest company on the globe selling their products exclusively to hipster millennials? That's actually quite a narrow demograph from which to have siphoned such immense wealth. Go check out an Apple store. It's filled with an entire spectrum of people buying their premium-priced products.

    This is the same type of stereotyping of Apple's limited appeal is exactly what led to Steve Ballmer's obsolescence.

    --
    $5 / month hosted VPS on linux = awesome!
  17. Re:Tesla is overpriced right now by pnutjam · · Score: 3, Informative

    There is a reason there have been virtually no new car companies then last 4 decades.

    Kia and Hyundai have both been in the US for less then 4 decades, just off the top of my head.

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