By Doug Magill
Artificial Intelligence is no match for human stupidity. Unknown
One of the signature conceits of the Obama administration is the belief that by investing in certain technologies markets would magically appear and obliterate the old markets. As if this has not been tried in various forms by prior administrations.
Markets always win, although they can be deterred for a while by mandates, regulations and capital manipulation.
So it is with electric vehicles and advanced vehicle battery technology. The most recent casualty, A123 Systems, filed for bankruptcy last week. The company has been struggling for several years, and bankruptcy rumors have been surfacing regularly for the last few months.
In August the company claimed that it would be kept afloat by an infusion of capital from a Chinese company, Wanxiang Group Corp in exchange for a majority stake. The management team at A123 subsequently decided to scrap the deal with Wanxiang and go through bankruptcy so it could sell its assets to Johnson Controls. As part of the process the battery-maker got approval for a federal judge to obtain a loan from Johnson Controls of $15.5 million (at only 13.5 percent) to help it to process the transaction.
For most of the last year the stock has been a favorite of short-sellers, as it was clear that the expected avalanche of demand for the company’s batteries failed to materialize. Like most green-energy companies favored by the administration (it received a $249 million federal grant along with additional aid from the state of Michigan) it failed not because of incompetence but lack of a market for its products at the price needed to survive.
To realize just how delusional liberals are when it comes to economics and using taxpayer money to finance what they perceive are market-changing technologies, the boys at Powerline dug up a video of incredibly idiotic statements by the politicians involved in the A123 project.
Some quotes from the opening ceremony at A123 Systems’ factory in Michigan
Governor Jennifer Granholm, onetime democrat rising star: “63 thousand jobs in Michigan……Michigan now becomes the advanced battery capital of North America.”
Dr. Steven Chu, Energy Secretary: “…Just the beginning…it’s gonna be great!”
Senator Carl Levin (D, MI): “…hundreds of employees today, thousands of employees by next year….evidence that manufacturing is coming back to America.”
Senator Debbie Stabenow (D, MI): “…thousands of jobs across Michigan.”
David Vieu, CEO of A123 Systems, “We will be a significant player in this market….we will get off of foreign oil.”
Certainly liberal politicians are not the only deluded optimists when it comes to advanced technologies. They just happen to be the ones that spend money you have involuntarily given them chasing chimeras that are based on wishful thinking and economic ignorance.
And, of course, when investing in the wrong things doesn’t work, rather than dealing with market corrections and changing strategies, our Pollyannas of the Potomac would rather try to manipulate the market rather than deal with mistakes.
The much-derided Chevy Volt comes to mind.
In an article published in the Washington Times, Rep. Mike Kelly (R-PA) noted that the administration engaged in a lame attempt to blame Republicans for the debacle in Libya due to budget cuts. Except that, as Rep. Kelly reports, the State Department in May denied a request by Special Forces tasked with protecting the Libyan embassy to continue to use a DC-3 for security operations. Yet just four days later the State Department authorized the U.S. embassy in Vienna to install a $108,000 battery charging station for the new Chevy Volts that the State Department is planning on purchasing. Of course the U.S. government will probably pay full price for the Volts, and add to that the not-inconsiderable expense of shipping them to Austria and wherever else the buffoons at Foggy Bottom decide to send them.
Rep Kelly stated that “While the embassy in Vienna was going green, the consulate in Benghazi was getting bombed, and little was done to stop it.”
Reuters has reported that the company known as General Motors – now owned by the federal government and the UAW – is selling the Chevy Volt at a loss of up to $49,000 each. Precise numbers are hard to come by, but the fact is that the company is losing money on a product it would not otherwise be trying to market. The Obama administration has dictated that this albatross of a car be built, and regardless of economics or markets or common sense they will find a way to foist them onto a not-unsuspecting public.
