Former GM exec pans rumored 'Apple Car' sight unseen, calls it 'a gigantic money pit'
Despite having no apparent personal knowledge of an Apple-built electric car, former General Motors vice chairman Bob Lutz proclaimed this week that shareholders should be "very upset" that Apple may be eyeing an entrance into the automotive business.
Appearing on CNBC's "Closing Bell," Lutz said that no company in the world has "made a nickel" on electric cars thus far, while Apple's current primary business -- the iPhone --?is a highly successful, high-margin business.
"When it comes to actually making cars, 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," Lutz said. "So I think this is going to be a giant 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."
When asked whether Apple could partner with current automobile makers to manufacture a vehicle, Lutz said he sees it as a possibility. Specifically, he said he could see a company like Hyundai or Kia handling the manufacturing of the vehicle, allowing Apple to put in the remaining pieces to complete the product.
AppleInsider exclusively reported earlier this month that major manufacturing roadblocks have Apple considering such partnerships as it pushes forward with its electric car project.
Overall, Lutz is bearish on the electric car market, and the former GM executive suggested that manufacturers are only pursuing electric vehicles to meet emissions requirements in place in Europe and the U.S. He suggested that perhaps Apple could sell electric vehicle credits to other companies that need them in order to turn a profit, but even that would be a stretch, in his eyes.
"If I were a board member of Apple, I would ask some serious questions about this whole thing," Lutz told CNBC.
Of course, executives from smartphone companies made similar claims about Apple prior to the debut of the first iPhone. Most famously, Palm CEO Ed Colligan responded to rumors of an Apple smartphone by saying that the market was difficult and established companies had expertise that Apple could not match.
"PC guys are not going to just figure this out," Colligan said in an interview with The New York Times. "They're not going to just walk in."
Even after the iPad was announced in 2010, reactions among high-profile tech industry leaders were negative. One of the most notable critics was Microsoft founder Bill Gates, whose immediate reaction was to say that netbooks with real keyboards and touch input were superior.
"It's not like I sit there and feel the same way I did with iPhone where I say, 'Oh my God, Microsoft didn't aim high enough,'" Gates told CBS News in 2010. "It's a nice reader, but there's nothing on the iPad I look at and say, 'Oh, I wish Microsoft had done it.'"
As for the rumored Apple vehicle, dubbed "Project Titan," the latest rumors this week claim that the company has an aggressive internal target ship date of 2019. While some reports have claimed Apple is working on a self driving car, it was said that the first-generation vehicle will not be autonomous.
AppleInsider exclusively reported earlier this year that the bulk of "Project Titan" development is underway at a secretive facility in Sunnyvale, Calif., known by the code-name "SG5." Evidence suggests that a shell company known as SixtyEight Research may be a cover for Apple to help conceal its true operations at the Sunnyvale garage.
Appearing on CNBC's "Closing Bell," Lutz said that no company in the world has "made a nickel" on electric cars thus far, while Apple's current primary business -- the iPhone --?is a highly successful, high-margin business.
"When it comes to actually making cars, 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," Lutz said. "So I think this is going to be a giant 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."
When asked whether Apple could partner with current automobile makers to manufacture a vehicle, Lutz said he sees it as a possibility. Specifically, he said he could see a company like Hyundai or Kia handling the manufacturing of the vehicle, allowing Apple to put in the remaining pieces to complete the product.
AppleInsider exclusively reported earlier this month that major manufacturing roadblocks have Apple considering such partnerships as it pushes forward with its electric car project.
Overall, Lutz is bearish on the electric car market, and the former GM executive suggested that manufacturers are only pursuing electric vehicles to meet emissions requirements in place in Europe and the U.S. He suggested that perhaps Apple could sell electric vehicle credits to other companies that need them in order to turn a profit, but even that would be a stretch, in his eyes.
"If I were a board member of Apple, I would ask some serious questions about this whole thing," Lutz told CNBC.
Of course, executives from smartphone companies made similar claims about Apple prior to the debut of the first iPhone. Most famously, Palm CEO Ed Colligan responded to rumors of an Apple smartphone by saying that the market was difficult and established companies had expertise that Apple could not match.
"PC guys are not going to just figure this out," Colligan said in an interview with The New York Times. "They're not going to just walk in."
Even after the iPad was announced in 2010, reactions among high-profile tech industry leaders were negative. One of the most notable critics was Microsoft founder Bill Gates, whose immediate reaction was to say that netbooks with real keyboards and touch input were superior.
"It's not like I sit there and feel the same way I did with iPhone where I say, 'Oh my God, Microsoft didn't aim high enough,'" Gates told CBS News in 2010. "It's a nice reader, but there's nothing on the iPad I look at and say, 'Oh, I wish Microsoft had done it.'"
As for the rumored Apple vehicle, dubbed "Project Titan," the latest rumors this week claim that the company has an aggressive internal target ship date of 2019. While some reports have claimed Apple is working on a self driving car, it was said that the first-generation vehicle will not be autonomous.
AppleInsider exclusively reported earlier this year that the bulk of "Project Titan" development is underway at a secretive facility in Sunnyvale, Calif., known by the code-name "SG5." Evidence suggests that a shell company known as SixtyEight Research may be a cover for Apple to help conceal its true operations at the Sunnyvale garage.
Comments
"When it comes to actually making cars, 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," Lutz said.
Same was said about music players, cellphones, and tablets.
This guy doesn't know Apple very well.
Power density in storage is the biggest issue with electric cars - seems like it is also a huge issue in mobile devices...
