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Volvo: Safety Beyond the Star RatingsGreat Cars That Lost Their Company Money
Sure, loss leaders and boondoggles abound in automotive history, but did you know even the Corvette once struggled for profitability?
Good, But Not Good Enough
There’s an old saw in the automotive world that “making cars is hard.” The saying hints at the wide chasm that exists between promising blueprints and a profitable car at the other end. One of the biggest hurdles to profitability is cost. Plenty of companies can make good, even great cars. Fewer are able to scale that process and market that car at a price point that produces a profit.
Making cars is hard even for the biggest and most experienced car companies and their histories are filled with awesome, history-making cars that lost money. Below we look at some of the greatest cars ever built; all of which were, at least at one time, financial millstones for their companies.
BMW 507 and M1
What if I told you the most beautiful BMW ever built was also a financial disaster doomed to obscurity? The BMW 507 was intended to be a mid-level luxury sports car at a time when that was a rarity. Max Hoffman, the US importer, had been instrumental in the development of the Mercedes-Benz 300 SL from racecar to streetcar, and so too was influential in the birthing of the 507. The BMW 507 was a gorgeous hand-built car that, in 1955, lived up to the Ultimate Driving Machine billing. But because of the quality of materials and the painstaking manhours involved in their construction, the cars ended up costing double their projected overhead. Even so, Elvis loved the car so much he bought two when stationed in Germany. Despite high profile fans, the 507 was such a money loser for BMW it nearly sank the already troubled company.
The 507 wasn’t the only awesome BMW that failed to earn a profit. Decades later as a Group-5 racing homologation special, the BMW M1 ignited the M brand, become a racing phenomenon, and lost the company money as a production car. The highly-advanced mid-engine sports car was largely hand built in Italy and Germany and designed by Giorgetto Giugiaro. Just 453 production cars were completed between 1978 and 1981.
Porsche 959
The Porsche 959 was the brand’s first supercar and served as a testing ground for new tech that would make its way into the likes of the 911 and Boxster for decades to come. The car’s long and intensive incubation ballooned expenses. New tech for the car’s all-wheel drive, its sequential twin-turbochargers, novel aerodynamics, and finely tuned suspension all took time to refine to that very German car nerd level of perfection. The result was a racing legend and the fastest production car in the world. The only problem? Porsche was losing an estimated $200,000 per car.
“Ford/Lincoln” Continental Mark II
For 1956, Ford Motor Company decided to bring back the Continental name after an eight-year hiatus. This time spinning it off from Lincoln to its own flagship brand. Swelled with ambition, the new Continental Mark II was created to be the pinnacle of automotive design and technology of its day. The two-door coupe offered all the latest creature comforts from power seats and power windows to the choice of 19 paint colors and 43 different interior schemes. The bespoke nature of the Mark II made it a classic “loss leader” for Ford, going approximately $1,000 into the red on every car built (about $11,000 today).
VW Phaeton
The Volkswagen Phaeton was the brainchild of VW head Ferdinand Piëch. Among his successes had been the Porsche 906 and 917 racecars, the Audi Quattro, and a legacy cemented with VW’s eventual acquisitions of Bugatti, Lamborghini, Rolls-Royce, and Bentley. Taking Audi up market had proven successful, so when a limousine VW was pitched in the late 1990s, Piëch gave it the green light. The resulting car did indeed compete with the Mercedes it was created to emulate. But as good as the Phaeton was, the VW badge didn’t jibe with the car’s high asking price, and outside of Germany and China, the Phaeton failed to catch on with buyers. The Phaeton is also notable not just for its sales losses but for the unusual engines it carried over the years including VR6s, a W12, and a diesel V10.
1953-1954 Chevrolet Corvette
The seventy-year run of the Chevrolet Corvette wasn’t always a smooth one. In fact, the Corvette was nearly cancelled after just two years of production. The C1 Corvette was envisioned by Harley Earl as an American version of the popular European roadsters of the time. The Corvette managed to emulate those cars in spirit and even improved on their looks, thanks to Earl’s design. The problem was, the early Corvettes also emulated a European roadster’s middling build quality. Leaky fiber glass bodies and a puny “Blue Flame” I-6 had early customers dissatisfied and piles of 1954 model year Corvettes sitting unsold on dealer lots. Efforts by GM engineer Zora Arkus-Duntov got the Corvette the V8 it needed and build quality issues were addressed. The fixes proved enough to reignite interest in Chevy’s two-seater and the rest is history.
Lexus LFA
When Toyota corporate tells its engineers to build the halo car of their dreams, expenses be darned, don’t be surprised when the project doesn’t turn a profit. A big part of the legend of the Lexus LFA is its decade-long development costing upwards of a billion dollars, all for a car that the company knew they’d lose money on. That doesn’t mean the LFA wasn’t “worth it” for Toyota or the automotive world. On the contrary, like Porsche’s 959, the LFA was a test case for new tech for Toyota/Lexus, including developing in-house carbon fiber fabrication at breakneck speed. Lexus gathered all the best engineers and designers from across the Toyota and Lexus and said, build the best thing you can. Those folks built a legend of a car that burnished the brand and contributed mightily to company technology and know-how. In the end, profit and loss don’t really cover what makes the Lexus LFA great.
Cadillac Allanté (1986-1993)
It should be clear by now that when you read, “hand-built in Italy,” such an appellation drastically lowers the chances a given car made money for its company. Another case in point, the Cadillac Allanté of the mid-1980s designed to compete against European marks like Mercedes, BWM, and Jaguar. For this, Cadillac reached out to Pininfarina for design and body work. This wasn’t even the first Cadillac from the famed designers of Ferraris, Pininfarina had worked decades earlier on the Eldorado Brougham back in 1959. The Allanté, like the Brougham before it, was built in Italy by Pininfarina and shipped to the US for chassis, powertrain, and finally assemblage. The “longest production line in the world” was unsurprisingly an expensive endeavor. Those expenses were passed onto consumers as the Allanté carried the hefty price tag of $59,975 in its final production year of 1993, equivalent to over $120,000 today. And that was before the V8-induced gas-guzzler tax piled on another $1,700.
I would love to own one of those V6s that were in the C1 Corvette I’ll just bet they’re worth a fortune today if you could find one! They were very rare because they didn’t exist. Very funny!