The Chevy Volt is too Expensive unless you want to Drive in the Carpool Lane Alone

Posted by PITHOCRATES - September 9th, 2012

Week in Review

The government rarely runs anything well.  Because few politicians have any business experience.  Which explains why the more they intervene into the private sector economy the more the economy suffers.  Case in point GM.  GM was losing money because they couldn’t sell cars at a high enough price to pay their bills.  Especially their retiree pension and health care costs.  Instead of allowing GM to go through the bankruptcy process to fix their problems so they could sell cars at prices that would pay their bills the government bailed out the UAW.  And did not fix their underlying problem.  What caused all of their problems in the first place.  High labor and retiree costs.  So it’s no surprise that GM did not emerge leaner and meaner from bankruptcy.  Like the airlines typically do.  Instead they left the problems in place.  And told GM to build the Chevy Volt (see The Chevy Volt: Dead or alive? by Brooke Crothers posted 9/3/2012 on CNET News).

Depending on who you believe, the Volt is either alive and kickin’ or in its death throes.

The most recent news about GM’s plug-in hybrid gives fodder to both sides. On the upside, GM said on Wednesday that it already has sold more than 2,500 Volts this month. That would be a monthly record, bringing the global total this year to about 13,000, according to reports.

But critics quickly jumped on another piece of news: GM’s suspension of Volt production for four weeks.

Dying or not this is not good news for the Volt.  Very few are buying these cars.  And those who do are not buying them because they are great cars.  They’re buying them to make a statement.  Or for some other reason.  And that is the problem for the Volt.  When a vehicle is selling well you hear the rank and file complaining about all of the overtime they have to work.  To keep up with demand.  While demanding their factories add another shift.  But when you’re only selling 13,000 a year (just over 1,000 a month) you can shut down for four weeks.  And no one will even notice.

But the completely electric Nissan Leaf has not fared well either. It has a goal of 20,000 units this year, which the Detroit News says is increasingly unlikely.

Another problem GM faces is competition. It’s no longer the only plug-in hybrid on the block. Ford has its C-Max Energi plug-in hybrid ($32,950) and Toyota is now selling a Prius plug-in hybrid ($32,000)…

GM says one in three Volts are now sold in California. And there are reasons for an uptick in Golden State sales. The Volt earlier this year finally qualified for the California provision that allows environmentally friendly cars to use restricted carpool lanes whether they’re carrying passengers or not.

And the Chevy Volt sells for $40,000.  People just aren’t demanding these cars.  Because they’re expensive, small cars.  And the people that are buying the most Volts are in California.  Just so they can drive in the carpool lanes.  Where commuters will pay almost any price to avoid that awful Californian gridlock.  Especially if you don’t have to drag along another body with you.

The federal government poured a lot of money into the Chevy Volt when they bailed out the UAW pension fund (aka the auto bailout).  This was the car of the future.  Because President Obama said so.  And proclaimed the new GM would sell a million Volts a year.  And GM would use the proceeds from these sales to repay the taxpayers.  Not only have they grossly missed the president’s sales target.  The government interference in the company (by making them build a car that no one demanded) has caused the stock price to fall.  While the government still owns a substantial amount of shares.  Pushing any repayment of the taxpayers’ money further out in the future.  If there is any repayment at all.

It just may not be time for the plug-in hybrid.  Based on these sales numbers.  So it probably wasn’t wise to make it such a big part of GM’s turnaround plan.  Or to pour so much taxpayer money into it.  Worse, GM is not positioned any better to compete in the market place.  Which is why their plug-in hybrid is the most costly one in the market place.  And will be for the foreseeable future.  Until they have a true bankruptcy reorganization.

