What the GM Volt Means to the U.S. Economy 24 comments
August 12, 2009
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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 (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 (TM), Honda (HMC), Mitsubishi (MMTOF.PK), Nissan (NSANY), Hyundai (HYMLF.PK), 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.
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Say the average Volt buyer does 30 miles round-trip per day, six days per week, and hence only uses the battery. This is 9360 miles per year, for which the Prius would burn 195 gallons of gas, costing, say, $600. So how is a Volt worth an additional $15,000 up front? The answer, unfortunately, is that it isn't.
As battery peformance gradually diminishes to the point of frustration,a new battery is needed.Time to shell out $10,000 for a replacement!
They could still be used for backing up wind power etc.
The GM Volt uses similar chemistry but doesn't work it so hard, as they oversize the battery to prevent it being drained too low which greatly affects battery life. They reckon it will be good for 150,000 miles
Lithium Iron Phosphor batteries are much better for longevity and is OK after at least 2,000 cycles for many brands.
On Aug 12 09:02 AM umuculus wrote:
> No one ever talks about the life cycle of the battery.As the battery
> constantly gets recharged you get less and less mileage on each charge
> as the battery ages. This becomes disconcerting to the owner of the
> electric vehicle.
> As battery peformance gradually diminishes to the point of frustration,a
> new battery is needed.Time to shell out $10,000 for a replacement!
The Volt is ideally suited to the U.S. market. Europeans will likley want the extra flexibility it offers too.
As for the Prius, it is a great car, but it is not currently competitive on an mpg rating basis with the Volt. Perhaps TM will change this soon? I am not fully aware of all of their development plans and schedule. It is, of course, a much more affordable car for the average US consumer. I think I have tried to suggest that this is the most important issue for GM and the US government to address.
The US needs to wean itself off of its dependence on foreign oil. The specifications for the Volt indicate that it is a car that can help us achieve that goal. It is a car that will give an order of magnitude improvement over current car mpg ratings without restricting range appreciably. This is what we need. We just need to make it more affordable to the general public. This needs to be a top priority. I am sure it can be done. All one has to do is look to the PC markets to see how things can get cheaper and better quickly. Some American ingenuity needs to be applied to the problem.
The above comments also reinforce my concern that marketing work has to be done by GM to improve its image. The Volt will undoubtedly have competition, but it is at the forefront of the race this time.
As for competing with China on labor costs, that should not be a huge issue. Autos are largely no longer made by hand. They are made by robots, with a little human supervision. This will be more true going forward. I believe the Japanese probably lead in this field. However, their is no reason the US cannot use their robots to make US cars (or use US robots). The issue of cheap labor is not what it used to be, although much was made of it lately. More of the process will become automated over the next decade. You will hardly need any human intervention at all to make a car. GM needs to stay at the forefront of this revolution. This should also help it to make its cars cheaper.
As a final point I cannot say enough times that this technological advance will help the US wean itself from foreign oil. The Volt seemingly can be the answer. It only needs to be made a bit cheaper. This seems an achievable feat. The only question is the time frame. The government needs to support the car with a tax incentive at its introduction. The government needs to support GM's work to reduce the costs of the vehicle. It is very close to being the solution to America's energy trade deficit. It is close to being America's solution to pollution. We need to take it the rest of the way. It is the first car that has shown the promise of energy independence to the US again. It is the first US car that is truly a leader in its field. The energy trade deficit is a huge negative factor in the US economy. The auto trade deficit is another. This car offers the potential of solving both of those problems.
Scoffing at GM and/or the Volt is a fatally wrong reaction for the US economy. Full speed ahead, damn the torpedoes is the more appropriate reaction. This is the reaction needed. The US will not regain a dominant position by admiring TM, which has actually become almost as stodgy as the Big 3 used to be. It must instead be the brash, impudent upstart. It must toot its own horn. It must put its money where its ego is. It cannot keep going further into debt to foreign oil purveyors and foreign auto purveyors. It needs to make the a quantum leap. The Volt represents such a quantum leap. It just needs to be made a little more cheaply.
