[ANSWERED] What does $100mm get you?
#1
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[ANSWERED] What does $100mm get you?
Original question is here.
Bwright asked:
Bob Lutz said recently that for development of the C7 the team asked for $900mm but instead was only given $250mm. Given how good the C7 is I am curious, how might the car have been different if the team had been given say an extra $100mm? Just trying to get a better sense of how much $100mm buys on a program like the Corvette today.
Thanks in advance
Bob Lutz said recently that for development of the C7 the team asked for $900mm but instead was only given $250mm. Given how good the C7 is I am curious, how might the car have been different if the team had been given say an extra $100mm? Just trying to get a better sense of how much $100mm buys on a program like the Corvette today.
Thanks in advance
Tadge answered:
Thanks for the question, Bwright: First of all, my recall of the budget requests for new Corvette programs differs a bit from Bob's recollection and I can't quote the actual figures because that is a trade secret. Suffice it to say, the auto industry is very capital intensive and operates on relatively thin margins. In a typical car program, we spend hundreds of millions of dollars years before producing the product intended to pay back that capital. The way GM works, and I suspect most auto companies do the same, is to evaluate each car program as a financial investment with potential risks and rewards. Corvette is no different. When we go to the leadership of GM with a proposal for a new Corvette, we have to understand the full cost structure including how much we have to pay for tools to make the parts, how much the development cost will be, how much it will cost to change over the assembly plant to produce the new vehicle, how many we expect to sell and how much we are going to make on each car (price minus variable cost per unit). We have strict financial goals that must be met to be granted program approval. These are Board of Director-level decisions on major programs.
This long-winded preamble is to point out that we are not "given the hundred million", we are loaned it and are obligated to pay it back with interest and profit. On a low volume program like Corvette, $100M is an enormous debt that is very tough to pay back without adding more price (not popular with customers and would reduce sales) or cutting cost on each unit (would lose performance and would reduce sales). So this is a multifaceted problem we have to solve: How can we do a new car, add technology and performance, make it more appealing so sales increase, but hold the line on cost so we don't have to raise price significantly. We have been quite successful at solving this conundrum on the seventh generation Corvette and so are enjoying excellent business results that gives GM leadership confidence that Corvette programs represent a good investment. I have to thank our customers at this point, because without them, we have nothing, no brand, no business, and no great product for we engineering geeks to work on.
So if I was asked how to improve the Corvette with an extra $100M in the budget, what would I do? Probably increase customization, make more models catering to individuals preferences. We could expand the bandwidth on the performance end by producing more hard-core cars and track-only models. On the luxury end, we could have more unique interior options - both aesthetic and functional. Of course all this would come at a price... We would have to pay back that hundred mil somehow.
Thanks for the question, Bwright: First of all, my recall of the budget requests for new Corvette programs differs a bit from Bob's recollection and I can't quote the actual figures because that is a trade secret. Suffice it to say, the auto industry is very capital intensive and operates on relatively thin margins. In a typical car program, we spend hundreds of millions of dollars years before producing the product intended to pay back that capital. The way GM works, and I suspect most auto companies do the same, is to evaluate each car program as a financial investment with potential risks and rewards. Corvette is no different. When we go to the leadership of GM with a proposal for a new Corvette, we have to understand the full cost structure including how much we have to pay for tools to make the parts, how much the development cost will be, how much it will cost to change over the assembly plant to produce the new vehicle, how many we expect to sell and how much we are going to make on each car (price minus variable cost per unit). We have strict financial goals that must be met to be granted program approval. These are Board of Director-level decisions on major programs.
This long-winded preamble is to point out that we are not "given the hundred million", we are loaned it and are obligated to pay it back with interest and profit. On a low volume program like Corvette, $100M is an enormous debt that is very tough to pay back without adding more price (not popular with customers and would reduce sales) or cutting cost on each unit (would lose performance and would reduce sales). So this is a multifaceted problem we have to solve: How can we do a new car, add technology and performance, make it more appealing so sales increase, but hold the line on cost so we don't have to raise price significantly. We have been quite successful at solving this conundrum on the seventh generation Corvette and so are enjoying excellent business results that gives GM leadership confidence that Corvette programs represent a good investment. I have to thank our customers at this point, because without them, we have nothing, no brand, no business, and no great product for we engineering geeks to work on.
