Washington- General Motors extended-range electric Chevrolet Volt had its worst sales month since August, as negative publicity over fire risks hurt vehicles sales in January.

GM sold just 603 Volts – above its sales in January 2011, but far below GM’s best-ever sales month in December, when GM sold 1,529 Volts.

Last week, GM North America President Mark Reuss said sales of the Volt have been hurt by bad publicity.

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For years, the lawyers have not been able to resist instructing the auto industry. Since Ralph Nader began tinkering in the sixties, cars have gone from iconic to ridiculous. We have seen great cars like the Impala turned into a tiny little go-cart filled with airbags and other safety equipment. While I do not begrudge those of us who like safety equipment (after all, that’s why God created Volvos), I long for some of the breathtaking muscle cars of my youth–the proud beasts of an era gone by.

Lawyers cannot fix cars. The talent required for turning a wrench is not the same talent you use when twisting a contract. Most attorneys are not as comfortable working beneath the hood of a car as they are running behind an ambulance. So a wise nation keeps attorneys as far away from their automotive plants as possible.

But change has again found its way into the auto industry. No longer content to direct the industry from the back seat, this Administration has planted itself firmly behind the steering wheel. After taking over General Motors and selling Chrysler to Fiat (an Italian manufacturer best known for its expensive short-lived replacement parts), they invested half a billion taxpayer dollars into the the Fisker–Al Gore’s car of the future. There is no question who is driving the industry into the second decade of the new millennium.

But it’s not going as smoothly as planned. Just recently, the electric Fisker recalled its entire product line for problems that could lead to the cars catching on fire. I guess the future just came a little too early. It seems the problem is not unique to the Fisker either. A Chevy Volt burst into flames while ironically parked over at the Safety Administration. Nothing says “Green” more than black smoke car fires.

In an effort to stem the worst PR event since the Ford Pinto, GM offered Volt owners loaner cars until they could figure out what caused the fire. When two more blew up, they actually offered to buy them all back, resulting in the largest one-day sale of Volts in the history of the nameplate. (more…)

DETROIT (AP) – A person briefed on the matter says General Motors will ask Volt owners to bring their electric cars into dealers to strengthen the structure around the batteries.

The move is similar to a recall and involves the 8,000 Volts sold in the U.S. in the past two years.

The move comes after three batteries caught fire after side-impact crash tests done by federal safety regulators. The fires occurred seven days to three weeks after the tests and have been blamed on a coolant leak that caused an electrical short. No fires have broken out in real-world crashes.

The person says GM will contact Volt owners and have them return the cars to dealers for several structural repairs.

The repairs are a step below a formal recall.

Yesterday we stumbled across a marketing team promoting GM vehicles at the University of Chicago. Students were being offered $10 to test drive Chevy’s inferior quality cars around campus, and promised an additional $10 to the Colleges Against Cancer fund at the school for each participant.

Passersby were also offered free pizza and soft drinks on GM’s dime.

$20 bucks and pizza, not bad….

While donating money to this presumably noble cause seems like a nice thing for Chevy to do, who decided now is a good time for them to do so? And a $10 giveaway to students? Who decided that was a good idea?

We spoke with one of the marketing team members who said this was a promo that Chevy was just kicking off around the Midwest. He estimated the economically brain-challenged auto company, who received a $49 billion TARP bailout from the taxpayers, would be giving away about $1,200-$1,500 that day.

Sadly, after the smoke-and-mirror reporting over the past year or so, GM has still not repaid its TARP loan, and 33 percent of the company is still owned by the taxpayers.

$1,200-$1,500 to students who hardly pay taxes at all, roaming around a university campus on a Saturday…. All the while, the likelihood that these kids are even in the market to buy a car is slim.

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UPDATE:  The White House has responded to our inquiry and they deny that this week’s weekly address video was shot in front of a green screen.  They also explained that the production line that the president was posed in front of is always shut-down on Fridays, the day President Obama taped his message.  It’s impossible to resist the temptation to speculate that this odd production schedule must suggest that the production line is designated for the Chevy Volt.

President Obama delivered his weekly address to the nation from Detroit, Michigan this week after visiting workers at a GM assembly plant.  When the video hit at Breitbart.tv, our tip box suddenly became very active with people claiming that the President was actually sitting in front of a green screen and the background image was really a composite image of an assembly line.