The EPA needs to classify a Serial Hybrids like the Volt or Fisker with two numbers.
Auto Miles per charge/Miles per gallon.
Volt 38/50
Tesla 244/0
Clearly the electric component of the Volt gets much better "equivalent" gas mileage than its gas component (gas generator). That does not mean the number is a joke. The Volt has a 300mi range. This is much more in tune with US desires for a car.
On Aug 12 12:03 PM David White wrote:
> Many of the comments about the competitive nature of the electric
> or combi market have value. Supposedly the all electric Nissan Leaf
> will have an mpg rating of 367mpg (gasoline equivalent rating). Still
> it has only approx. a 100 mile range. The 300 mile range of the Volt
> is more in keeping with the U.S. ideal of freedom. Besides you can
> always fill up the gas tank (and maybe get a little charge) to continue
> further.
>
> The Volt is ideally suited to the U.S. market. Europeans will likley
> want the extra flexibility it offers too.
>
> As for the Prius, it is a great car, but it is not currently competitive
> on an mpg rating basis with the Volt. Perhaps TM will change this
> soon? I am not fully aware of all of their development plans and
> schedule. It is, of course, a much more affordable car for the average
> US consumer. I think I have tried to suggest that this is the most
> important issue for GM and the US government to address.
>
> The US needs to wean itself off of its dependence on foreign oil.
> The specifications for the Volt indicate that it is a car that can
> help us achieve that goal. It is a car that will give an order of
> magnitude improvement over current car mpg ratings without restricting
> range appreciably. This is what we need. We just need to make it
> more affordable to the general public. This needs to be a top priority.
> I am sure it can be done. All one has to do is look to the PC markets
> to see how things can get cheaper and better quickly. Some American
> ingenuity needs to be applied to the problem.
>
> The above comments also reinforce my concern that marketing work
> has to be done by GM to improve its image. The Volt will undoubtedly
> have competition, but it is at the forefront of the race this time.
>
>
> As for competing with China on labor costs, that should not be a
> huge issue. Autos are largely no longer made by hand. They are made
> by robots, with a little human supervision. This will be more true
> going forward. I believe the Japanese probably lead in this field.
> However, their is no reason the US cannot use their robots to make
> US cars (or use US robots). The issue of cheap labor is not what
> it used to be, although much was made of it lately. More of the process
> will become automated over the next decade. You will hardly need
> any human intervention at all to make a car. GM needs to stay at
> the forefront of this revolution. This should also help it to make
> its cars cheaper.
>
> As a final point I cannot say enough times that this technological
> advance will help the US wean itself from foreign oil. The Volt seemingly
> can be the answer. It only needs to be made a bit cheaper. This seems
> an achievable feat. The only question is the time frame. The government
> needs to support the car with a tax incentive at its introduction.
> The government needs to support GM's work to reduce the costs of
> the vehicle. It is very close to being the solution to America's
> energy trade deficit. It is close to being America's solution to
> pollution. We need to take it the rest of the way. It is the first
> car that has shown the promise of energy independence to the US again.
> It is the first US car that is truly a leader in its field. The energy
> trade deficit is a huge negative factor in the US economy. The auto
> trade deficit is another. This car offers the potential of solving
> both of those problems.
>
> Scoffing at GM and/or the Volt is a fatally wrong reaction for the
> US economy. Full speed ahead, damn the torpedoes is the more appropriate
> reaction. This is the reaction needed. The US will not regain a dominant
> position by admiring TM, which has actually become almost as stodgy
> as the Big 3 used to be. It must instead be the brash, impudent upstart.
> It must toot its own horn. It must put its money where its ego is.
> It cannot keep going further into debt to foreign oil purveyors and
> foreign auto purveyors. It needs to make the a quantum leap. The
> Volt represents such a quantum leap. It just needs to be made a little
> more cheaply.
