Chevrolet Volt

I am reading about Chevrolet's new eco-friendly car the Volt. A couple of days ago it was officially panned by the New York Times as a first-class LEMON. The car costs a whopping $41K with all the features and convenience of a $15K economy car. This after millions of dollars invested through grants, not to mention the millions spent by the company to develop. Most predict that it will not be a more than a niche--even the company came up with that assessment even though the $1.5 Billion (yes, that is BILLION) is be lavished on consumers as an incentive for them to buy these . A couple of years we could laugh at such business folly, but of course as taxpayers we have majority ownership of GM.

It would be easy to jump to the conclusion that the Volt is the idea of a government bent on pushing an environmental agenda, but the Volt was conceived well before GM became Government Motors. No, the Volt was a strategic decision made by the management that got GM bankrupt in the first place. Bad management can happen without government intervention.

What interests me is what will happen if there truly is no market for this seeming misfit of a car. The problem with government ownership is that even a cash strapped government can foist lots of resources to an endeavor (think NASA in the 60s and any war effort). Two problems with that in the case of GM's Volt. First, having access to money too easily will not likely incent market innovation, something that is sorely needed in the battery or hybrid car markets (same with alternative energy: the cost of the alternative is just too high to be competitive). Companies that are lean and not flush with resources can often outmaneuver those behemoths where resources come too easily. Second, if the government can create incentives that impact the demand side of the business--i.e., offer rebates for making the purchase, it creates a conflict of interest with competing products. That is, the government is part of both sides of the transaction (seller and buyer) and will certainly create the appearance of being unfair if not actually being that way.

I do know that at $41K, the Volt is priced well beyond my means and I don't expect to see many in the Rockhurst parking lots.