So if I was asked how to improve the Corvette with an extra $100M in the budget, what would I do? Probably increase customization, make more models catering to individuals preferences. We could expand the bandwidth on the performance end by producing more hard-core cars and track-only models. On the luxury end, we could have more unique interior options - both aesthetic and functional. Of course all this would come at a price... We would have to pay back that hundred mil somehow.
Last edited by jvp; 04-25-2015 at 09:56 AM.
#2
Le Mans Master
So with more money you could have kept the brake system development "in house" and not had to have farmed that out to the truck division for the Porky Pig cast iron parts the C7 has? Would have been nice if one of the goals would have been to make the new model weigh less than the model it replaces....maybe for the C8....MUST WEIGH LESS THAN THE C6! shoot for under 3200lbs....the performance will come easily of that is done...
Just wondering....how much can a set of aluminum hats and radial retainer hardware run...maybe even a steel stamping.....that cast iron integral hub rotor.....NICE TRUCK technology! DAMN! I mean you could have even riveted on a iron rotor to a nicely done hub.
Just wondering....how much can a set of aluminum hats and radial retainer hardware run...maybe even a steel stamping.....that cast iron integral hub rotor.....NICE TRUCK technology! DAMN! I mean you could have even riveted on a iron rotor to a nicely done hub.
#3
Le Mans Master
So what this says is that for Bob Lutz's claim to be accurate, the proposal to request 900 million must've encapsulated something truly bold and the risk was too great at this time. I assume it would've been something that would've transformed the entire program and the Corvette name itself.
Nitpicking about rotors and calipers...I'm sure they did what was necessary. The car, at the price point is a series of compromises. If it were as easy as you outline, it'd be on the car. Tadge was very clear that for every sector of the cars development, he forced engineers to justify every kilo. Inevitably you can shave weight everywhere if you want to make an unprofitable base model or raise the msrp 15k. The C7 base does what it does very well...and frankly I perceive it as a better package for the money. I'd rather mod a C7Z51 my way than buy the Z06, taking advantage of the Z06 parts bin and aftermarket (thus avoiding federal and epa bs).
Nitpicking about rotors and calipers...I'm sure they did what was necessary. The car, at the price point is a series of compromises. If it were as easy as you outline, it'd be on the car. Tadge was very clear that for every sector of the cars development, he forced engineers to justify every kilo. Inevitably you can shave weight everywhere if you want to make an unprofitable base model or raise the msrp 15k. The C7 base does what it does very well...and frankly I perceive it as a better package for the money. I'd rather mod a C7Z51 my way than buy the Z06, taking advantage of the Z06 parts bin and aftermarket (thus avoiding federal and epa bs).
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St. Jude Donor '15
How about some wideband O2 sensors...? Pretty please?
#6
Tech Contributor
If my memory serves during the plant tour last week, I believe they mentioned they spent $130M retro fitting the plant for the C7.
IMHO I think they spent the money wisely - the level of performance of the C7 and C7Z is nothing short of amazing and the build quality of the interior is so much higher than my C5 or C6. Truly world class.
IMHO if there is one thing they should invest in, I'd suggest they invest in something that will attract a younger demographic to Vette ownership.... at 49 I think I was one of the youngest Vette owners at the Bash! I'm worried about a c8 if they don't get the purchasing demographic 10 years younger or so.
BTW a plant tour should be on every Vette owner's To Do list, it's a great way to spend the afternoon.
For those that can't, here's a video:
IMHO I think they spent the money wisely - the level of performance of the C7 and C7Z is nothing short of amazing and the build quality of the interior is so much higher than my C5 or C6. Truly world class.