As for the price of the Volt, I think I have made it clear that I think the price is too high to appeal to the bulk of Americans. I proposed that the government help GM bring that price down through a combination of research grants and tax incentives for buyers of the Volt. These tax incentives would help GM continue its push to make the Volt the "best low mileage vehicle on the road." It is to the US's benefit to have GM acquire that title for its car. It is to the US's benefit to have an affordable car that beats our current average car mpg figures by an order of magnitude. If this can be accomplished, the dependence on foreign oil can be greatly reduced if not eliminated entirely (over time).
The Nissan Leaf's mpg rating is impressive. However, it has only a 100 mile range before needing a recharge. It does not fit the American dream, which is the freedom of a "road trip" to anywhere. The American consumer does not want to have to keep two cars to have one that is very fuel efficient. Therefore the Volt is still much better than the Leaf. The Volt also gets much better gas mileage in the city than the Prius (approx. a factor of 4 unless the Prius's spec's have changed dramatically recently). It is the top low mileage car in the world if the price can be brought down.
For the moment I would agree with you that the Prius is more affordable to the average consumer. However, the Prius with it current mpg rating does much less to address the oil trade deficit issue. A large number of Volt's on the road would put a serious dent in the foreign oil dependence of the US. The government and GM need to put on a full court press at this time. Now is not the time to ease up.
Just to be clear, 2 out of 3 of the American motor companies are bust, and surviving with a still uncompetitive cost structure courtesy of the taxpayer.
The Volt is not ahead of the competition. Does anyone imagine that with their hybrid experience Toyota could not build a plug-in? Of course they could, but they think it is a silly idea and uneconomic with present battery technology.
When they do bring out one around 2012 it will have a a far more cost-effective all electric range of 20 miles.
I admire patriotism, at times, but admire rationality far more.
I any case, there is not a great deal distinctively American in this project, where you have an organ of the state producing a car at a loss, as GM admits.
They are likely to be as successful as the Russian Zil, and for the same reason.
Governments do not build good cars.
I did the math. I'll do it again:
Say the average Volt buyer does 30 miles round-trip per day, six days per week, and hence only uses the battery. This is 9360 miles per year, for which the Prius would burn 195 gallons of gas, costing, say, $600. So how is a Volt worth an additional $15,000 up front? And as for your proposal that the government subsidize this cost differential, well, that strikes me as pissing away a lot of money simply because Toyota was able to design a product that makes a lot more sense!
On Aug 12 03:09 PM David White wrote:
> logicalthought: The "very slightly lowered annual fule cost" is not
> very slight. It is big. It will be bigger as oil prices rise in the
> future. China and India are supposed to put a huge amount of upward
> pressure on oil prices eventually.
>
> As for the price of the Volt, I think I have made it clear that I
> think the price is too high to appeal to the bulk of Americans. I
> proposed that the government help GM bring that price down through
> a combination of research grants and tax incentives for buyers of
> the Volt. These tax incentives would help GM continue its push to
> make the Volt the "best low mileage vehicle on the road." It is to
> the US's benefit to have GM acquire that title for its car. It is
> to the US's benefit to have an affordable car that beats our current
> average car mpg figures by an order of magnitude. If this can be
> accomplished, the dependence on foreign oil can be greatly reduced
> if not eliminated entirely (over time).
>
> The Nissan Leaf's mpg rating is impressive. However, it has only
> a 100 mile range before needing a recharge. It does not fit the American
> dream, which is the freedom of a "road trip" to anywhere. The American
> consumer does not want to have to keep two cars to have one that
> is very fuel efficient. Therefore the Volt is still much better than
> the Leaf. The Volt also gets much better gas mileage in the city
> than the Prius (approx. a factor of 4 unless the Prius's spec's
> have changed dramatically recently). It is the top low mileage car
> in the world if the price can be brought down.
>
> For the moment I would agree with you that the Prius is more affordable
> to the average consumer. However, the Prius with it current mpg rating
> does much less to address the oil trade deficit issue. A large number
> of Volt's on the road would put a serious dent in the foreign oil
> dependence of the US. The government and GM need to put on a full
> court press at this time. Now is not the time to ease up.
