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.

The Administration is Very Anxious to Control More of the Economy. Be Nice if They Knew What They Were Doing. by The Elephant's Child
February 26, 2010, 9:57 pm
Filed under: Capitalism, Democrat Corruption, Economy | Tags: , ,

Mitt Romney’s new book,  No Apology” The Case for American Greatness apparently makes the claim that “government is calling the shots on every major decision at GM, including which plants to expand and which to close.”

According to long-time Detroit newspaperman and political cartoonist Henry Payne:

White House spokesman Matt Lehrich told the Detroit News: “While the president will continue to monitor the taxpayers’ investment in these companies, he has enough on his plate to have no interest in running them. Decisions and management are handled by the company alone.”

Payne lists the ways in which Washington isn’t running GM.:

  • The Obama administration forced GM into Chapter 11 last March and rejected its first restructuring plan as inadequate.
  • The Obama administration fired GM CEO Rick Wagoner.
  • The Obama administration appointed new GM board chairman, Ed Whitacre.
  • The Obama administration forced GM to reverse a decision to build its new small car in Asia.  To satisfy UAW demands, the car will be built in Orion Township, north of Detroit.
  • Rep. Barney Frank (D-MA) strong-armed GM into keeping open a facility slated for closure in his district.
  • Congress has balked at GM’s dealer streamlining plans, passing a law requiring dealer arbitration.
  • And just today, the Obama administration GM announced that it would discontinue the gas-hungry Hummer.

Makes sense to me.  Once again, Obama’s ideology trumps the facts.  He believes firmly that oil and gas are dirty and evil, that “clean green” policies will save the planet, in spite of all evidence to the contrary.  Or perhaps it is just payback for the environmental organizations that supported his campaign.  The Chicago Boys are very big on paying back your supporters.  It’s called “crony capitalism.”  Used to be called “graft.”

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