What the GM Volt Means to the U.S. Economy

by: David White
I think people have written the US off a little early. The recent data on the Chevy Volt (230mpg in the city) indicate that the US may still be a big factor in the automobile industry in the not too distant future. The Cash for Clunkers program, while not necessarily the most efficient use of tax dollars, has the invaluable benefit of getting the US public to actually think about fuel efficiency in their auto purchases. It also shows the US leadership is actually thinking about the psychology of the US consumer.
Further, the government-backed bankruptcies of GM and Chrysler clearly directed the companies in the direction the government wanted to see the public move (toward more fuel efficient autos). Again leadership was good. The recently released Volt data have temporarily at least restored faith in that leadership. The US government's incentives for solar power add to that faith. They too will help to wean the US away from oil. Obama is making good on his promise to try to reduce US dependence on foreign oil and to make the U "greener". Let’s give kudos to him and to Congress for addressing such important problems in this time of crisis.
US workers may be paid more than Chinese or Indians, but they can also be more productive. They can be innovative. The Volt is an example. The Tesla, which gets 110 mpg (energy equivalent since it is all electric), is another example. This car even looks and performs like a sports car. It will go over 200 miles without needing a recharge.
If the US can wean itself off of foreign oil, all of that money will funnel back into the US economy every year instead of going to support a lot of governments that more often than not hate the US. Many of the regimes are countries we have spent trillions conducting wars in recently. This is no small thing. Some predicted the deficit from foreign oil purchases in 2008 was going to be about $700B (before the crash). After a couple of years of recovery, this may be true again and more if the US dependence on foreign oil is not reduced.
If the US does away with that dependence, it will have the effect of an economic stimulus package of $700B+/year. Imagine how much better the US economy would do in that case. If the trade deficit due to auto importation were reduced simultaneously, this might be a truly huge stimulus to the US economy. You can protest that this cannot happen. However, I think even a grade school student can figure out that a population driving Volts would use about 1/8 or less gasoline than we currently do. If only 1/2 the country drove vehicles as efficient as the Volt, we would still be able to cut the amount of gasoline used by almost half.
The government is upping the mpg requirements on all of the other new cars sold too. Imagine a US economy that got a $2T stimulus package every year. Imagine that that stimulus actually gets multiplied by a factor of several as that money later recirculates through the US economy. Instead of a subtraction of $1T+/year for oil and auto imports, the US would spend that $1T+/year on US manufactured goods and services. This alone would add $2T to the GDP. However, that is completely neglecting the multiplier effect. That same extra $1T+/year would recirculate within the US economy to spur further growth. The actual effect would likely end up to total $3T-$5T.
With vehicles like the Volt and the Tesla, the US can easily regain the lead in the auto industry. Others will copy those cars. There is no good way to prevent that. What the US has to do is to make sure that GM and Tesla get the money and government backing they need to make their cars in huge numbers (and more cheaply). GM has to continue to innovate with the Volt. The government should do what it can to help Chrysler and Ford (NYSE:F) manufacture fuel efficient vehicles also. These companies will also help the US reduce its dependence on foreign oil and foreign autos.
If the price tag on the Volt could be dropped to $30,000 from its current $40,000, it would be affordable for a large portion of the US public. The US government needs to make this happen. We have the technology. Now we need to make sure that the foreign automakers don’t start making their own versions of the Volt more cheaply and more plentifully than the US does. It is GM’s job not only to produce an innovative car like the Volt. It is GM’s job to market its technically superior car and itself to the American public. It is GM’s job to grow itself into the biggest and most highly thought-of car manufacturer in the world. It is GM’s job to seize credit for itself and the US for the sheer brilliance of this engineering marvel. It is GM’s job to take back the reputation of the American automaker.
This is truly the first great car of the 21st century. It could be a key to the future health of the US economy. The US and GM cannot afford to let Toyota (NYSE:TM), Honda (NYSE:HMC), Mitsubishi (OTCPK:MMTOF), Nissan (OTCPK:NSANY), Hyundai (OTC:HYMLF), Tata, or any of the others steal its thunder on this car. The US cannot afford to let another country make it much more cheaply than we do. GM has to not just be the innovator. GM has to manage the moment. It will have a limited amount of time before the invention is copied. It has to make the most of that time. The copiers will not be content with just copying it. They will start with the idea of making it cheaper and better. GM cannot rest on the laurels garnered for this great innovation. It has to beat the other manufacturers to the punch. It has to make a better, cheaper version of the same car much more quickly than the competition.
The government needs to give GM every aid to make sure this happens. This car literally beats the currrent US average city driving mpg rating by an order of magnitude. This fact needs to be taken extremely seriously. The US needs to get the Volt on the road as quickly and in as great a number as is possible. This could well be the keystone of the US economy as it moves forth in the 21st century. The US cannot afford for it to be misshapen or faulty. Congratulations GM, but please don't make the mistake of thinking your task is anywhere near done.