There you go, being logical again!
Not that logical though, as it is clear that this is a faith-based article, and hence not subject to rational thought!
No actual argumentation has been produced, merely dubious assertion.
I wish the American car industry well, and there is nothing the matter with their engineers, but unfortunately it has been crucified by the America system, with vast costs for pensions and health care producing inordinate profits, and executives who are paid a huge multiple of the 'incompetents' (!) running Toyota and Honda.
Reality has to be faced before recovery is possible, and this article does not help.
I saw your point. However, cars stay in use for generally 15 years or more (150,000 miles plus). The 2008 Prius specification is 48mpg city. 2010 Volt says 230mpg city. If you do mostly city driving (to make the argument easier say all city driving), the the Prius uses 3125 gallons and the Volt uses 652 gallons for those 150,000 miles. The difference is 2473 gallons. If you mulitply this by $4/gallon, you have almost a $10,000 difference. When you consider that increased oil use by India and China could send the price of gas skyrocketing to even $10 easily, the difference could be 2.5 times that ($25,000) over the life of the car. That would actually make the Volt the better deal over the long term.
However, I do agree with you that the Volt is at the moment so expensive that most Americans will not buy it. They will not take a long term view. They are mostly driven by immediate considerations. In that case the Volt will be relegated to the fairly affluent and the strongly "green" customers.
I have suggested that perhaps the greatest need to make this car a true success is to make it less expensive. GM probably needs government research grants to help it to do that. Subsidizing the Volt's purchase for the first few years would also help. It would create more demand for the car. It would let GM ramp up the production of it. This by itself would make the car cheaper to manufacture and support. Volume usually does that. It would also serve the purpose of making the US a little less dependent on foreign oil.
You could say the government would be throwing money away. However, that should not be the case. By all accounts this car is the real deal. It should be possible to make it cheaper. A cheaper, well supported Volt is a very competitive car in the current market. Plus it would, especially if the technology were proliferated to other GM cars, provide a very real way for the US to reduce if not completely eliminate its dependence on foreign oil. This dependence will in the near future be more than $1T/year. The US GDP is only $14T/yr. The Volt technology if managed correctly should also allow GM to be very competitive with Japanese and other manufacturers. GM should gain market share in all areas of the world. This too would help the trade deficit.
Back to oil. If you no longer pay out $1T/year to foreigners for oil (money paid out gets subtracted from GDP), you probably spend most of that $1T on US products. This means an automatic boost of $2T to the GDP of the US. That's nearly 15% of the GDP. That's without even taking into account the mulitplier effect of the extra $2T now recirculating in the economy. If you do that, the benefit figure balloons to $3T to $5T conservatively. That's an increase of 21% to 35% in the GDP. Of course that is not per year. However, even if you split it over 7-10 years, an extra 2% to 3% growth in the GDP per year would do wonders for the US economy.
If you further consider that you will not be accruing an extra $1T worth of debt that you need to pay interest on, you will see how beneficial this advance in technology could be to the country. Let's say without this change you racked up $1T in oil debt per year (probably more) for 10 years. This would then total $10T. If you paid an average of 5% on this say average $5T debt over those 10 years, the interest on its own would be $250B per year. You can see how this trade deficit problem has been puting a damper on the US economy. You should be able to see why escaping dependence on foreign oil is so critical.
Escaping some of the dependence on foreign automakers would help also. This car's technology can make that a reality of managed well. GM might even garner a fair amount of export business to Europe and China if the product is managed well.
GM and the product also have to be marketed well. You and other commenters are excellent examples of why that it so. The technology is there this time. This car really is a great car with great technology. Admittedly it needs to be made cheaper, but it is almost there. It would be a major mistake for the US not to push it through to a being a tremendous success. It has all the earmarks. Your and other peoples gripes about GM are just that gripes. The government has the leverage now to make demands of GM. The government can guide this product through to success. The government has already seriously reduced the extra pay that US union workers were getting. It can tilt the scales further in favor of the Volt and GM by adding incentives. It can gift research money for what is really a stratigic economic initiative for the US.
