Zoomi Life

A recent article in the Wall Street Journal, written by Keith Johnson, lays out the reasons why he believes that General Motors will drop the Volt.  An immediate response article on Treehugger.com by Michael G. Richard refutes that argument and lays out his reasoning for it.

I, personally, think they’re both wrong.

Johnson’s WSJ article notes several sound reasons why the Volt won’t save GM or even survive their pending bankruptcy.  The strongest of his reasoning, however, is not sound. He posits that the government, which will own a resounding majority share (70%) of GM after restructuring, will want the company to become solvent as quickly as possible so that they can sell it back their shares and get out of it.

Richard, meanwhile, thinks this view is “shortsighted” and that the Volt is the first in a long line of hybrid/electric production vehicles and therefore is expected to take a loss. He points to Toyota’s Prius as an example: the car began in 1997 when fuel prices were relatively low and compact hybrid cars unpopular in America.  It’s all about the R&D, Richard says.

Well, Johnson makes the mistake of thinking that government has ever had any worry about “solvency” for anything. The government takeover of GM will inevitably mean a resulting government-appointed bureaucracy to “handle” GM.  Can anyone name anybody in government who knows how to run a business?  Exactly, if they knew how, they’d be in business, not government.

Richard, however, makes another classic mistake: he compares apples to oranges. Another of his mistakes is forgetting that government is (always) short-sighted. R&D and the time and commitment required to put a new technology on the road is a long-term, far-sighted endeavor.  Government never thinks beyond the next election cycle.  Secondly, Toyota did all of this while making money and operating in the black.  Hardly comparable to GM’s current situation.

So my view is that the Volt will, indeed, hit the streets (eventually).  Why? Because the gubment bureaucrats will want it to.  It’s GM’s “green baby.”  So it has to come through, or the takeover will be viewed as government (meaning President Obama to most Americans) reneging on the deal.

When it does release, however, all research, development, and so forth with the car will either cease completely, or be so cut back that they’ll become next to pointless. Why?  Solvency.  All of that R&D requires money and the new government handlers will want to prove that GM can “stand alone.”

Eventually.  In reality, like all bureaucracies, they won’t actually want to see GM succeed.  That’s the second thing neither of these writers made note of.  Bureaucracies, by their very nature, are growing organisms. Parasites, generally, but still growing.

A new bureaucracy built to be the handlers of GM (and probably Chrysler) will not only want to continue it’s own survival, it will want to grow.  This means that their charges can never be kicked from the nest.  Those birdies will never fly, but will spend the rest of their days under the belly of their new, oppressive mother, who will continue feeding them worms.

The $50 billion the government is about to spend on GM and the estimated $20 billion being spent on Chrysler?  That’s just the beginning.

So, in a way, both Johnson and Richard are right and both are wrong.  The Volt will, indeed, probably roll out and hit the streets at who-knows-what pricetag.  What it will not do, though, is survive.  Not in a real market, anyway.  It will either be dropped or heavily incentivized to continue sales.

That’s my view of the whole mess.