In the image below, you can see a black outline around the president’s shoulder, and you can see the background image slightly distorted around the president’s ear.

Several experts in the field of video effects have given us their opinions on the matter.  Some examples of their takes:

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This is all that remains of the very popular Ford commercial that went viral on the internet and was featured on cable news channels over the past three weeks:

According to the Detroit News, Ford has pulled the ad due to pressure from the Obama White House:

Ford pulled the ad after individuals inside the White House questioned whether the copy was publicly denigrating the controversial bailout policy CEO Alan Mulally repeatedly supported in the dark days of late 2008, in early ‘09 and again when the ad flap arose. And more.

With President Barack Obama tuning his re-election campaign amid dismal economic conditions and simmering antipathy toward his stimulus spending and associated bailouts, the Ford ad carried the makings of a political liability when Team Obama can least afford yet another one. Can’t have that.

In an exclusive interview with Breitbart.com, the “star” of the popular ad, Chris McDaniel told me he was “a little bit flustered’ by Ford’s decision. He found out about it during a live radio interview this morning.  “I had no idea.  As soon as I got off the interview, I sent an e-mail to Ford’s VP of Marketing.”  He told me,  “I put myself out there on the line.  You either stand behind it or you don’t.”

Ford has not yet returned Mr. McDaniel’s e-mail.

A note posted by Ford Motor Co. on Facebook responding to the controversy says:

“(W)e were not coerced into pulling the ad down. The campaign continues to run. We took the ad out of rotation after 4 weeks which is consistent with the typical lifecycle for the campaign.”

But this explanation is inconsistent with the past practice of Ford and their handling of these commercials.  Other “press conference” style ads that they have produced are still available on YouTube, but the one featuring Chris McDaniel has been removed.

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From The Detroit News:

As part of a campaign featuring “real people” explaining their decision to buy the Blue Oval, a guy named “Chris” says he “wasn’t going to buy another car that was bailed out by our government,” according the text of the ad, launched in early September.

“I was going to buy from a manufacturer that’s standing on their own: win, lose, or draw. That’s what America is about is taking the chance to succeed and understanding when you fail that you gotta’ pick yourself up and go back to work.”

That’s what some of America is about, evidently. Because Ford pulled the ad after individuals inside the White House questioned whether the copy was publicly denigrating the controversial bailout policy CEO Alan Mulally repeatedly supported in the dark days of late 2008, in early ‘09 and again when the ad flap arose. And more.

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We’ve all seen the staggeringly horrific sales figures for the Chevy Volt. In any other market for any other consumer good, this hunk of junk would’ve been left in the dustbin of historic manufacturing failures, like the Apple II. Just ask Steve Jobs.

Under no coherent, rational interpretation of “market efficiency” should the Chevy Volt even be a production consideration for a private firm. Not only does sticker shock prevent most people from buying the Volt, but for those misguided few who do, costs to fix them are more than those of a less expensive Chevy Malibu.

Curious onlookers must be all the more flummoxed, then, after the recent announcement that GM and electronics manufacturing giant LG have teamed up to continue development of the Volt:

Under the agreement signed on Wednesday by GM Chief Executive Daniel Akerson and LG President Juno Cho, the two companies said they would design a range of electric vehicles that would be sold in markets around the world… “This is a strategic development for LG and we fully support GM’s goal to lead the industry in the electrification of the automobile,” LG’s Cho said in a statement.

Supporting GM’s goal to bend to the will of progressive environmentalists in the Obama administration shouldn’t be surprising, since LG is itself a healthy recipient of so-called “stimulus” funding:

President Obama visited Holland Michigan on Thursday to participate in the groundbreaking ceremony of the new LG Chem battery plant. This plant was funded in part by a DOE stimulus grant of $151 million with a matching $151 million provided by LG Chem. Once fully operational in 2012, the plant will be capable of producing enough cells for 200,000 hybrids and electric cars, and will specifically be making the cells both for the Chevrolet Volt and the upcoming Ford Focus Electric, expected to go on sale in 2011.

“This is about more than just building a new factory,” said Obama. “It’s about building a better future for this city, for this state, and for this country.”