Yes, you are right. I am cheerleading. However, there is a lot of truth in what I am saying. Not making the Volt a success would be a tragedy for GM, but it would be a bigger tragedy for the US economy. Sure other cars may eventually fill some of the purpose I have proposed for the Volt. Still those will again all subtract from the US GDP. Why not get behind a car that will add to the US GDP. It could be the keystone of the new GM. It could be the keystone (or one of them) of the US economy. I am appealing to people to give it the chance it deserves. Don't make the US a failure with negative thinking. Allow for the possibility of success by keeping an open mind.
China and India have populations many times the size of the US's. If they ever start using oil in a per person ratio anywhere close to 1/2 or even 1/4 of the US use per person, the price of oil will skyrocket to unimagined heights. This is not something the US wants to experience as a huge importer of oil. It would send our economy into the toilet. We might never recover. We want to be an exporter or at the very least neutral by the then. The Volt is the beginning of a solution to the problem. Sure other manufacturers will make similar car eventually. However, importation of all of our cars would be a big long term negative too. It already has been for some time. We cannot afford to let it go on. It is destroying the US economy. Americans should nurture their technological marvels. They should not throw them away.
David,
Where do you get this crazy figure? The U.S. imports approximately 10 million barrels a day. At $100 a barrel, this would be $1 billion a day, which would be $365 billion a year. And please don't tell me that oil prices north of, say, $120/barrel (absent inflation) are sustainable in the long-term. As was proven last year, demand above those levels quickly evaporates, and this will be aided by all of the higher mileage cars (as well as, perhaps, nat gas vehicles) that will continue to replace the low-mileage ones.
More importantly, though, I don't think that GM (or any manufacturer) should be singled out for a boondoggle of a specific vehicle subsidy. If GM can figure out how to build the Volt cheaper, they'll do it by using a team of a hundred smart engineers making, say, $100,000/year each. This cost ($10 million annually) can be borne by GM, if it thinks it has a viable product here. And let Ford, Toyota and Honda do the same thing.
On Aug 12 07:31 PM David White wrote:
> logicalthought:
> I saw your point. However, cars stay in use for generally 15 years
> or more (150,000 miles plus). The 2008 Prius specification is 48mpg
> city. 2010 Volt says 230mpg city. If you do mostly city driving (to
> make the argument easier say all city driving), the the Prius uses
> 3125 gallons and the Volt uses 652 gallons for those 150,000 miles.
> The difference is 2473 gallons. If you mulitply this by $4/gallon,
> you have almost a $10,000 difference. When you consider that increased
> oil use by India and China could send the price of gas skyrocketing
> to even $10 easily, the difference could be 2.5 times that ($25,000)
> over the life of the car. That would actually make the Volt the better
> deal over the long term.
>
> However, I do agree with you that the Volt is at the moment so expensive
> that most Americans will not buy it. They will not take a long term
> view. They are mostly driven by immediate considerations. In that
> case the Volt will be relegated to the fairly affluent and the strongly
> "green" customers.
>
> I have suggested that perhaps the greatest need to make this car
> a true success is to make it less expensive. GM probably needs government
> research grants to help it to do that. Subsidizing the Volt's purchase
> for the first few years would also help. It would create more demand
> for the car. It would let GM ramp up the production of it. This by
> itself would make the car cheaper to manufacture and support. Volume
> usually does that. It would also serve the purpose of making the
> US a little less dependent on foreign oil.
>
> You could say the government would be throwing money away. However,
> that should not be the case. By all accounts this car is the real
> deal. It should be possible to make it cheaper. A cheaper, well supported
> Volt is a very competitive car in the current market. Plus it would,
> especially if the technology were proliferated to other GM cars,
> provide a very real way for the US to reduce if not completely eliminate
> its dependence on foreign oil. This dependence will in the near future
> be more than $1T/year. The US GDP is only $14T/yr. The Volt technology
> if managed correctly should also allow GM to be very competitive
> with Japanese and other manufacturers. GM should gain market share
> in all areas of the world. This too would help the trade deficit.