Or, well, you guessed it: a market that they can control, the Defense Department. Yep, even though we are facing drastic cuts in the ability of our nation to protect itself, we are going to squander money on Obama’s techno toys. Our military, which doesn’t have enough ships or advanced aircraft to protect our interests, is going to become more green (although not so well camouflaged) by purchasing Chevy Volts.
Lost in otherwise dismal economic news GM reported over the summer that the sales of the hybrid vehicle had reached record levels (2800 vehicles in August). Well, maybe. Records being in the eye of the beholder, as GM’s annual sales of the Volt would look like a monthly disaster for any other known vehicle brand.
Aside from forcing the Pentagon to buy vehicles it doesn’t want, it seems that the government is allowing the company to artificially inflate its sales numbers by an old auto industry trick (one that got GM into trouble in the first place): discounted leases.
GM (I mean, the US taxpayer) is providing two-year leases on the little critters for $250 down and $199 a month. Essentially a giveaway lease that guarantees the company will lose money both on the lease and on the residual value of the car when returned. How do you price a used Volt when there is no market, and future owners are going to have to pay for incredibly expensive battery replacements at an unknown time? The car will become a writeoff for GM (sound familiar), the dealer makes money on the process, and you and I – the taxpayers – get stiffed once again.
Finally, the environmentally-rabid liberals that make up much of the administration are ignoring a September report from the Congressional Budget Office that analyzed the results of subsidies to the electric vehicle industry.
The news isn’t pretty.
Evaluating both the cost of energy and the cost of the vehicles the CBO concluded that electric vehicles are more expensive over their lifetime than other vehicles. Even with massive subsidies. The clear recognition of market forces was the following killer statement:
“Assuming that everything else is equal, the larger an electric vehicle’s battery capacity, the greater its cost disadvantage relative to conventional vehicles—and thus the larger the tax credit needed to make it cost-competitive.”
Which means the more green-friendly the vehicle the more it costs, and the more we would have to pay to even make it competitive.
One would think that large subsidies would entice buyers who wouldn’t otherwise be interested. Not so, says the CBO:
“The direct effect of the credits is to subsidize purchases of electric vehicles—including purchases that would have been made even without the credits.”
We are subsidizing the purchases of well-off consumers (think Hollywood) who could afford them anyway, but are getting to use our tax money to help them. Demand is not being increased by government help, we are just making fat-cat liberals a little better off in their smug assumption of superiority. The average car purchaser isn’t going anywhere near these things.
Well, okay. But surely electric and hybrid vehicles will help with the latest environmental catch-all: greenhouse gases and carbon emissions? Sadly, no. The CBO says:
“Increased sales of electric vehicles allow automakers to sell more low-fuel-economy vehicles and still comply with the federal standards that govern the average fuel economy of the vehicles they sell (known as CAFE standards). Consequently, the credits will result in little or no reduction in the total gasoline use and greenhouse gas emissions of the nation’s vehicle fleet over the next several years.”
Even while touting its successful hybrid, Toyota is backing away from an all-electric vehicle, and knows that the future is uncertain relative to long-term demand for hybrids due to their limited utility.
And lest we forget, there are huge environmental problems coming down the road in terms of battery disposal. No one know how it will be accomplished, and at what cost. Expect a battery disposal fee to become part of the battery-replacement cost for even hybrids, making their resale value even further diminished.
Not be pile on but there are also international trade issues involved in the manufacture of lithium-ion batteries. Since they require rare-earth elements, and those come primarily from Asia, we have to think through the implications of becoming dependent on foreign sources; and at what cost.
There are technologies that it makes sense for the government to invest in and encourage. Perhaps in some limited way even electric vehicle technology development might be part of that portfolio. But not in the way it has been done – by showering billions on companies that have no chance of making it in the market, and by enriching investors that for the most part happen to be connected to the administration.
We have better things to spend taxpayer money on.
As in most things associated with liberals this is all old news become new again: Ford announced in 1971 that it was developing an electric vehicle.
We know how that turned out.
Doug Magill has worked in the automobile industry and is currently a freelance writer and voice-over talent. He can be reached at email@example.com