1) GM: Still a long way to go to get our money back:

The federal and Ontario governments have decided to take the “prudent” approach to General Motors Co.’s initial public offering rather than follow the lead of the U.S. Treasury and the United Auto Workers health trust, both of which dramatically increased the number of shares they intended to sell Wednesday.

“We want to protect the investment by as much as we can,” Industry Minister Tony Clement told reporters in Ottawa.

He said the government has held “intensive” meetings with its advisors, Rothschild Inc., and determined its approach of offering 20 per cent of its shares in the IPO was the best way to maximize its investment.

GM has priced the offering at $33 U.S. a share after the close of the market on Wednesday, with its stock expected to begin trading on the Toronto Stock Exchange and the New York Stock Exchange today.

The total value of the deal has ballooned to $22.8 billion U.S., pushing it past the largest common-stock sale in history, Agriculture Bank of China’s $22.1-billion offering in July.

The Canadian governments, which collectively have a 11.7-per-cent ownership stake in GM after supplying the automaker with $9.5 billion U.S. in loans in July 2009, intend to raise more than $1 billion in the offering by selling 30.5 million shares and reducing their stake to 9.6 per cent at the most…

While the Canadians have taken the conservative approach, the Americans have been taking advantage of the hot IPO.

The U.S. Treasury increased its portion of the sale by 73 per cent to 358.5 million shares, raising up to $11.8 billion…

The U.S. Treasury needs to sell GM stock for an average of $43.67 a share to break even on its investment, and if the overallotment is exercised, then it would need to sell its remaining shares at $53.07 apiece to break even, according to data compiled by Bloomberg.

The Canadian governments need an average price across of about $54.25 to break even, and would have to sell its remaining stake at $60.08 a share to break even [emphasis added, good luck, see Update], if the overallotment is exercised, the same data shows…

2) Fiysler: Even further here, look what’s making big bucks for Ford and GM in the US and not for these guys:

The Big Three is [sic, and in the Gray Lady!] starting to look more like the Big Two, as Chrysler drifts further behind its larger hometown rivals Ford and General Motors, whose newly issued stock will be publicly traded for the first time on Thursday.

…Chrysler is increasingly being cast as the odd man out in Detroit’s automotive resurgence.

Chrysler’s sales in the United States are less than half what they were five years ago and its product lineup is still in the early stages of an overhaul.

On Wednesday, the company showed off its new Dodge Durango sport utility vehicle at the Los Angeles auto show, as well as the tiny Fiat 500 microcar that Chrysler dealers will begin soon begin selling in the United States [see here for Canada, and a post on the Cinquecento with photo here].

But industry analysts said that the company remained in low gear and was quite a way from its own public stock offering…

Chrysler cut its losses in the third quarter to $84 million, but still owes $7.4 billion to the United States and Canadian governments for loans it received. The interest payments on the loans — $899 million so far this year — has prevented it from posting any profits…

This year through October, Chrysler sales have risen 16 percent, to 910,000 vehicles. As recently as 2005, Chrysler sold 2.3 million vehicles in the United States. Over all, it currently ranks fifth among carmakers in the market, behind G.M., Ford, Toyota and Honda [Canadians for some reason like Chrysler a lot more--it's third here, selling almost twice as many vehicles per capita as in the States]. This year, G.M. has sold 1.8 million vehicles in the United States.

…the company continues to struggle to get traction in the revived market for pickup trucks. Sales of the Ram pickup have increased less than 2 percent this year, while pickup sales at Ford have risen 30 percent and at G.M. by 15 percent [emphasis added]…

Related:

Ford just keeps on truckin’

Meanwhile it’s hard to see GM, despite oodles of governmental cheerleading, making any money with this for quite some while:

Unplugging the Volt

Update: The stock closed in New York at $34.19, up 3.6%.

Mark
Ottawa

Further to this post,

Electric Fairyland, Part 2: Too much green (at least in US) to drive green

from an Op-Ed piece in the Washington Post:

…
Maybe it was karma, but the Volt’s launch coincided with publication of a 72-page report by J.D. Power and Associates that confirmed, in devastating detail, what many other experts have found: Electric cars still cost too much, even with substantial federal subsidies for both manufacturers and consumers, to attract more than a handful of wealthy buyers – and this will be true for at least another decade.