>
>
> Back to oil. If you no longer pay out $1T/year to foreigners for
> oil (money paid out gets subtracted from GDP), you probably spend
> most of that $1T on US products. This means an automatic boost of
> $2T to the GDP of the US. That's nearly 15% of the GDP. That's without
> even taking into account the mulitplier effect of the extra $2T now
> recirculating in the economy. If you do that, the benefit figure
> balloons to $3T to $5T conservatively. That's an increase of 21%
> to 35% in the GDP. Of course that is not per year. However, even
> if you split it over 7-10 years, an extra 2% to 3% growth in the
> GDP per year would do wonders for the US economy.
>
> If you further consider that you will not be accruing an extra $1T
> worth of debt that you need to pay interest on, you will see how
> beneficial this advance in technology could be to the country. Let's
> say without this change you racked up $1T in oil debt per year (probably
> more) for 10 years. This would then total $10T. If you paid an average
> of 5% on this say average $5T debt over those 10 years, the interest
> on its own would be $250B per year. You can see how this trade deficit
> problem has been puting a damper on the US economy. You should be
> able to see why escaping dependence on foreign oil is so critical.
>
>
> Escaping some of the dependence on foreign automakers would help
> also. This car's technology can make that a reality of managed well.
> GM might even garner a fair amount of export business to Europe and
> China if the product is managed well.
>
> GM and the product also have to be marketed well. You and other commenters
> are excellent examples of why that it so. The technology is there
> this time. This car really is a great car with great technology.
> Admittedly it needs to be made cheaper, but it is almost there. It
> would be a major mistake for the US not to push it through to a being
> a tremendous success. It has all the earmarks. Your and other peoples
> gripes about GM are just that gripes. The government has the leverage
> now to make demands of GM. The government can guide this product
> through to success. The government has already seriously reduced
> the extra pay that US union workers were getting. It can tilt the
> scales further in favor of the Volt and GM by adding incentives.
> It can gift research money for what is really a stratigic economic
> initiative for the US.
>
> Yes, you are right. I am cheerleading. However, there is a lot of
> truth in what I am saying. Not making the Volt a success would be
> a tragedy for GM, but it would be a bigger tragedy for the US economy.
> Sure other cars may eventually fill some of the purpose I have proposed
> for the Volt. Still those will again all subtract from the US GDP.
> Why not get behind a car that will add to the US GDP. It could be
> the keystone of the new GM. It could be the keystone (or one of them)
> of the US economy. I am appealing to people to give it the chance
> it deserves. Don't make the US a failure with negative thinking.
> Allow for the possibility of success by keeping an open mind.
>
> China and India have populations many times the size of the US's.
> If they ever start using oil in a per person ratio anywhere close
> to 1/2 or even 1/4 of the US use per person, the price of oil will
> skyrocket to unimagined heights. This is not something the US wants
> to experience as a huge importer of oil. It would send our economy
> into the toilet. We might never recover. We want to be an exporter
> or at the very least neutral by the then. The Volt is the beginning
> of a solution to the problem. Sure other manufacturers will make
> similar car eventually. However, importation of all of our cars would
> be a big long term negative too. It already has been for some time.
> We cannot afford to let it go on. It is destroying the US economy.
> Americans should nurture their technological marvels. They should
> not throw them away.
I was working off a T.Boone Pickens estimate for the cost last year of imported oil of $700B. This estimate was made before the crash. T. Boone Pickens is likely a lot more knowledgeable than you or I about oil. I extrapolated that estimate over a 10 year period. I estimated that the $700B figure would likely be close to correct for soon after the recovery from the recession. The reason is simply that the China and India especially (others too) will use much more oil as their economies grow rapidly. The extra demand on the limited supply will cause crude prices to go up dramatically.
China and India together have perhaps 10 times the people that the US does. In 2007 the US used twice the oil of these two countries combined. That's about 20 times as much per person. It's not hard to figure out that those countries will start to use more per person as their economies grow.