The Obama administration has pledged a goal of putting 1 million electric cars on US roads by 2015. So far the Recovery Act has contributed $2.5 billion towards United States electric car battery and component plants, 26 of which are already in some stage of construction. Nine of these are battery plants, including ones from A123 Systems and Johnson Controls. These facilities can collectively expect to produce 500,000 electric cars annually, and are expected to help transform Michigan into the electric car battery capital of the country.

The 650,000 square foot LG Chem plant is expected to produce 300 jobs.

Wow – a $151 million win-the-future “investment” will create a whopping 300 jobs? At $500k per job, I’m clearly in the wrong business.

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At the Detroit Economic Club today, Treasury Secretary Timothy Geithner tried to claim the auto bailout is a success.

It certainly doesn’t seem like a success for the taxpayers. GM stock is about $30 today, and unless it gets up to $54, the taxpayers lose money on the deal. Why would it go up? You want to fight high gas prices by buying a Volt? How does $41 grand a pop sound? And still GM loses money on every one it sells even at that price. Not only that but we are seeing that government subsides for electric cars is good tax money wasted in any case.

It doesn’t get any better. Worldwide, U.S. cars aren’t selling worth beans and domestically, GM is lagging because people who hate the bailouts won’t support it with their car-buying dollars any more than they did with their votes last year when they kicked out every incumbent they could find who’d been for it. And GM still has all its old problems, too, like those big fat union pension obligations. Sadly, nothing that caused GM’s financial trouble has been fixed.

But the spin continues.

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Like any good environmental science graduate, I take the bus to work. This morning, our driver dumped us out two miles before my usual stop. “The President,” he said, pointing to the police roadblock ahead.

As I contemplated the irony of having to walk the rest of the way while President Obama, fundraising cash in hand, took off in his fossil-fuel-powered helicopter, I remembered something he said yesterday.

Speaking in Nevada about the rising cost of gasoline, Obama put in a plug for the administration’s favorite flop, GM’s Chevy Volt: “I’ve been in one of these Chevy Volts. This is a nice car. It drives well.”

As I trudged along the sidewalk, it occurred to me that the President had probably fibbed. He had certainly “been in” the Chevy Volt, but he hadn’t ever driven one enough to know how it actually handles.

When he tried the Chevy Volt last summer, he drove it “10 feet, and probably not above 2 mph,” according to the Associated Press at the time.

So, yes–I suppose the Volt “drives well,” or at least as well as any other vehicle stuck in traffic while the President leaves a giant carbon footprint behind.

GM, Obama’s favorite federally owned car company, was thrilled to report in March that sales figures for the Chevy Cruze helped put the company on the fast track to success but it wasn’t the best news when the wheels began to literally fall off the Cruze causing a recall of GM’s “success” story.

As we will remember, last November Obama proclaimed GM a great success story, one that justified his raging fever for bailouts. This March GM buttressed Obama’s glowing account by reporting rosy sales figures in which the Chevy Cruze made a big appearance. Then GM reported that the Cruze and the Malibu accounted for “98,950 sales – roughly one of every four Chevrolets sold in the first quarter.”

But let’s not break out the champagne too soon because only weeks after GM celebrated sales of the Cruze, at least one steering wheel popped off in transit. It’s a literal case of the wheels coming off GMs success story.

In one case, a Chevy Cruze owner was driving 65 MPH on a highway when her steering wheel broke right off. With her in the car were her young son and her own elderly mother. None were hurt fortunately.

Now GM is recalling 2,100 cars in hopes of preventing another such unfortunate accident.

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3. GM’s Incentive Spending:  Slashing prices through discounts and incentives to juke market share is not a healthy business model

Famed investor Warren Buffett once said, “If you have to have a prayer session before raising prices by ten percent, then you’ve got a terrible business.”  So, what does it mean if your business is slashing prices month over month through discounts and other incentives? Take a look at the graph below.

From GM’s IPO last November through February, the incentives and discounts the company is offering to consumers have increased from 29.8% above the industry average to more than 50% above industry average according to Edmunds.com.

What this means is simple: Yes, GM can crow about its 46% sales surge in February, as it did last week.  But what they aren’t telling you is they are offering discounts and incentives 50% higher than the industry average helping to inflate their numbers, and that these discounts have grown by leaps and bounds every month since the IPO.

