Tuesday, August 17

New technologies and the GM "Volt"

I've been following the debate about the Chevy Volt. The car has a list price of $41,000 or so, but the government is offering a "maximum" tax credit (i.e. a government subsidy) of "up to" $7,500 per car, which would drop the net cost to $33,500.

For that price you get a car that can go 40 miles on battery power. After that a gasoline-powered generator starts up and we're back to...well, a gasoline-powered car.

Except this car also has batteries that will need to be replaced every 100,000 miles or so.

Hey, new technologies have to start somewhere, and early products are usually pricier and don't offer as much performance as later versions. That's almost universal.

But in this case it's hard to ignore the fact that the U.S. government gave then-bankrupt GM something like $60 Billion (later converted to a 61% stake in GM)--a move widely regarded as a way to transfer tax dollars into union jobs and pension funds. The concensus is that Obama and crew consider GM "too big to fail"--meaning that Democrats will continue to funnel whatever amount of your tax dollars it takes to keep GM in business.

This means that even if company execs make a bunch of utterly disastrous decisions, the Dems will give the company more of your tax dollars to bail them out.

Wow! Nice business model, eh?

It's not at all unusual for manufacturers--including car makers--to float trial balloons with the public, announcing a project will be produced and sold to see how the public reacts. If the market is unimpressed by forecast performance or price, the project can be delayed to refine the technology, or can even quietly be 'put on hold'. And indeed, GM had already delayed a production decision the Volt.

But once Obama used taxpayer dollars to buy a controlling interest in GM, and given that Obie and co. wanted GM to produce the Volt to prove their "commitment to the environment," further delay and technical refinement of the project was no longer an option.

So where a *private* company might have quietly shelved a project if they viewwed the market as unimpressed, the new improved Gubmint-run Motors went ahead full-throttle.

Hey, private companies make crap decisions every day. It's the beauty of a thing called the "free market." If they make enough bad decisions--or even just one if the company has spent enough money on it--they go bankrupt and everyone finds another job and life goes on.

But once government decides it won't allow a company to fail, there's no longer a free market. Instead, decisions are made for political reasons rather than being market-based.

I'm delighted that GM has developed the Volt, and I hope it turns out to be a huge success. But it needs to be emphasized that most politicians know almost nothing about business, or the free market. Yet they're not shy about making decisions for any company, large or small.

Ah, Dem/lib/socialism at work!


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