You also seem completely oblivious to the fact that gasoline costs an average of approx. $7/gallon currently in Western Europe. Some of that is taxes. However, they clearly understand better than the US how much harm excessive importation of oil does to their economies. Can the price of oil go to $10/gallon within the next ten years? Easily! The supply is not expanding. In fact a lot of exploration and development has been curtailed due to the recession (and lower oil prices). When the worldwide recession ends, the price of oil may go up to $150/barrel just as a start. The US will have to conserve more. GS already has an estimate out for $85/barrel by the end of 2009. That's in a recession with almost 10% unemployment (which if you listen to some may actually be 15% unemployment). Can it go back to $150 again soon? Yes! Will that price have a disastrous effect on the US economy, if the US doesn't drastically cut back on its oil use? Yes! Other economies don't use as much oil. They will feel less effect. The US economy will struggle as others surge ahead. Does this mean we should go blithely on importing 10M+ barrels of oil a day? Or should we try to take actions which would do away with that oil trade deficit? You should also be aware that the US has been importing a higher and higher percentage of oil in a perpetual upward trend for some years now. This trend seems likely to continue. The US uses approx. 20M barrels/day.
One way to get close to the $1T figure is:
$150/barrel oil * 15,000,000 barrels/day imported * 365 = $821,250,000,000 of trade deficit.
or
$200/barrel oil * 12,000,000 barrels/day imported *365 = $876,000,000,000 of trade deficit.
I point out that we were paying about $5/gallon at the pump when oil was at $150/barrel. By extrapolation $200/barrel oil might only mean we were still paying less than Western Europe is now. To say it can't happen is to be extremely naive. $5/gallon gas has only minor impact on how much people drove. The oil import trade deficit likely has a lot to do with how the US economy has been performing over the last few year. The auto import trade deficit does too.
If you look at this only with the past in the US in mind, some of the things I am saying seem extreme. If you look at it from a more global perspective, you see they are likely not extreme at all. The US cannot afford its trade deficit. Particularly its oil trade deficit, which is likely to rise dramatically as world economies grow faster than the US economy in large part because the are not being held back by a huge trade deficit. Many people refuse to see that. It behooves the US to address the biggest factors in its trade deficit as quickly as it can.
Note: In this answer I have not even mentioned the extra interest money that mounts every year for payments on the trade deficit.
The problem is that GM is still the same institution that got itself into a mess.
Just like in the financial system, money is being pumped in without real reform.
Most of it's problems are in any case external to itself, and are due to the structures underpinning the US economy, chiefly loading bloated and expensive pension and health care costs on to individual companies, with inflated executive bonuses as an additional burden.
Check out the 'Bare Necessities' program that GM is running to get design criteria for a new car and truck.
The first thing that hits you are the fancy alloy wheels!
They explain that they mean Californian bare necessities!
This typifies a mindset.
For the Volt they are trying to charge into the wild blue yonder on the taxpayers dime, and admit themselves that they will not make any money on it.
For the American auto industry, just like the banking industry, the real, capitalist, America solution would have been to let the dinosaurs go to the wall, and have dynamic new businesses spring up from the ashes.
These zombies are just going to drain cash for as long as they are not put out of their misery.
I certainly agree that it would be good to use less imported oil. However, at a certain price, elasticity kicks in and demand drops like a stone while new, previously unviable sources such as the tar sands are brought on line. I don't think you'll ever see oil prices sustained above around $120/barrel (in 2009 prices), just as last year's run proved to be unsustainable. We now have a virtually unlimited supply of natural gas and that, combined with the new electric cars and hybrids, will put a lid on U.S. oil consumption once it hits the kind of prices you're talking about. You and I have the same goals here-- all I'm arguing is that it isn't beneficial for U.S. taxpayer money to be spent making the Volt a sellable product, when lots of other private setor companies are spending their own money to come up with better alternatives. If you want to spend U.S. tax money somewhere, I suggest you spend it on electric transmission line infrastructure, because without that, we're going to have a big problem recharging all those upcoming plug-in electric cars!