If Apple is getting in to the electric car game, its because they can already see the profit endgame. On the contrary Lutz, those auto manufacturers ought to start paying attention to the Apple rumors...because clearly Apple has figured out something they could not.
Oh dear, this reminds me of Steve Balmer's rather inaccurate forecast of the failure of the iPhone. And with what does Lutz rhyme?
Actually, Lutz has a very strong track record, and deserves more respect than he's likely to be shown here.
The thinking of "Apple has been successful in most stuff since 1998, therefore everything they do will be a huge success" is dangerous and wrong.
Elon Musk has said that if all Telsa were doing was making Model S and selling it, they would be making a profit, it's only because they are investing so much in capacity expansion and R&D for the Model 3 that they are making a loss overall. So it is possible to make money selling electric cars.
Maybe if GM aren't making any money, it's more to do with the particular models they have designed, rather than anything inherently unprofitable about electric cars.
He's a guy who genuinely cares about making the best vehicles possible.
It's understandable that he would hold this view.
However, car companies are much like telcos, cable companies, and large governments - they are big, slow, and so tied to old ways of thinking, old processes, and old business models that they cannot even imagine something new or different being BETTER.
The fact is that technology exist today that will mature tomorrow to turn the auto industry on its head. Instead of panning, they should be planning. Change and compete. And do it now instead of Wynn it's too late and the latest Apple/iDevice mile your late to the party zune.
"no company in the world has "made a nickel" on electric cars thus far"
This guy must think Tesla is just an 80's hair band then....
If Elon Musk was concentrating on profits and not on open patents and enriching lives through initiatives like the Tesla Powerwall, the company would be making money hand over fist.
I think these so called "PC guys" might be the ones who wíll figure it out. I think they tend to have a much better understanding of electronics than car manufacturers who tend to be better with machinery. They're two very different beasts.
And also: he can easily dismiss Apple as a failure-to-be in the automotive industry, but he forgets to mention that Tesla is doing a remarkable job, éven if they don't make a good enough profit yet (which I think they do), they managed to make a better electric car than any of the established car manufacturers have been able to.
I don't think that Apple will work together with a Toyota, Mercedes, BMW or Ford. But I do believe that they'll figure it out ánd slap those usually pretty old fashioned car manufacturers silly with technological advancements… just like Tesla is doing. As good as they are with mechanics, they're not really there yet with electronics. And in the end I see the Ford's, VW's and Toyota's as the Nokia's of the car industry. They just don't know that they're falling behind and that technology is catching up on them yet… untill it's too late and someone else snatches away their customers.
Actually, Lutz has a very strong track record, and deserves more respect than he's likely to be shown here.
The thinking of "Apple has been successful in most stuff since 1998, therefore everything they do will be a huge success" is dangerous and wrong.
Very strong track record indeed. One of the largest and worst U.S. bailouts in history, not to mention the whole ignition switch scandal. Steer clear of Bob Lutz.
And watches. It's funny when history repeats itself.
What product since '98 has Apple had that has failed? That they haven't made money on? Services is another story that their working toward but even then overall they make money on services too. AAPL is a product company. They have the luxury of time and money to work toward a better product. They don't have to be first. And, quite frankly (speaking as a multiple Chevy owner), Apple's recent track record is much better than GM's.
This is the kind of statement which will become a collector in the future .....
Elon Musk has said that if all Telsa were doing was making Model S and selling it, they would be making a profit, it's only because they are investing so much in capacity expansion and R&D for the Model 3 that they are making a loss overall. So it is possible to make money selling electric cars.
Maybe if GM aren't making any money, it's more to do with the particular models they have designed, rather than anything inherently unprofitable about electric cars.
Nail on the head. If these car companies (or any company) were interested in investing in themselves and becoming disruptive they may already have a profitable electric car business. Unfortunately scraping the cream off the top of an already established business is simply too inviting.
Considering this is coming from a former executive of a failed automaker that declared bankruptcy and had to be put on life support by the taxpayers (GM aka Government Motors) I think the comments are laughable. It reminds me of Steve Balmer’s iPhone quip, “No keyboard so it can’t be used for business...”
Well, if anyone's an expert at losing money in the auto business, it's GM.
Lutz was a "Car guy" at GM who clearly loved to drive and promote cool cars. However, he was not much of a forward thinker and not a proponent of all the technology starting to be included in cars. He might just not get how to sell cars to people who aren't passionate about driving.
Actually, Lutz has a very strong track record, and deserves more respect than he's likely to be shown here.
The thinking of "Apple has been successful in most stuff since 1998, therefore everything they do will be a huge success" is dangerous and wrong.
...The opinions of the entrenched leaders of an entrenched industry from a company that only exists in the 21st century because my tax dollars bailed out its poor business decisions...
I will take the words he says with a grain of salt, especially when speaking of the potential of a company that has made its business improving what already exists.
"no company in the world has "made a nickel" on electric cars thus far"
This guy must think Tesla is just an 80's hair band then....
If Elon Musk was concentrating on profits and not on open patents and enriching lives through initiatives like the Tesla Powerwall, the company would be making money hand over fist.
This is wishful thinking.
Nail on the head. If these car companies (or any company) were interested in investing in themselves and becoming disruptive they may already have a profitable electric car business. Unfortunately scraping the cream off the top of an already established business is simply too inviting.
And remember that GM is the company back in the 1940s who killed the electric street car with its diesel powered buses. And they did it underhandedly and surreptitiously.
http://www.cbsnews.com/news/the-gm-trolley-conspiracy-what-really-happened/
And of course there was the EV1 all electric that was shelved by GM.