During GM’s IPO announcement in November, the company promised that it would offer fewer incentives that crimped margins.  In February, GM Vice President Rick Scheidt said regarding incentives “it’s way to close to the bankruptcy for us to be sliding back into old habits.  We know everybody’s watching.”  Last week, GM said it will fall back to regular industry incentive levels in March.

Yet, the same week, GM announced a new 72-month, interest free financing plan on several GM models.  The announcement prompted Edmunds auto-analyst Jeremy Anwyl to note “GM’s rhetoric has been saying one thing – discipline, discipline, discipline – and their actions have been going completely in another direction.”

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From the 1^st quarter through the 4th quarter of 2010, GM’s lobbying expenses more than doubled from $1.8 million to $3.89 million – a 113% increase.  After all, when the government is your largest shareholder, your company execs will inevitably be spending an inordinate amount of time cozying up to Washington politicians.

Moreover, GM’s lobbyist team reads like a who’s who of the government bailout business.  And why wouldn’t it?  When you’re lobbying Washington to privatize gains for your clients and socialize their losses among taxpayers, you hire those firms with the most experience representing other notorious companies that received massive bailouts by U.S. taxpayers — Fannie Mae, Freddie Mac, Goldman Sachs, AIG and others.

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News coverage of Government Motors over the past few weeks has painted an increasingly glowing picture, but here’s a dose of reality:  GM still has not repaid taxpayers for the bailout and it’s looking less and less like taxpayers will ever be made whole.

Unlike much of the media, we actually spent a considerable amount of time looking behind the press releases to see what GM’s numbers really say about the health of a company taxpayers now own.

This week, we will be sharing with readers a more realistic picture of the company’s health.  The bottom line:  The picture is far less rosy than GM would like you to believe.

1. GM’s Share Price:  Will taxpayers ever be made whole?

Remember these promises?

• “Recent progress at GM gives reason for optimism that it may be possible for taxpayers to get every penny back.” – Steve Rattner, Presidential Task Force on the Auto Industry (11/18/2010)
• “American taxpayers are now positioned to recover more than my administration invested in GM.” – President Barack Obama (11/18/2010)
• “The government’s investment is well placed, and I think they’ll make a lot of money.” – Former GM CEO Ed Whitacre (11/18/2010)

GM’s share price closed below its $33 IPO price for the first time on March 1st.  The company has underperformed the S&P 500 by 15% since the beginning of the year.  The Middle East is in turmoil and gas prices are skyrocketing.  Not a good harbinger for GM’s share price.

Now the Feds say that they want to get out of their GM position as soon as possible. Their first opportunity to do so will be when the government’s “lockup period” ends in May.

But according to the House Oversight Panel’s January update on TARP and the auto industry, for U.S. taxpayers just to break even on the government’s historic $50 billion “investment”, GM shares will need to trade at $54.28 — a whopping 65% premium over GM’s March 1^st closing price.

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From Claire Berlinski in City Journal:

You see, about a month ago, I asked my mother to bail me out. I knew she’d do it. She’s done it before. She sent me money she’s been saving toward my retirement. I resolved to stop spending money on stupid things. (There was really no excuse for that lamp, Mom, I know. Sorry! In my defense, I was sure there was a genie in it.)

With my mom paying my rent, I’ve been able to charge less for what I write and stay in the black. Voilà, I’m selling a cheaper product (for now) than Reuters and AP. That will teach them where to stuff their “good investment decisions” and their “economies of scale.” I fired the guy who does my odd jobs—it was painful, but it had to be done. So, congratulations to me! I’m making it in this tough business climate, with a little help from Mom. America’s back! And if I’m broke again in a year, I’ll hit her up again. (Don’t forget, Mom, that you really have no choice: no matter what you do, I’m still going to be a huge financial drag on you. If I fail, I’ll end up coming home with all my cats. You don’t want me sleeping on your couch, do you? And you sure don’t want to see what my cats would do to that couch. Antique, I believe it is?)

All of this is, alas, a perfectly accurate description of my financial life. The reader may wonder about my mom’s wisdom in going along with this plan. That’s between me and her—she loves me, and it’s her money, not yours. The money that went to GM was yours, however. And I suppose you must love GM as if it’s your profligate kid, because surely you could not be so credulous as to believe these reports about the spectacular success of the bailout.