On Aug 14 02:07 AM David White wrote:
> logicalthought:
> I was working off a T.Boone Pickens estimate for the cost last year
> of imported oil of $700B. This estimate was made before the crash.
> T. Boone Pickens is likely a lot more knowledgeable than you or I
> about oil. I extrapolated that estimate over a 10 year period. I
> estimated that the $700B figure would likely be close to correct
> for soon after the recovery from the recession. The reason is simply
> that the China and India especially (others too) will use much more
> oil as their economies grow rapidly. The extra demand on the limited
> supply will cause crude prices to go up dramatically.
>
> China and India together have perhaps 10 times the people that the
> US does. In 2007 the US used twice the oil of these two countries
> combined. That's about 20 times as much per person. It's not hard
> to figure out that those countries will start to use more per person
> as their economies grow.
>
> You also seem completely oblivious to the fact that gasoline costs
> an average of approx. $7/gallon currently in Western Europe. Some
> of that is taxes. However, they clearly understand better than the
> US how much harm excessive importation of oil does to their economies.
> Can the price of oil go to $10/gallon within the next ten years?
> Easily! The supply is not expanding. In fact a lot of exploration
> and development has been curtailed due to the recession (and lower
> oil prices). When the worldwide recession ends, the price of oil
> may go up to $150/barrel just as a start. The US will have to conserve
> more. GS already has an estimate out for $85/barrel by the end of
> 2009. That's in a recession with almost 10% unemployment (which if
> you listen to some may actually be 15% unemployment). Can it go back
> to $150 again soon? Yes! Will that price have a disastrous effect
> on the US economy, if the US doesn't drastically cut back on its
> oil use? Yes! Other economies don't use as much oil. They will feel
> less effect. The US economy will struggle as others surge ahead.
> Does this mean we should go blithely on importing 10M+ barrels of
> oil a day? Or should we try to take actions which would do away with
> that oil trade deficit? You should also be aware that the US has
> been importing a higher and higher percentage of oil in a perpetual
> upward trend for some years now. This trend seems likely to continue.
> The US uses approx. 20M barrels/day.
>
> One way to get close to the $1T figure is:
> $150/barrel oil * 15,000,000 barrels/day imported * 365 = $821,250,000,000
> of trade deficit.
> or
> $200/barrel oil * 12,000,000 barrels/day imported *365 = $876,000,000,000
> of trade deficit.
>
> I point out that we were paying about $5/gallon at the pump when
> oil was at $150/barrel. By extrapolation $200/barrel oil might only
> mean we were still paying less than Western Europe is now. To say
> it can't happen is to be extremely naive. $5/gallon gas has only
> minor impact on how much people drove. The oil import trade deficit
> likely has a lot to do with how the US economy has been performing
> over the last few year. The auto import trade deficit does too.<br/>
>
> If you look at this only with the past in the US in mind, some of
> the things I am saying seem extreme. If you look at it from a more
> global perspective, you see they are likely not extreme at all. The
> US cannot afford its trade deficit. Particularly its oil trade deficit,
> which is likely to rise dramatically as world economies grow faster
> than the US economy in large part because the are not being held
> back by a huge trade deficit. Many people refuse to see that. It
> behooves the US to address the biggest factors in its trade deficit
> as quickly as it can.
>
> Note: In this answer I have not even mentioned the extra interest
> money that mounts every year for payments on the trade deficit.
When I was entering college in 1970, a new Volkswagon bug cost $1700. Today, a new bug costs $20,000. This is an increase of 1100%. A person making $20,000 in 1970 would need to be making more than $215,000 dollars today to keep up with that inflation rate.
How did we manage this type of inflation? Through debt. Through tricky financing, that turned the consuming in to a debt junkie. How can we make the above example more manageable, so that a person making $30,000 in 2015 can afford a car without taking on excess debt?
This is an example of why we NEED deflation.