What little gasoline savings the vehicles achieve could be had through cheaper alternative means. And electrics don’t reliably reduce greenhouse gas emissions, since, as often as not, the electricity to charge their batteries will come from coal-fired plants.

The Obama Energy Department has suggested that, with the help of federal money, manufacturers can ramp up mass production and bring the price of electric-car battery packs down 70 percent by 2014 – thus rendering the cars more affordable.

But J.D. Power is skeptical. “Declines of any real significance are not anticipated during the next 5 years,” the report notes, adding that “the disposal of depleted battery packs presents yet another environmental challenge.”

Nor are industry and government close to resolving the lack of a nationwide recharging infrastructure – or the vehicles’ poor performance in cold weather or on hilly terrain.

Fine print on the Volt ad promises just “25-50 miles of electric driving in moderate conditions.” Translation: Much of the time the car will be running on gas, just like ones that cost far, far less than the four-seat Volt’s price of $33,500 (after a $7,500 federal tax credit).

In short, the Obama administration’s commitment of $5 billion in loans and grants for electric cars is the biggest taxpayer rip-off since corn-based ethanol. It benefits no one but a few well-to-do car buyers and politically connected companies. Any “green” jobs these rent-seeking firms create will vanish when consumers reject their products and/or the subsidies cease…

The J.D. Power study is hardly an outlier. It jibes with similar work by Deloitte Touche, Boston Consulting Group, Roland Berger Strategy Consultants, professor Henry Lee of Harvard’s Belfer Center for Science and International Affairs, and the Massachusetts Institute of Technology’s Energy Initiative.

Last year the National Academy of Sciences’ National Research Council concluded: “Subsidies in the tens to hundreds of billions of dollars. . .will be needed if plug-ins are to achieve rapid penetration of the U.S. automotive market. Even with these efforts, plug-in hybrid electric vehicles are not expected to significantly impact oil consumption or carbon emissions before 2030.”..

Another nail in Dauntless Dalton’s coffin?

McGuinty promises to boost plug-in car

The Ontario government is giving a jolt to the Chevy Volt.

While the experimental electric car that General Motors hopes will turn around its fortunes doesn’t hit the market till late next year, the province, which owns 3.8 per cent of GM after a multi-level government bailout of the automaker, is planning hefty cash incentives for would-be Volt buyers.

Premier Dalton McGuinty and Transportation Minister Jim Bradley will be at Courtesy Chevrolet on The Queensway this morning to announce “support for Ontarians buying electric vehicles.”

In the U.S., the Volt, a plug-in electric hybrid that is more advanced than traditional hybrids such as the Toyota Prius because it is propelled solely by its electric motor, will cost about $40,000 and there are to be government rebates worth $7,500.

Sources say McGuinty, a vocal booster of the Volt since it was first unveiled as a concept car in 2007, plans cash incentives in Ontario of up to $10,000…

My tax dollars at work to help “…a few well-to-do car buyers and politically connected companies.” Fie.

Update: Version of the post is in the National Post’s “Full Comment”:

Mark
Ottawa

This has been blazingly obvious to anyone who thinks about it–I guess that excludes governments fanatic about CO2 emissions reductions.  Good on Greg Keenan of the Globe and Mail (pity story is just in the Business section):

Green car revolution won’t be as advertised

An electric car made by Mini [test drive by The Economist]

The looming takeover of the world’s roads by “green” vehicles is hitting a yellow light.

The tens of billions of dollars being spent by auto makers and governments to develop environmentally friendly vehicles won’t transform the fleet by 2020 unless they lead to a breakthrough that dramatically reduces costs, consulting firm J.D. Power and Associates said in a study examining how plug-in hybrids and battery-powered vehicles will fare in the coming decade.

