Before I comment on Steve Rattner’s op-ed in the New York Times on GM’s decision to stop producing electric vehicles in the United States, I should probably repeat my opinion of the man himself. I think that Steve Rattner is a Democratic Party rainmaker without the knowledge, experience, or temperament to conduct serious negotiations with GM or Chrysler back in 2009 but excellent credentials to be a messenger boy between the auto industry and the Obama Administration. Occam’s Razor suggests that was indeed his role. The problem with the Obama Administration’s handling of the near-collapse of the domestic auto industry was that it had, as an old friend of mine might have put it, too many oars in the water. One of those oars was electric vehicles.
This statement from the op-ed startled me:
Moves toward electric vehicles, in particular, will vastly change the types of factories and workers that G.M. needs.
Maybe I’m naive but what moves? GM’s sales of EVs (all models) have tanked. They aren’t increasing the way sales projections have thought they would. To my eye any bumps in EV sales have been produced by Tesla. Tesla has proved that, if an automaker produces a stylish vehicle and sells it at a loss, they can sell as many as they can produce. More. Exciting news. Also, you can sell as many quarters at a nickel a piece as you care to.
Increases in worldwide sales of EVs are largely due to sales in China. China uses and produces a lot of EVs. It’s amazing what you can in a command economy. China’s motives are clear: they want to reduce oil imports, at this point their largest category of imports.
In the United States EVs are likely to remain what they have been: a niche product.
When Mr. Rattner writes this:
Mr. Trump’s responses to G.M.’s decision also miss the mark. He called on G.M. to close one of its plants in China, even though G.M. doesn’t import a meaningful number of cars from there. He said G.M. should no longer have access to incentives to stimulate electric car production, which would simply damage the government’s effort to make the industry more competitive by spurring investment in new technologies.
I suspect he doesn’t understand the big picture. IMO Trump’s not trying to curb imports of Chinese EVs. He wants China to import EVs. I don’t think that’s going to happen for reasons I’ve suggested above.
Here’s the balance of Mr. Rattner’s piece:
In addition, the American government should increase spending on education and training and finally begin that the long-delayed infrastructure initiative. We need to foster Americans’ pioneer spirit, and encourage them to move to where the jobs are.
For some Americans, it’s too late for retraining or relocation. They deserve a stronger social safety net, including programs to reduce the tendency to turn to alcohol and opioids.
or, in other words, he thinks we can educate workers to take the mid-level jobs that aren’t being produced and give the increasing numbers of unemployed and unemployable health care. At the end of this process we’ll have highly compensated educators and health care providers and millions of bored unemployed people.
It sounds to me as though he wants to manage the decline rather than produce a recovery.
I did not read the op-ed. So, this is limited to the excerpts, and somewhat tangential.
To me, it seems perfectly reasonable that China would want to manufacture whatever it can for domestic sales, and the same goes for the US or any other country.
Though it would be nice, the US does not need to be a net exporter, and if the numbers are low, the US could be a net importer without a problem.
Numbers that are huge for the US are not necessarily very big for China. Their EV usage may seem gigantic, but everything about China is ginormous.
Do you have any idea how many government job training programs there are? Neither does anybody else.
BTUs are BTUs. Calories are calories. Kwhs are Kwhs. The energy required to move a vehicle a fixed distance is directly proportional to its weight (mass). Different fuels are compared by GGE – gasoline gallon equivalent.
https://en.wikipedia.org/wiki/Gasoline_gallon_equivalent
The average cost of electricity is $.09 / Kwh. The gasoline equivalent is $3.09 / gallon.
But here’s the catch – an electric vehicle, Chevy Bolt style, weighs about 600 lb. more than a gasoline vehicle of the same size. That’s like hauling the family next door, plus their dog, around with you.
EV’s will always be a niche market here. Maybe even mandated for smog plagued cities like L.A. But none of that is what is wrong with GM, which I sadly suspect, is still healthcare and pensions. Workers in China and Mexico are, in practice if not in theory, expendable.
If we don’t want to emulate them, some kind of import restrictions are going to be necessary. Tariffs or something else.
How much of this is because the UAW contracts are up for negotiation next year?
But the truth is domestic demand for cars has reached a cyclical peak. For the US as a whole; the only way that increased production can be sustained is if (a) export more cars or (b) import less cars.
I thought the amusing line in the op-Ed was how GM repair all but 11 billion of its 50 billion bailout. 11 billion here, 11 billion there, it may add up to real money.
But its also true 11 billion is small change considering all the ways we subsidize other things / industries.
GM is canceling 6 vehicles, 4 are large, luxury sedans, one is the Cruze, a compact sedan, and then there is the Volt, a hybrid. GM is keeping the all-electric Bolt.
More than anything, I think this says that Americans aren’t much interested in sedans generally (not “small cars” as the oped claims – small SUV’s are very popular) and that GM isn’t very competitive in the sedan market. This really doesn’t have anything to do with electric vehicles or ride-sharing (mentioned in the op-ed), it’s about what’s viable in the auto market and the structure of GM’s manufacturing. For example, the Lordstown Plant in Ohio only makes the Chevy Cruze. If GM cuts that vehicle because it isn’t selling, then the plant has to close or GM would need to retool it to make something else. That’s a consequence of how GM has aligned its manufacturing facilities which has nothing to do with the purported workforce needed for electric vehicles or American’s love for SUV’s, trucks and crossovers – a love that’s been longstanding.
It’s been a long time since I shipped product to GM stamping plants and followed the auto industry closely. But I think Andy has squarely put his finger on it.
Separately, they never should have been bailed out and Trump shouldn’t be dictating how GM runs. (Although I came out of an industry that Presidents such as Kennedy did exactly that). But GM made the deal with the devil. Payback is a bitch.
As I said at the time, ensure a soft landing for GM’s employees, don’t bailout the company. GM has been making lousy management decisions for decades.
Having toured many a stamping and assembly plant, and knowing the mentality, I’m not so sympathetic to GM employees. Yes, that’s bias. But as Keef would say, it’s well earnt.
Management? My first hand experience goes back to the 80s. These clowns simply sawed off the ass end of a sedan to meet fuel requirements, and told the public “buy’m.†I forget the model; it was a Buick or Olds, but it was horrid. Eff’m. But maybe they have gotten better over time. The Caddy CTS is a good car. That’s one……….
Soft landing for employees, doesn’t seem a priority for professional (as opposed to professing) Democrat Rattner as much as burnishing the party line.
This will end Donald Trump’s re-election chances.
This is a smear based on an identity you’ve assigned to an entire group of people. We might even call it identity politics.
Just wanted to note that I don’t have any insight into GM except for friends and family who’ve worked for them or associated industries.
My understanding is that are still making the Bolt, but a lot of it is for export.
Steve