American Elephants

Admitting Failure Is Really Hard, Not Doing So Costs Taxpayers. by The Elephant's Child

chevy volt 2013

Back when we first learned that the auto industry was in trouble, we were told that Chevrolet had a prototype of an electric car that they were experimenting with, but that it wasn’t ready yet for prime time. Obama rejected the bankruptcy laws, which might have caused problems for his union supporters, appointed a czar to fix the auto industry, and bailed them out in their preferred kind of bankruptcy, which involved giving a third of General Motors to the Unions and Chrysler to Fiat, firing the automobile dealers who were legally private businesses whose only connection to the auto industry was that they bought their inventory of automobiles from the car companies. Whoa.

What kind of deal was that? Then there was “cash for clunkers” which was supposedly going to get the elderly gas burners off the highways and re place them with the newest cars off the line with better mpg. The people who were planning to buy a new car anyway promptly turned up for the subsidy, Their cars, often only lightly-used, were crushed, and the used car marketplace and the used parts marketplace were deeply damaged, and have not, even yet, recovered.

Obama got all excited about the Volt and demanded that Chevy make the new 21st century automobile — the car of the future. GM reminded that it wasn’t ready for prime time, but Obama insisted. Well, you know what happened: government taxpayer subsidies, cars bursting into flame, I think it was Karmas that turned into bricks or was it Fiskers? At any rate the cars ranged up in price to over $100,000 — and why we needed to subsidize buyers who could afford that, I really don’t understand.

Investors brings us up to date:

Gone Green: Nearly a year ago General Motors was losing almost $50,000 for each Chevrolet Volt it built. Now GM’s business model, driven by trendy environmentalism, calls for it to cut the price and lose even more money.

The green lobby wants more hybrids and plug-in electric cars on the roads. Therefore the president wants 1 million electrics humming around by 2015 — and the carmakers have to ignore market reality under pressure to do what the environmentalist-political complex demands.

Even if it makes no sense.

The whole story can be filed under “Governments Do Not Know How To Pick Winners and Losers” — but we have long known that. It’s just politicians, sure that they are more enlightened than the rest of us that do not. Republicans talk about “Markets.” Even the CEOs of companies don’t know how their new product will fare when put on the open market for potential buyers. It is the marketplace that will tell the company whether they have a winner or a loser— when millions of ordinary people decide whether they will buy it or not. There are lots of famous total flops — the Edsel car, Michelle Obama’s ‘My Plate’ food guide, Solyndra, and the Lone Ranger movie,just as an example.

So General Motors is going to drop the price by $5,000. USA Today reports that with a “full $7,500 federal tax credit, the price is cut to $27,495.” So it is going to cost taxpayers $7,500 for each Volt they sell, (and probably a chunk of the $5,000 that GM is cutting the price by). The big question is do they just sell the cars they have on the lots? Or are they going to keep on making the things, adding to taxpayer cost with each car?

The Volt sold about half of the 45,000 they expected to sell last year. Ford built 1,627 Focus electrics in 2012 and sold 685. Nissan sold fewer than 800 of its Leaf’s and Mitsubishi could sell only 600 of its I-MIEVs.

Government does few things well. Picking winners and losers in not among them. The Free Market works, but you have to listen to what the market has to tell you.

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