IMHO if there is one thing they should invest in, I'd suggest they invest in something that will attract a younger demographic to Vette ownership.... at 49 I think I was one of the youngest Vette owners at the Bash! I'm worried about a c8 if they don't get the purchasing demographic 10 years younger or so.
BTW a plant tour should be on every Vette owner's To Do list, it's a great way to spend the afternoon.
For those that can't, here's a video:
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St. Jude Donor '15
I agree though.. the interior improved quite a bit towards the end of the C6 (can't remember what year) then the C7 really improved it from there
Looking back at the C5 interiors you can really see how far they've come.
#8
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I hope the guy that designed the tail end of the car has Nothing to do with the C8. I can't believe the brass okay'd that design.
That's coming from a guy that currently has a c5z and c6z.
I'm skipping the c7, as are a lot of diehard Corvette fans.
That's coming from a guy that currently has a c5z and c6z.
I'm skipping the c7, as are a lot of diehard Corvette fans.
#9
Le Mans Master
I totally get that some aren't enamored by the tail treatment. But if you are right, then GM has hit it's intended mark as sales for the 14/15 have been a complete success.
#10
new vette problems
Original question is here.
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St. Jude Donor '15
I was considering the new vette but after seeing all the overheat issues and blowing engines with 6000 miles on it and breaking torque tubes i decided to pass and look for an older vette and have it modified..the callaway people fixed the z06 they had and explained why the z06 was overheating by putting a bigger supercharger on it and opened the hood up to allow air flow instead of trapping all that hot air in the engine bay ect...makes me wonder why gm engineers even built the z06 like that..plus im hearing about earlier vettes having balancers wobbling ob the 05-07 and fuel leaks on 08 upper fuel tanks and gm wont fix the poorly designed cheap fuel problem and havent had a recall..this is supposed to be americas best and gm wont even stand behind the vette...mabey ill just go modify a viper or gtr..hey gm go spend that 100m and hire the callaway people to make the vette then youde have a great strong reliable dependable car...
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St. Jude Donor '15
The previous post was talking about GM design decisions that were obviously purely to save money.
So, I posted an example. It wasn't Corvette related, I know, I know.
A $55K car that is supposed to be one of their highest end vehicles doesn't have one of the basic features that a Honda Accord or Toyota Prius has. It's true...
So, I posted an example. It wasn't Corvette related, I know, I know.
A $55K car that is supposed to be one of their highest end vehicles doesn't have one of the basic features that a Honda Accord or Toyota Prius has. It's true...
#14
Le Mans Master
Heritage isn't about styling solely, it's about what the car represents and what it accomplishes in the marketplace. If you look at the C7 and all you see is the taillights, then you need to step back a couple feet and see the entire package. The body is still VERY much a Corvette.
Like it or not, the true heritage of the car rests with racing, Zora Duntov and represents achievement...both as a car, and as a personal investment (for lack of a better term...as we know cars are poor investments).
The one statement that stood out to me that Tadge made was along the lines of "performance/open air" as being the basis for the entire Z06/Corvette line. He also speaks very much about "bandwidth" thinking. The issue for me is, how much do you GIVE IN to the bandwidth mindset, in order to boost sales figures. In the end, I believe the Z06 got watered down because it was too much about bandwidth, and not enough about Z06.
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St. Jude Donor '12-'13, '16
And the 14/15 sales are not unpresendented. In the early C4 years, production exceeded 100,000 units annually. Now, granted, it's a great to be able to sell everything you can build. But, at what point, will that not be enough? And before being called a hater, I have owned 5 corvettes over the past 30 continuous years.....and don't plan on changing.
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I'm not sure where you get your data from, but you're exceptionally wrong about that. The first C4 year: 1984 saw 50K units, due to the pent-up demand of them missing a year. The sales numbers dropped from there.
http://www.corvetteactioncenter.com/...c4/c4prod.html
Corvette has never (and probably will never) sold 100K units/year.
http://www.corvetteactioncenter.com/...c4/c4prod.html
Corvette has never (and probably will never) sold 100K units/year.
