July 30, 2010

The GM $50,000,000,000 Taxpayer Bailout and The $41,000 Volt

Edward Niedermeyer:
By taking a loss on the first several years of Prius production, Toyota was able to hold its price steady, and then sell the gas-sippers in huge numbers when oil prices soared. Today a Prius costs roughly the same in inflation-adjusted dollars as those 1997 models did, and it has become the best-selling Toyota in the United States after the evergreen Camry and Corolla.

Instead of following Toyota’s model, G.M. decided to make the Volt more affordable by offering a $350-a-month lease over 36 months. But that offer allows only 12,000 miles per year, or about 33 miles per day. Assuming you charged your Volt every evening, giving you 40 miles of battery power, and wanted to keep below the mileage limit, you would rarely use its expensive range-extending gas engine. No wonder the Volt’s main competition, the Nissan Leaf, forgoes the additional combustion engine — and ends up costing $8,000 less as a result.

In the industry, some suspect that G.M. and the Obama administration decided against selling the Volt at a loss because they want the company to appear profitable before its long-awaited initial stock offering, which is likely to take place next month. For taxpayers, that approach might have made sense if the government planned on selling its entire 61 percent stake in G.M. But the administration has said it will sell only enough equity in the public offering to relinquish its controlling stake in G.M. Thus the government will remain exposed to the company’s (and the Volt’s) long-term fate.
Posted by James Zellmer at July 30, 2010 11:59 AM | Subscribe to this site via RSS:
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