“Auto makers will be challenged to convince consumers to invest in these relatively expensive and unproven technologies,” said the 70-page study, called Global Hybrid and Electric Vehicles: More Hope than Reality During the Next Decade…

The cost of hybrid-electric vehicles and battery-powered cars and trucks will limit consumer demand, J.D. Power noted. They will make up just 7.3 per cent of the 70.9 million vehicles that will be sold globally in 2020, the report predicted.

Consumers won’t embrace such vehicles in large numbers unless there is a big jump in the price of gas, co-ordinated government policies to encourage drivers to switch out of internal combustion engines, or a major breakthrough in the technologies that would reduce cost and improve consumer confidence.

“None of these scenarios are believed to be likely during the next 10 years,” the study said.

The race to develop environmentally friendly vehicles is being driven mainly by government regulations that require auto makers to reduce the emissions generated by their fleets…

What Americans (and lots of Canadians) really like to buy:

Ford just keeps on truckin’

More reality:

Cars and electric fairyland: Not much jolt from the Volt

Also:

Auto emissions: Electric reLeaf?

Mark
Ottawa

Not so fast, says The Economist in a leader:

Highly charged motoring
Electric cars, though a welcome development, are neither as useful nor as green as their proponents claim

…the big car firms are pushing all-electric cars for the mass market. At the Paris Motor Show this week they unveiled electric vehicles of all shapes and sizes. Some go on sale in the next few months.

This represents a huge leap forward for the industry, but the showroom patter will be misleading, for two reasons. First, although electric cars are nippy, stylish and as easy to drive as conventional vehicles, electric motoring has some distinct disadvantages. Second, they are not really as green as their promoters claim.

The idea of recharging an electric car at home for only a few dollars and never again having to visit a filling station is enticing. For most journeys, the limitations of battery capacity are irrelevant. As salesmen will be quick to point out, 99% of the time people do only short runs—the daily commute, trips to the shops and to pick up the children—all of which are well within the range of most electric cars.

But that final 1% of journeys presumably includes the summer holiday when people pile into the car and head off for the coast. Hopping on the train laden with suitcases and children may not be an attractive alternative. And even the relatively short ranges that salesmen advertise may be optimistic. On a cold, wet night when lots of electrical systems are running and the vehicle is laden with passengers and luggage, a car may lose around a third of its supposed range [emphasis added--Canada, eh?].

…what of electric cars’ environmental credentials? Electric cars are being hugely subsidised by taxpayers—£5,000 ($7,940) in Britain and up to $7,500 in America—on the ground that they are zero-emission vehicles. Makers of electric cars claim that this is an efficient way to reduce greenhouse-gas emissions. Road transport accounts for a tenth of such emissions worldwide; the sorts of biofuels currently in use are not much greener than petrol [The Economist is including diesel, which fuels some 50% of cars in Europe]; and next-generation biofuels are proving slow to come to the market.

Although electric cars may not themselves produce greenhouse gases, generating the electricity they use does. How green they are depends on the fuel mix at the power plants in the country in which they are driven. An electric car in Britain today, for instance, produces around 20% less in CO2 emissions than a car with a petrol engine. Even if the generating mix gets greener, electric vehicles are so expensive to produce, that they will still be a relatively costly way of abating CO2 emissions. Sceptics therefore doubt that the subsidy is a good use of public money. According to Richard Pike, chief executive of the Royal Society of Chemistry, replacing all of Britain’s cars with subsidised electric cars would cost the taxpayer £150 billion and, with Britain’s current fuel mix, cut CO2 emissions from cars by about 2%. For the same money, Britain could replace its entire power-generation stock with solar cells and cut its emissions by a third…

This is their news story in the same issue:

A sparky new motor
The first mass-market electric cars are arriving in showrooms. They represent a big gamble for carmakers

As for, er, Leafs…

Earlier:

Cars and electric fairyland: Not much jolt from the Volt

Mark
Ottawa

Peter Foster however has his brain well plugged in.  A Financial Post “Comment”:

The Voltswagen — The people’s car the people pay for
…
Ontario taxpayers should be grateful that the Chevy Volt is not due to appear in the province until next year. Put together a $10,000-per-car provincial subsidy with ultra high-cost solar electricity foisted on the public via feed-in tariffs and you have a level of economic insanity it would be hard to match. Indeed, perhaps the Volt should be renamed “The McGuinty” for the Canadian market. It would take the pressure off the memory of poor Edsel Ford, who gave his name to a tail-finned lemon.