#17
The one statement that stood out to me that Tadge made was along the lines of "performance/open air" as being the basis for the entire Z06/Corvette line. He also speaks very much about "bandwidth" thinking. The issue for me is, how much do you GIVE IN to the bandwidth mindset, in order to boost sales figures. In the end, I believe the Z06 got watered down because it was too much about bandwidth, and not enough about Z06.
Tadge gets a lot of push back on the forum, I think because he's too visible and also he's not very direct in how he speaks (probably a personality thing. I don't know for sure, I never met the man). Nevertheless, if you look at the entire program as a whole it seems obvious to me that the confidence level was lower going into C7 vs C6. A lot of risk (read as: cost) was removed from the Z06 by sharing the C7 frame, engine (with CTS-V), automatic transmission (multiple), E-Diff (multiple), and other expensive to develop parts with other programs.
It is telling to me that they are coming out with Magride for the base C7 now instead of at launch. It is expensive to calibrate the suspension system, and it must be done separately for each car configuration (springs, tires, etc). I suspect it's initial development was prioritized for Z51 to stretch the dollars/and development time frame until calibration could be completed for the base car.
When Dave Hill became the chief engineer the rhetoric was that he was a "Cadillac man," who would water down the vette by making it too soft. Now it's politician Tadge, who is not a "real" engineer, even though he is clearly visible as part of the Corvette Team going back to C5. The major take away from his answer, and similar questions in other venues, is that a ultra high performance Corvette is in the realm of possibility only if there are enough buyers to justify its existence. I sincerely hope that the new ACR and Shelby GT350R do well enough in the market, and not just enthusiast mags and forums, to give the Corvette Team the ammunition to go to whoever is pulling the purse strings and say, "They can do it, so we can too."
#18
Le Mans Master
All valid thinking for sure...I can't say I disagree with any of it. I won't pretend to know Tadge or Dave Hill, despite having met them multiple times...I've met their "pr" personalities I should say. I don't doubt Tadge, or any other Corvette team members dedication to the brand, but one must also understand that with power comes responsibility. I've always had a feeling that Tadge really wanted to "leave his mark" on this car, but that can be said for any of the prior chiefs as well. The issue comes with, how do they leave that mark.
I bounce back and forth between my criticism of this car...and frankly still own my C5 because I'm so torn about the C7. I've met all the people involved year after year at events...I realize they are real people and they all speak passionately about the car. I also know though, that there are many factors in the background we aren't told. In addition, history has shown that people like Zora, who hit RPO's from the higher ups so people could go race, are the things that made Corvette what they are. That's the side of an engineer who never truly sells out to the bean counter mentality, because they feel it'll mean a promotion to the executive side or something along those lines.
I've met Harlen several times...spoke to him (attempted to I should say), and I will tell you...the guy doesn't have me sold. He's the head of marketing for this car, and I'm just gonna say flat out, the guy is a douche. He may be a nice guy, on some personal level...but in my dealings with him, he is arrogant, disconnected, and in many ways struck me as not really too invested in the "idea" of Corvette.
On a seperate note, I met and spoke with some who was VERY connected to the STi program within Subaru, and developed the 2000-2004 model year wrx sti's. He is actually related to Tanner Foust (if I recall correctly)...anyway, he spoke about the direction STi went over the years, and how people within the company were making decisions about the car that many on the development side didn't agree with. He said, at the time, Subaru was bringing in buyers of the STi platform and having them report what they thought about the car...the good and the bad...even had them drive cars with varying spring rates, etc. He said, the people who were the technical "buyers" of the car were often parents of the actual kid who drove the car though. They were reporting the car was too harsh, too stiff, etc, but some of the development team argued...these arent the actual demographics that WANT the car though.
Inevitably, he said a lot of that input is what led to the softer spring rates, more usable space, etc of the later cars. For me though, that was proof that internal mentality can vary, and people employed to make decisions often are foolish about how they do so.