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FT118: ” It’s better to have rich investors risk their wealth than having the government risk our taxes.” -Old Pithy

Posted by PITHOCRATES - May 18th, 2012

Fundamental Truth

It wasn’t the Private Investors who lost Half a Billion Dollars on Solyndra

It takes money to create jobs.  Some conveniently forget this fact when the politicians want to take money away from rich people who got rich by creating jobs.  But the politicians always remember this fact when they want to ‘invest’ our tax money into projects to create jobs.  When they want to spend our taxes they then fully understand the concept that it takes money to create jobs.  Funny how that works.

Also funny is that the projects the politicians want to invest in are not projects the rich investors want to invest in.  Because it’s their wealth they’re risking they are a little choosier in deciding where to invest it.  So they don’t invest in these losers the politicians champion.  For even though these politicians are Ivy League graduates who are smarter than everyone else they only like to risk other people’s money.  Unless they have inside information.  Such as pending legislation that will affect the market.  Then they’ll invest their own money.  But that’s the only time.  For as smart as these Ivy League graduates are they have little understanding of free market capitalism.  Or what it takes to be an entrepreneur.  And have no idea how to evaluate an investment opportunity without having inside information.

Still, politicians are so arrogant to believe that they are smarter than the market.  And that if they ‘wisely’ invest our tax money that they can do a better job than those who risk their own money.  People the politicians believe aren’t smart enough to make the best and wisest investments.  Despite their having gotten rich doing just that.  Making wise investments.  For example, it wasn’t the private investors who lost half a billion dollars on Solyndra.  For they saw the only thing keeping the solar industry afloat were government subsidies.  And any industry that requires government subsidies is not likely ever to earn a profit.  So they said ‘no’ to Solyndra and put their money in what they deemed wiser investments.  While the government invested in Solyndra.  Because they saw that as the ‘wiser’ investment.  Only to lose a half a billion of our tax dollars in the process.  Yup.  When it comes to making smart investments the politicians are regular ‘geniuses’.  And by that I mean they are actually the opposite of geniuses.  I was using sarcasm.

Politicians lose Hundreds of Billions of our Tax Dollars in Investment after Investment because they Care 

So the politicians are worse than the worst rank amateur investor.  We know it.  They know it.  At least they should know it what with their perfect record of failure.  So why do they do it?  Why do they continually take money away from the people who know how to better invest that money so they can make some of the worst investments of all time?  That’s a good question.  And we really need to think about it. 

To figure this out think about this one word.  Elections.  That’s the key.  You see, a majority of people wouldn’t vote for these politicians.  Because they want to spend our money.  They want to raise our taxes.  So they can spend it on more Solyndras.  How does that help them?  Here’s how.  People at these companies who receive this federal money are very grateful.  And to show their gratitude they make campaign contributions.  Often with some of the very money they received from the government.  Part of that ‘wise’ investment to create the ‘smart jobs’ of the future.  And why not?  There’ll be a little left over after paying some generous executive salaries and bonuses.  Why not give a little back to the people that made all of that possible?  Make a nice campaign contribution to help the politicians convince the people that they are smart and wise and deserve to win the next election.  So they can spend more of the people’s taxes.  Into other wise investments.  Like Solyndra. 

You just need one thing to make this all possible.  A bad investment.  An investment so bad that no rich people will risk their own money.  Because they know what a loser the investment is.  It has to be that bad.  So someone in the government can say rich people are evil and selfish.  That they only care about turning a profit.  That they are not interested in the jobs of the future.  Or high paying jobs with good benefits for the working man.  Like the politicians do.  They care about the people.  Instead of turning a profit.  And are willing to invest taxpayer money in the poorest of investments.  And lose hundreds of billions of our tax dollars in investment after investment.  Because they care.  More for their own self-interests but they care.  Unlike those evil rich people.  Who refuse to waste valuable investment capital.  And won’t let the people they’ve loaned it to waste it either.  Because they only care about the money.  Unlike our government.  Who has no problem throwing away trillions of our tax dollars.