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In today’s edition of Coffee and Markets, Ben Domenech and Francis Cianfrocca to discuss the the latest Fed actions, Wall Street numbers, earnings report expectations, whether the Democrats are wise to keep Nancy Pelosi, and President Obama’s declaration of the “New Normal.”

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. You can find our iTunes feed at CoffeeandMarkets.com. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

WSJ: Obama Warns of New Normal
Zerohedge: Zoellick Talks Gold Standard
WSJ: Ford and GM Rise, Chrysler Sinks
Cianfrocca: Bernanke Treats the Fever, Not the Infection

So much for GM’s self-imposed ban on political contributions. According to The Washington Post:

General Motors reported making $47,000 in contributions to lawmakers and congressional candidates in July, the first it has made since November 2008. The company stopped giving through its political action committee just as it began to seek government assistance to stay in business.

The U.S. government provided support but also steered the company through bankruptcy. Today, the Treasury owns a 60 percent stake in the company, which recently announced plans to go public with a stock sale.

GM earlier gave $41,000 to groups and causes associated with lawmakers. The latest contributions were made directly to lawmakers’ campaigns.

The Post notes the fact that GM is spreading the wealth around to both political parties: $26,000 to Republicans and $21,000 to Democrats. Below is the list of GM PAC recipients from the Federal Election Commission:

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In this week’s edition of Coffee and Markets, featuring The New Ledger’s Francis Cianfrocca, we’re talking about GM’s purchase of Americredit, changes in FHA policy, deflation, Ben Bernanke, Tim Geithner, and more. We’re brought to you as always by Andrew Breitbart’s BigGovernment.com and LibertyPundits.com.

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You can subscribe to the podcast by following the links above, and if you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

Geithner Squashes Tax Cut Extension Talk
NYT: GM’s Free Ride on the Taxpayer Dime
Everything Happens Faster Under State Run Capitalism
The Coming Crisis for Social Security
When is a Tax Not a Tax? When the White House Says So

Authored with Ivan Osorio

Yesterday, the United Auto Workers union (UAW) named Bob King as its new president. Does this mean a change in direction for one of America’s most powerful unions? Not likely.

King, a UAW vice president before yesterday and a member of the union’s executive board, was described by Time magazine late last year as being “Picked – Not Elected – to Lead [the] UAW.” As Time writer Joseph Szczesny noted, “For more than 60 years, the UAW’s top leadership has blocked attempts to permit union members to vote directly for the union presidency.” Instead, the union’s executive board has picked the UAW president since the late 1940s through closed caucuses.

It’s not like the union doesn’t need change. For several decades, lavish compensation packages and restrictive work rules have helped make the Big Three Detroit automakers uncompetitive, especially in the face of increased foreign competition. Yet you wouldn’t know it from the parade of old faces at the UAW’s recent convention. Listening to their comments, it’ s no wonder why Michigan has the worst unemployment in the nation—14 percent compared to 9.7 percent average for the entire country.)

AFL-CIO President Trumka pushed the class-war rhetoric so common among labor bosses. He thundered, “We cannot ease off the fight against trade agreements that favor Wall Street over workers throughout the world.” He applauded the UAW for “fighting back” against corporate America and hostile politicians, and called on the automakers to give back concessions made by the UAW.

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General Motors CEO Ed Whitacre has bragged in TV commercials and newspaper columns that GM has paid back its bailout “in full and ahead of schedule.”

As with the Pontiac Aztek, an ugly exterior masks an ever darker problem: Whitacre is being fanciful to the point of deceit. GM received $50 billion in TARP funds (never mind that TARP was only supposed to cover financial institutions). About $7 billion of that came in the form of a straight-up, low-interest loan. And about $13 billion came in the form of an escrow account.

So how has GM, which lost $38 billion in 2007 even as it sold 9.4 million cars, paid back its debt? It took money from the escrow account to pay back the $6.7 billion loan.

Do you remember when you were a kid and your parents gave you $20 to buy them a Christmas present? You bought them something worth $3 and pocketed the rest? That’s what GM has just done.

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