For me...Z06 stood for something. Maybe it didn't sell like crazy...the reasons are debatable...but some things need preserved for a time when they become feasible again. ZR1 has always been the loaded, power house, for the upper end wallets...that's not Z06. The C5Z was a great representation of Z06 in many ways. The C6Z was a price push, but that LS7 really excited people. Z06 captured young buyers attention...the badge, the rawness, the manual only, etc. Z06 should be that first Corvette to get a DCT, but remain manual until then imo...it should've been preserved as the brands "driver machine"...the GT3 if you will.
All I know is...they lost me...I don't want the C7Z...and I hate that I dont.
I bounce back and forth between my criticism of this car...and frankly still own my C5 because I'm so torn about the C7. I've met all the people involved year after year at events...I realize they are real people and they all speak passionately about the car. I also know though, that there are many factors in the background we aren't told. In addition, history has shown that people like Zora, who hit RPO's from the higher ups so people could go race, are the things that made Corvette what they are. That's the side of an engineer who never truly sells out to the bean counter mentality, because they feel it'll mean a promotion to the executive side or something along those lines.
I've met Harlen several times...spoke to him (attempted to I should say), and I will tell you...the guy doesn't have me sold. He's the head of marketing for this car, and I'm just gonna say flat out, the guy is a douche. He may be a nice guy, on some personal level...but in my dealings with him, he is arrogant, disconnected, and in many ways struck me as not really too invested in the "idea" of Corvette.
On a seperate note, I met and spoke with some who was VERY connected to the STi program within Subaru, and developed the 2000-2004 model year wrx sti's. He is actually related to Tanner Foust (if I recall correctly)...anyway, he spoke about the direction STi went over the years, and how people within the company were making decisions about the car that many on the development side didn't agree with. He said, at the time, Subaru was bringing in buyers of the STi platform and having them report what they thought about the car...the good and the bad...even had them drive cars with varying spring rates, etc. He said, the people who were the technical "buyers" of the car were often parents of the actual kid who drove the car though. They were reporting the car was too harsh, too stiff, etc, but some of the development team argued...these arent the actual demographics that WANT the car though.
Inevitably, he said a lot of that input is what led to the softer spring rates, more usable space, etc of the later cars. For me though, that was proof that internal mentality can vary, and people employed to make decisions often are foolish about how they do so.
For me...Z06 stood for something. Maybe it didn't sell like crazy...the reasons are debatable...but some things need preserved for a time when they become feasible again. ZR1 has always been the loaded, power house, for the upper end wallets...that's not Z06. The C5Z was a great representation of Z06 in many ways. The C6Z was a price push, but that LS7 really excited people. Z06 captured young buyers attention...the badge, the rawness, the manual only, etc. Z06 should be that first Corvette to get a DCT, but remain manual until then imo...it should've been preserved as the brands "driver machine"...the GT3 if you will.
All I know is...they lost me...I don't want the C7Z...and I hate that I dont.
#19
The Corvette program is interesting to study due to its very long history and its constant redefinition, which is different from the 911, for instance, since that car hasn't changed as much each generation. It's fun to see the responses the Corvette team make from one generation to the next and predict from that history where it will go.
The talk going into C5 was about how much softer and approachable it is than C4 due to lower door sills and less harsh Z51 package (the C4 Z51 must haunt the team to this day because they STILL talk about how livable whatever current iteration of Z51 is). The lesson going out, due to the success of Z06, was that the corvette buyer will pay good money for a higher performance car.
Going into C6, the Z06 is a shockingly high performance car with several bespoke pieces. I remember quite well on this forum the laments that the team lost the "spirit" of the Z06 because the new one commanded such a high price premium over the base car and was thus no longer "affordable." I really think the team was surprised at how well the Z06 turned out. If I remember correctly, the car was originally going to have 450hp out of an engine based on what the LS3 became until Dave Hill pushed the team to reach for 505 (a 7 liter engine was required to hit the target). The ZR1 was made on a lark to see how far they could push with a price target of 100K. Ironically for all that the lesson going out, due to the success of the Grandsport, was that the corvette buyer will pay good money for the "appearance" of a high performance car.