Investors Invest Responsibly and know how to Pick a Winner that will Create Jobs 

Rich investors take risks when they invest their own money.  So they are very careful in how they invest it.  And when they invest it they are very interested in how that money is used.  They don’t need any oversight committees or legislation.  Because they are no one’s fool.  They are not rank amateurs.  And they appreciate the value of hard-earned money.  They have a vested interest to make sure that money is used in the most efficient manner possible.  Because it’s their money.  And they care.

Politicians invest taxpayer money.  They have no vested interest.  So they don’t care.  When they run out of money from all of their bad investments they don’t suffer any consequences.  All they do is malign rich people again to foster a little class warfare to make raising taxes on the ‘evil rich’ easier.  Then they keep on making bad investments.  Mostly to their political cronies.  Who will return some of that public money back to them in the form of a campaign contribution.

That’s why it’s better to have rich investors risk their wealth than having the government risk our taxes.  Investors will invest responsibly.  The politicians will not.  And the investors know how to pick a winner that will create jobs.  The politicians do not.  The only way they know how to make money is with inside information.  Or skimming a little off the top of the public purse.  Which is the only way to explain investments like Solyndra.  It’s either that or our politicians are just really stupid. 

What a choice.  Corrupt or stupid.  Or is it even worse?  Are they corrupt AND stupid?  If so it sure would help explain a lot.

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Shell New Zealand spending Hundreds of Millions of Dollars looking for Something in the Great South Basin to Sell

Posted by PITHOCRATES - May 6th, 2012

Week in Review

Bringing fossil fuels to market is expensive.  People look at the profits these oil and natural gas companies make and cry foul.  But few look at the cost side.  Which is very, very steep (see Shell NZ takes control of exploration in Great South Basin by ALAN WOOD posted 5/4/2012 on Stuff.co.nz).

Shell New Zealand has taken over control of a joint venture exploration in the Great South Basin, saying there are good indications of natural gas after $100 million of exploration in the “frontier” area.

However, to push into full development the explorer would need to find a field of a similar size to Maui off Taranaki, given that it would be need to spend $10 billion-plus on a processing facility if gas was found, the chairman of the Shell companies in New Zealand, Rob Jager, said…

Shell has assumed operatorship of the New Zealand exploration licence PEP 50119 in the Great South Basin from joint venture partner OMV New Zealand. The venture partners had spent about $100m exploring the area, including $50m early on, then another $50m on a just-completed seismic survey…

The cost of drilling a single offshore well in New Zealand was in the order of $200m given the expense of bringing a specialised rig from somewhere like the Gulf of Mexico…

“Certainly we would hope that we would be in a position to start seriously thinking about looking for and contracting a rig in the next six to 12 months … so you’re not looking at drilling realistically until the summer of 2014/15.”

Let’s add up the numbers.  Just to explore cost Shell New Zealand $100 million.  Drilling a single well will cost another $200 million.  And then the special natural gas processing equipment is another $10 billion.  All of this spent, of course, before they earn a dime of revenue off of this field.  That’s a lot of money. 

When you look at profit as percentage of revenue the oil companies aren’t as profitable as some other companies.  Such as Apple or Microsoft who are by far more profitable.  Yet we attack the rich oil companies as being too rich.  Who have to risk hundreds of millions of dollars JUST to see if there is a CHANCE that there may be something down there they can sell.

Despite all of this once they find something down there to sell they can bring it to market to sell in less than a year.  And that includes that $10 billion processing facility.  Incredible.  Compare that to the ‘smart’ green energy of the future.  That the Obama administration invested heavily into.  Only to see a string of failures.  And lost taxpayer money.  Just look at what the oil companies can do without any help from the government.  Some would even say while fighting the government’s attacks on their industry.  While the ‘smart’ green energy of the future has been working on government money for close to 4 years with NOTHING to show for it.

Perhaps it’s time to stop attacking the oil companies who are giving us the oil and natural gas we crave and need without the government subsidizing it.  And turn some of our anger on all that wasted taxpayer money on the ‘smart’ green energy of the future which is proving NOT to be the smart investment.

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