General Motors released its disappointing earnings report last week to the sound of crickets. While financial TV news networks (along with most analysts and journalists) ignored the negative aspects of the release, share price has fallen over 5% in less than a week since the news hit. The earnings release and subsequent SEC 10K (annual report) expose the fact that GM's recovery is not the success that the Obama Administration and media portray. The lack of the fanfare that typically comes with GM earnings releases is as good an indication of the meaning behind the numbers as is the decline in share price.
Undoubtedly alternative energy and transportation innovator Elon Musk (Flickr photo: Jurvetson) – like his competitor for the taxpayer-funded, six-figure electric automobile market Henrik Fisker – is a smart guy. But will economic and technological realities humble him, or worse, make him look like a fool?
After the experience recounted last week by New York Times journalist John Broder, who test drove the Tesla Model S in frigid conditions that required frequent unplanned recharging stops throughout the Northeast, humility is out of the question for Musk. The jury is still out on inanity.
Perhaps General Motors should have put more focus on competing in the largest segment of the auto market instead of focusing on being the market leader in the least popular, plug-in, electric vehicle (EV) field. A Detroit Free Press article reported that GM had to slash Chevy Malibu prices by hundreds of dollars to try and catch up with vehicles like the Toyota Camry, which is currently eating the Malibu's lunch.
According to Toyota Vice Chairman Takeshi Uchiyamada, "Because of its shortcomings - driving range, cost and recharging time - the electric vehicle is not a viable replacement for most conventional cars; we need something entirely new." Uchiyamada is considered the "father of the Prius."
An article by Reuter's exposes the limitations of EVs and focuses on Toyota's, along with Nissan's, change in strategy, which is now moving away from EVs. Even the most ideological and extreme green energy proponents and backers of the Chevy Volt will have to open their eyes to the sad truth uncovered by the latest report.
January's dismal numbers for Chevy Volt sales may give a clue as to how successful (or not) President Obama will be in reaching his goal of having a million electric vehicles (EVs) on American roads within the next few years, a goal that is increasingly becoming unlikely. It also gives us a glimpse into a bizarre strategy General Motors has had by focusing so strongly on plug-in cars while they lose market share elsewhere. The numbers are in, and GM can proudly say that they are the market leader in an insignificant field with a paltry 1,140 Volts sold in January. The best selling passenger car on the road, the Toyota Camry, sold 31,897 during the month, giving an indication of how illogical GM's misguided focus has been.
I recently came across a report written by the Congressional Budget Office (CBO) which estimated the cost to taxpayers for "federal policies to promote (aka subsidize) the manufacture and purchase of electric vehicles (EVs)." The piece also predicts the short-term benefits of the subsidies and includes the effects of rising federal requirements for fuel economy (known as CAFE) standards. The outlook is that federal subsidies will cost taxpayers $7.5 billion over the next few years for little or no benefit (even when including the impact of CAFE) to total gas consumption or emissions.
The past year was a dismal one for the passé idea that government would use taxpayer dollars responsibly, and that was nowhere more evident than with President Obama’s initiatives to promote “clean” energy technology companies and projects with so-called “stimulus” funds and other public money. NLPC reported extensively on some of the most egregious examples.
Amidst its ongoing financial problems and search for a “strategic alliance” that it says is not an attempt to sell the company, Fisker Automotive continues to make its current business partners extremely nervous.
In particular are those “investors” that represent the taxpayers of Delaware, who foolishly committed $21 million in public money to the California-based company, in exchange for a promise to take over a former General Motors manufacturing plant to build its next electric car, the Atlantic. But rather than generate thousands of “green jobs,” instead the factory sits dormant while Gov. Jack Markell and the state’s economic development officials stew. And now the state has learned that if Fisker goes belly-up or fails to operate in Delaware, the repayment of the funds it has outlaid is subordinate to the rights of other lenders to get their money back, including the U.S. government.
Not that the company is going to return taxpayers their money, since the premise upon which Nissan received the loan were ridiculously high production estimates. Too much in expenses would have to be eaten otherwise.
But that didn’t prevent the recipient of $193 million out of President Obama’s green stimulus from laying off another 40 workers. According to the Orange County Register, Fisker spokesman Roger Ormisher said the company – which had been awarded a $529 million loan guarantee by the Department of Energy only to see it halted due to unspecified shortcomings – had to halt production because its bankrupt supplier, A123 Systems, left them with a low battery inventory. Ormisher said Fisker has laid off about half its employees since February.