http://www.turkishclass.com/turkey_pictures_gallery_12

I definately agree that GM needs to save GM. There will be no third chances. No matter how much the US economy needs them. And I’m also hoping they’re using development money in all the directions you suggested. Especially flexible manufacturing and fuel economy tweaks. I don’t know anything about VCM or DI, but I’ll take your word for it that they’re worth doing.

But it’s not like they’re in any immediate danger of running out of cash anymore. They can spend development dollars for both the short and long term at this point. Besides, putting aside the Volt would be a complete PR disaster, which they really can’t afford at this point. And I think they need it to help them meet the new cafe standards.

I also agree that the Cruze is an important vehicle for GM. Much more so in the immediate future than the Volt. I think they’re holding back on the launch so that they’ll be able to iron out all the bugs in other less crucial markets. They’re actually emulating Toyota and Honda there. (The Japanese companies generally use the Japanese market to iron out all the bugs in a new car before it arrives in the US.)

You take good vacations! That’s an exotic locale that’s on my list. Mostly because I’d like to see some of the old Roman ruins and places Paul visited.

FYI – China is interesting. The food was not as good as I hoped nor as bad as I feared. However, people are generally not particularly helpful, English signage is limited, the cities are horribly polluted, you are always in a crowd and it’s just generally exhausting to visit there. But worth it.

LauraM writes, “But my point was that saving GM will make a difference to the trade deficit. If GM failed, the supply chain would have failed, and I believe that would have been the end of auto manufacturing in America.”

Well, I agree with you,. mostly. The thing is, though, that the rescue of GM is incomplete without GM attempting to rescue itself. Projects that won’t pay off are not a good element of the GM rescue plan.

I think EVs are a good strategic plan and that they are also inevitable. But we are waiting for affordable batteries. There’s little strategic value in the Volt to GM, the country or anyone else. GM is running on empty and they can’t affod strategic right now, they must focus on the tactical to make money right away (there will be time later to do EVs). So the Volt should be set aside and the development money used for things like:

VCM
DI
A successful Cruze launch
Fuel economy enhancement tweaks
Flexible manufacturing

Those are things that can pay off quickly.

It is more expensive to manufacture stuff here regardless of capital expenditure. If it’s cheaper to manufacture stuff here–why do so many American companies manufacture their products abroad? Apple. Microsoft. Garmin. Matel. I could go on…. Most of our vitamins are now made in China. Ditto for things like antibiotics/tylenol/asprin, etc. Then there’s the outsourcing of technical support to India–and I can tell you, I found the American tech support people much better.

I do agree with you about the Volt not making a significant difference to the trade deficit in the immediate future. The Volt’s potential is five years down the line. Just liike the Prius took five years to become profitable. And if GM is to become a viable company, they need to invest in the future.

But my point was that saving GM will make a difference to the trade deficit. If GM failed, the supply chain would have failed, and I believe that would have been the end of auto manufacturing in America. Ford (and obviously Chrysler) would have gone out of business. And the transplants would have used the opportunity to a) increase imports from Japan, and b)move their manufacturing to Mexico. If all the cars we buy were suddenly imports, that would definately increase our trade deficit substantially.

I completely agree with you that we desperately need a carbon tax and a gasoline tax. But we’re having trouble passing a carbon tax. And a gasoline tax is much too politically unpopular to ever actually happen. The general electorate hates it. And then there’s the lobby from the oil companies. It’s never going to happen. Although I really think it should.

And thanks for the welcome; I was vacationing in China for the last couple weeks and was more interested in seeing the sights than arranging for internet access.

Now, when you say, “The US has the highest labor costs in the world,” that is true but only in a limited way. We have some of the highest hourly rates. But what matters is productivity and, when you measure that, we actually have very high productivity. I believe it is almost always more cost-effective to manufacture here.

“As far as the Volt–it may not lead to enough exports to matter, but it will decrease our imports.”

Only in terms of 10K units of cars and a smidgen of oil, both of which benefits are in the distant future. There are two major investment decisions regarding the Volt that we should examine in light of alternatives:

1. GM’s decision to develop the car. GM is bankrupt and should be focussed not on the car but on making money. Development projects with questionable returns have no place in their current situation. What else could GM have done to shore up their competitive position and enhance revenue today? I submit that there are lots of projects. Using the funds to accelerate the Cruze to market would probably be a good thing. The Cruze has the potential to sell well and, if it does and works as promised, has the potential to drive down demand for oil. GM could aim for leadership fuel economy in certain classes of vehicles with a combination of aerodynamic tweaks, accelerated us of DI and accelerated implementation of Variable Displacement / Variable Cylinder Mangement engines (Toyota does not, to the best of my knowledge, have this and they have been slow to get DI onto the market, it’s still restricted to the Lexus line, as far as I know).

A competitive advantage this year would make a different right away.

The situation with the Volt reminds me of the way Wagoner and Lutz decided to pour additional resources into the GMT-900 program to get it onto the market faster and they accelerated it into a market beset with rising gas prices. Those vehicles have never sold very well. It also reminds me of their dogged determination to bring the two-mod hybrid to market as a much-too-expensive option on vehicles (Tahoe, Yukon, Escalade) bought by people who couldn’t care less about fuel economy or the environment or oil imports or anything like that (if they did, they wouldn’t buy SUVs).

2) The government’s decision to support this car with a targeted $7500 tax credit.

First, it’s bad for the government to pick technological solutions. The RE-EV concept may or may not work. Government tax incentives should be aimed more directly at policy goals. If the goal is to reduce greenhouse gasses, the tax credit should be couched in terms of grams/mile CO2. If the aim is to reduce oil consumption, the tax credit should be expressed in terms of fuel economy. This allows manufacturers to experiment with a wide range of options and build the best car they can, rather than build a car that meets government specifications and which the public may not want.

Second, in achieving policy goals (emissions or oil consumption), is this the best bang for the buck? I don’t believe so. Transport only accounts for a certain percentage of oil use. A broader incentive that discourages oil use or encourages replacements for oil across a broad cross-section of the economy would make more sense.

Of course, simply staging on a large oil tax would accomplish quite a lot, without much in the way of bureacracy or complciation. And an oil tax would not only encourage the development and purchase of very fuel-efficient cars, it would also encourage behavioral changes and there would be instant effect from that. Put a $1/gallon tax on gas and you will suddenly find that people immediately switch to carpools and busses and oil imports and GHG emissions start to drop at once. There will be no waiting 2 to 4 years for manufacturers to develop new cars before we realize oil consumption reductions; the effects are immediate.