Saturday, March 3, 2012

Chevy Volt, Perfect Car for the One Percent, Suspends Production

By John Ransom
Saturday, March 03, 2012

General Motors reached another Obama milestone when they announced late on a Friday afternoon that they were suspending production of the Obama-inspired Chevy Volt for five weeks due to lack of demand.

Presumably the Volt was an attempt by GM to help Obama with his pledge to put 1 million electric cars on the road in return for the tens of billions of dollars in forgivable “loans” that the company got from the Obama administration from the TARP bailout.

The hybrid gas-electric vehicle gets 25 miles on a full, overnight charge and costs around $40,000. To date, GM has sold around 10,000 vehicles. To put it in perspective, the Chevy Corvette has a sticker price of $49,600.

If the Volt’s not in the federal witness protection program, it ought to be.

“Sales also took a hit last fall when the National Highway Traffic Safety Administration opened a probe into why two Volts burst into flames days or weeks after severe NHTSA crash testing,” reports USA Today. Leaks from the cooling system were caused by shortages in the electrical system that prompted the fires. But the discovery came only after weeks of bad press for GM. Eventually the car company offered to buy back every single Volt for any consumer who was unhappy.

But lack of sales- and production- hasn’t stopped the government-owned car company from mapping out a marketing strategy that might have been fashioned by the marketing geniuses of the IRS and the United States Postal Service combined: “The Volt’s technology and its recent accolade from Consumer Reports make the Volt a marketing tool for Chevy,” said Alan Batey, vice president for Chevrolet U.S. sales, at the beginning of December according to Bloomberg. “This vehicle is about more than how many we sell,” Batey said. “This vehicle is a magnet around everything we are trying to do to showcase our brand.”

If that’s the case, it looks like a poor magnet and a poor tool. And taxpayers, who are still owed billions by the company, are about to get screwed even worse in the coming months.

The website ExtremeTech calculates that the car costs about 6.3 cents per mile when running on electricity at 13 cents per kilowatt hour. But that rate ignores depreciating the cost of a replacement battery ($8,000) over the life of the battery warranty.

When you add in the cost of the battery depreciation, you get a calculation of about 14.3 cents per mile for the Volt. As the tech site notes: “A compact car getting 35 mpg would cost 10 cents per mile using $3.50-a-gallon gasoline.” So in other words, the Volt, in addition to the high cost to purchase, costs 43% more to operate than a conventional car.

That’s why the Volt is the perfect car for the Occupy Wall Street crowd: It makes no economic sense no matter how convoluted its supporters make the economic argument or how much taxpayer support it’s given. The Volt relied heavily on $7,500 federal government subsidies- and even then couldn’t make a go of it.

As one economist pointed out in the USA Today:

"The fact that GM is now facing an oversupply of Volts suggests that consumer demand is just not that strong for these vehicles," comments Dr. Lacey Plache, chief economist for auto research site Edmunds.com. "The price premium on the Volt just doesn't make economic sense for the average consumer when there are so many fuel-efficient gasoline-powered cars available, typically for thousands of dollars less."

Even GM employees aren’t buying them: Eldon Renaud, president of United Auto Workers Local 2164 at the Bowling Green, Kentucky plant noted that his members were going “to use their [$7,000] profit sharing checks to put a down payment on the” Corvettes they manufacture.

Conversely, what does it tell you when GM won’t see a bump in production on a model they sell less than 2,000 of during a month when they pay record $7,000 bonuses to 47,500 workers?

USA Today goes on to point out that the Volt’s “average buyer has a $170,000 household income and doesn't need to have a new-car purchase subsidized” by the federal government.

But that’s how The One takes care of the One Percent and an iconic car company goes from “Like a Rock” to “The Perfect Company for the One Percent.”

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