GM announced this week that the Volt, as expected, would cost US$41,000, more than a loaded Cadillac. It will still lose money. GM’s marketing chief, Joel Ewanick, when revealing the price, said the Volt was “starting the world on a different path.” Would that be The Road to Serfdom [lots more here]? But let’s not go over the top. The Volt will collapse under the weight of its own pointless non-viability. GM’s future lies with new conventional fuel-powered models such as the Buick Regal, which by all accounts is a terrific car [pic and more here]. The Volt is pure politics.

GM this week started taking orders for the Volt, the purchase of which will attract a subsidy of US$7,500 from the U.S. government, plus another couple of thousand bucks in California. The phones are unlikely to be ringing off the hook. In fact, the number of Volts sold will likely be so small as to represent a mere drop in the bucket of fiscal fecklessness that is the Obama administration [hey, don't forget Dauntless Dalton!]…

Now this is a must-listen. Mr DesRosiers, Canada’s best auto expert, ain’t exactly flooring it for the Volt either in this interview on CFRA, Ottawa:

Thursday, July 29, 2010
The Volt
Madely in the Morning – 8:10am — Mark Sutcliffe is joined by Dennis DesRosiers of DesRosiers Automotive Consultants to discuss the Chevy Volt and how it will impact GM and the car-buying public.
mp3 (click here to download)

Then there’s Government Motors’ Canadian website, tee hee:

A charge in the right direction.

The Chevrolet Volt electric vehicle with extended range is designed for everyday city drivers. For Canadians who typically drive 64 kilometres per day or less, this rechargeable, plug-in electric vehicle will use zero tailpipe emissions. And when the range is more than 64 kilometres, the Volt’s small gasoline-powered engine generator kicks in to extend its range for hundreds of kilometres1…

1 Assumes fully charged battery. Actual range may vary depending on driving habits and conditions. Vehicle features and performance capabilities subject to change…

Preproduction model shown with US instrumentation.

At least no “Some assembly required.”  And more broadly, on governments, autos and subsidies generally, from the National Post editorial board:

The lesson to be learned from Windsor

This week, the city of Windsor, Ontario, was dealt a double-blow. First, on July 28, after 91 years of production, the last car rolled off the assembly line at the local General Motors plant. Then the following day, Ford Motor Company announced it will lay off nearly 400 workers at its Windsor engine plant, starting November 1…

…The CAW sees the GM plant as “a prime candidate for redevelopment as a factory for solar energy companies, which enjoy generous government subsidies.”

This response is as distressing as it is telling. It reveals much about the modern attitude toward private business: that it needs public money – aka corporate welfare – to succeed. Instead of hoping to attract a viable private enterprise to Windsor, the CAW’s reflex is to go from one government-subsidized industry to another, because in its experience, government pockets run deep.

Indeed, over the past 40 years, federal and local administrations on both sides of the border have pumped billions of dollars into the Big Three automakers. Subsidies took the form of loans, tax breaks, and most recently, outright share purchases. The goal was to “save” jobs, in companies deemed too big to fail.

But jobs were not saved. They were given a reprieve, but inexorably disappeared anyway. Why? Because by constantly throwing these ailing businesses a lifeline, government actually made them less competitive in the long run…

…the state has felt compelled to ride to the rescue of select industries and companies, often for political reasons. And the results are predictable. In the auto industry, instead of responding to customer demand for fuel efficiency and other advances, the Big Three ceded this ground to foreign manufacturers. They failed to contain labour and benefit costs, making their prices uncompetitive. When the economic crisis of 2008 pushed their businesses over the edge, they again turned to government for help – but have cut operations, regardless…

Predate: What a lot of Canadians, with Volt-type money, really like to buy:

Guzzling, not sipping

Update: Another, er, view:

Video: Auto-mogul-in-chief takes new GM lemon for a spin

Mark
Ottawa