Monday, October 5, 2009

As GM and Ford Cars Go Green the Economy May Collapse

by Ronnie Spangler

With the rush to go green the government must decide if they will allow the gas prices to reach the $4 to $5 magic mark that will encourage more interest in the green cars the government is endorsing.

With more and more auto companies jumping into the green car industry are we looking at gas prices being artificially increased to force people out of their gas and diesel powered vehicles? After Tesla Motors Incorporated, makers of all electric vehicles received a $465 million dollar government loan they partnered with Fisker Automotive and received another $529 million dollars. They are being backed by former Vice President Al Gore. They will not be selling their cars in the US but offering their high end expensive autos to Finland.

Henrik Fisker says they will produce about 15,000 lithium ion battery powered cars to be released in the US by June 2010. Fisker calls them Karma. This is only a portion of the $25 Billion program designed to help the auto industry go green that has currently been given out by the Department of Energy. According to the Wall Street Journal $8 Billion has been loaned to Ford, Nissan, and Tesla. There was no mention of General Motors in the Wall Street Article, but it is widely suspected they will receive a large influx of taxpayer dollars for their green cars.

Remember the words of GM Vice Chairman Bob Lutz,”And US fuel prices will have to rise to world levels, meaning $5 or $6 per gallon.” He was referring to the cost increase Americans would have to be subjected to before there would be a market large enough to be profitable in the US. Would the automotive industry and all of the new green car companies be so willing to invest their own money without some guarantee that something will happen that will create a huge market in the very near future?

All the hype surrounding Electric vehicles and the new green industry reminds me of the same hype that surrounded the Vectrix Maxi Scooter in 2008. It turned out to be a failure but at the time cable TV news organizations were falling all over each other to show it off. Nothing has really changed in the technology but the Lithium Ion battery. All the variables that were the downfall of the Maxi Scooter
apply to the Electric Cars of the future.

So how would $4 to $6 gas prices collapse our economy? Like it happened in 2008 everything we touch would increase in cost. This time with the economy already in recession and more important the unemployment expected to exceed 10% nobody will be able to afford this new green environment. Will going green have a positive effect on our job situation, not likely.

In the wind turbine industry 9 out of 10 manufacturers are outside of the US. Most of the solar panel manufacturers
are out side of the US with China now number 1 in the industry. Why is this green technology springing up in foreign countries instead of the US? Because of all of the restrictions and high wages placed on American companies. Solar panels are only one example of green products that are not environmentally friendly to build. Since China does not concern themselves with restrictions that could hurt their economy they mass produce solar panels cheaply. They also accomplish it through cheap wages and government subsidies.

GM has backed away from all of the Volt marketing and high production numbers they were pushing in 2008. Ford is going slow on their Electric vehicles. GM has cut the production of the Volt scheduled to be released in 2010 to around 10,000 in the US. Ford is looking more to 2011 for their stepping into the world of electric cars. Both are waiting to see who is left standing after 2010.

With the government so heavily invested in the auto industry would it be a surprise to see the oil prices and gas prices return to 2008 levels, sadly the answer is no.

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