Going into the C7, Tadge stated multiple times that the benchmark for the C7 was the Grandsport. The base C7 is a widebody, like the Grandsport, and looks similar to its Z06 sister...like the Grandsport. The Z06 is still an extremely high performance car. I've asked before, if there was no overheating issue, would anyone have a problem with it as presented? Nevertheless, there are less..."focused" versions of the car now for people who want a Z06 but don't "want" a Z06. Remember, if you order a Z07 package it's only meant for the track. Driving over even a pebble in that car will pulverize your skeleton (still haunted by C4 Z51 ). Anyway, the lessons going out of C7 have yet to be written, but I suspect they will be "It's alright to walk softly and carry a big stick, but you have to prove that you have a big stick for it to be respected."
The talk going into C5 was about how much softer and approachable it is than C4 due to lower door sills and less harsh Z51 package (the C4 Z51 must haunt the team to this day because they STILL talk about how livable whatever current iteration of Z51 is). The lesson going out, due to the success of Z06, was that the corvette buyer will pay good money for a higher performance car.
Going into C6, the Z06 is a shockingly high performance car with several bespoke pieces. I remember quite well on this forum the laments that the team lost the "spirit" of the Z06 because the new one commanded such a high price premium over the base car and was thus no longer "affordable." I really think the team was surprised at how well the Z06 turned out. If I remember correctly, the car was originally going to have 450hp out of an engine based on what the LS3 became until Dave Hill pushed the team to reach for 505 (a 7 liter engine was required to hit the target). The ZR1 was made on a lark to see how far they could push with a price target of 100K. Ironically for all that the lesson going out, due to the success of the Grandsport, was that the corvette buyer will pay good money for the "appearance" of a high performance car.
Going into the C7, Tadge stated multiple times that the benchmark for the C7 was the Grandsport. The base C7 is a widebody, like the Grandsport, and looks similar to its Z06 sister...like the Grandsport. The Z06 is still an extremely high performance car. I've asked before, if there was no overheating issue, would anyone have a problem with it as presented? Nevertheless, there are less..."focused" versions of the car now for people who want a Z06 but don't "want" a Z06. Remember, if you order a Z07 package it's only meant for the track. Driving over even a pebble in that car will pulverize your skeleton (still haunted by C4 Z51 ). Anyway, the lessons going out of C7 have yet to be written, but I suspect they will be "It's alright to walk softly and carry a big stick, but you have to prove that you have a big stick for it to be respected."
#20
Melting Slicks
Yes. To use but one example, if the team had decided to ask for more money to enable say carbon ceramic brakes as standard on the C7 Stingray that additional development money would take the form of a loan from GM which the Corvette program had better have a plan to pay back. In the case of such brakes the cost of the base Stingray would jump significantly. If the team had misjudged buyer desire for such a feature the results would be painful. I believe the last time I saw this was back in the C5’s generation when the expensive magnesium wheel option was offered. Long a feature on Ferrari’s road cars, the application on the Corvette program failed to gain traction and was dropped in relatively short order. I can only imagine now the likely non-trivial hit to the program’s development budget when that spend failed to generate the projected return. Supplier contract likely still had to be paid out.
Cutting cost out of the car to achieve the inclusion of the aforementioned brake system such that you could hold the line on the current base price would likely lead to the loss of some features. Such losses would likely not be countenanced by the broader buyer group.
So say doubling the Corvette budget may lead to an even more spectacular car, but one that precious few could afford if the car was priced honestly and fairly to reflect its content.
It would be as if GM decided at the outset of C6 development to make all cars the Z06 and not even bother producing the base car at all. The Z06’s price fairly reflected its content and was a tremendous vehicle. But it is unlikely that the Corvette program would have survived had that been their base offering.
So a balance has to be struck with an eye toward spending on something that the broader buyer base can afford. Done right, there should be enough profit to spend additional dollars on something that reaches further still, such as the current C7 Z06. All in all, and looking at the present gangbuster sales numbers for all models, nicely done.
As always, appreciate the education.