Tuesday, August 28, 2012

Who "killed" the Chevy Volt?

The short answer is market reality.

But smart people "know" who "killed" General Motors' EV1.  In fact, they also "know" who "killed" Los Angeles' original street car system (Snell Report).  Conspiracies are easier to digest for some than the workings of markets.  The fact that markets reflect revealed preference realities makes it extra important to conjure fairy tales.

We are not quite ready for "Who killed GM's Volt?"  But it may be time to outline some screenplays and talk to people about financing possibilities.

Today's WSJ reports "GM Curbs Volt Plant Production ... General Motors Co. said it plans to suspend production of its battery powered Chevrolet Volt for 26 days as part of a move to pare excess inventory."  Uh oh!

GM had been declining for many years and should have been allowed to go into normal bankruptcy.  But politicized bail-outs of large unionized companies are hard to resist.  To compound the problem, picking "green" winners is also politically appealing.   Add the appeal of federal consumer tax credits, which are topped off in some states.

Put them all together and we get the Chevy Volt.  Explaining away the failure should be simple.  It's been done many times.


Randall Holcombe points out that MPG goals are not policies.  The goals are feel-good soothing.  The policies (above) ar the killers.