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Political charges were in the air at a Jan. 25, 2012, congressional hearing on the Chevrolet Volt chaired by Republican Rep. Jim Jordan, a staunch critic of the Obama administration’s intervention in the General Motors bankruptcy.
Jordan, from Ohio’s Champaign County, said he called the hearing to explore whether the government’s involvement in General Motors swayed how the National Highway Traffic Safety Administration informed consumers about crash tests that caused fires in the hybrid electric vehicles’ batteries. At the hearing, his committee released a report titled: "Government Motors: A Preliminary Report on the Effects of Bailouts and Politics on the Obama Administration’s Ability to Protect American Consumers." He opened the hearing with a statement that outlined some of his beefs with the government’s role in GM, including tax subsidies to the Volt.
"Total federal, state and local governments have subsidized the production of the Volt to the tune of estimates between $50,000 and $250,000 per vehicle sold," said Jordan.
That number seemed shocking for a car with a low-end retail price of $31,645, so we asked Jordan’s office where it came from. His spokeswoman said his statement relied on a Dec. 21 study from Michigan’s Mackinac Center for Public Policy - which estimated that each of the 6,000 Volts sold up until that date has received between $50,000 and $250,000 in subsidies.
Its analysis tallied up nearly $3 billion worth of state and federal assistance it said were offered for the Volt’s development and production.
It cited 18 tax credits and government subsidies for General Motors and its suppliers - such as a $105.9 million U.S. Department of Energy grant to the General Motors plant in Brownstown Township southwest of Detroit, a $106 million state job retention credit for its Detroit-Hamtramck plant and up to $100 million in refundable battery credits for a Volt battery supplier called Compact Power.
The biggest slice of that money - $1.5 billion - comes from a $7,500 tax credit that the IRS offered to the the first 200,000 buyers of the Volt, or other electric cars from GM. Similar credits are available to buyers of other manufacturers’ electric vehicles. When author James Hohman compiled his statistics, roughly 6,000 Volts had been sold. By the time Jordan held his hearing, GM said the vehicle’s sales were around 8,000.
"GM has estimated they’ve sold 6,000 Volts so far," said Mackinac’s report on Hohman’s work. "That would mean each of the 6,000 Volts sold would be subsidized between $50,000 and $250,000, depending on how many government subsidy milestones are reached."
The report said it didn’t include subsidies that could boost the level of government aid, such as the land for one of the GM assembly plants being acquired through eminent domain by General Motors. Hohman said the Volt "might be the most government-supported car since the Trabant," a car that was made by the formerly communist state of East Germany.
Mackinac’s data was attacked immediately. An analysis in The Street on Dec. 22, 2011, criticized its methodology of dividing $1.5 billion in subsidies by the 6,000 cars sold to reach his $250,000 per vehicle number. The Street, a digital financial media company established in 1996, said the author would have reached a very different statistic if the study had been done at the end of 2012 - when GM projects it will have made 60,000 of the cars. It said that technology from the car will be used in roughly 60 million vehicles over the next in 25 years, which would make for a subsidy of roughly $25 per car.
"The absurdity of the math used can be further shown by asking what the study would have yielded if it had been done six months ago or a year ago," said The Street. "Six months ago, 3,000 Volts had been sold and therefore the implied subsidy was $500,000 per car - half as many cars, twice the subsidy per car. One year ago, the first Volt was sold and therefore this one car must have cost $1.5 billion, according to the reasoning by the people who wrote the headlines around this study."
General Motors spokesman Greg Martin said Mackinac’s study "is not even in the same area code as accurate." He said the study compiled "every conceivable" energy battery subsidy over the past several years, whether or not it had anything to do with the Volt, added it up and "came up with this outrageous $250,000 subsidy per Volt."
For example, five of the tax credits and loans cited in Mackinac’s report, totaling more than $388 million - went to a battery maker called A123 that has nothing to do with the Volt, Martin said. He says it’s fair to question the wisdom of of subsidies and consumer incentives for vehicle purchases, but a serious debate "should not be clouded and distracted by fun and games with numbers."
In an emailed response to questions about his study, Hohman said its high-end $250,000 estimate includes the A123 money that GM disputes "because, at the time the incentives were being awarded, both government policy makers and the company itself were unsure about the suppliers."
"However, with the Volt in mind as the standard bearer for the idea of a mass produced American-made EV, it was unlikely that a lot of these deals would have been approved--or certainly approved at the levels offered -- without the Volt." Hohman’s email said.
Although Hohman says a number of Volt-associated projects got local government assistance in addition to federal and state aid, he excluded those incentives from his calculations because they were inconsistently reported.
Hohman said he felt that calculating the maximum amount of assistance offered to the Volt added valuable context to discussions about the vehicle. He said the federal and state entities that awarded incentives to the project "never got together to try to figure out just how much each car would receive." He said The Street was correct to assert that the per-vehicle subsidy he calculated would decrease as more vehicles are sold, but said that’s a "clear implication from how we describe the calculations."
Ernest Goss, an economist at Nebraska’s Creighton University who is critical of tax incentives to large companies, said such incentives often lead to construction of projects that would not be built otherwise and may be mistakes. He said he believes the Chevrolet Volt "is very costly to the taxpayer and probably not worth the subsidy," but the scope of government subsidies can be difficult to gauge.
"The question is, what subsidies do you count?" says Goss. "There is no doubt there have been significant subsidies going to GM, which is problematic, given that GM was bailed out and taxpayers still own a significant share of GM."
So, where does that leave Jordan’s assertion?
Jordan’s claim is partially accurate. He stated it as fact, relying on the study from the Mackinac Center. That study did estimate the Volt has received between $50,000 and $250,000 in aid per vehicle, although its tally did not include local government aid, as Jordan said. And his underlying point is true -- that there has been much subsidy directed toward development of the Volt.
But the claim leaves out important details that are need to fully understand the truth.
Mackinac’s numbers seem inexact and fluid and designed to make headlines at the expense of accuracy. They include money that went to a company that doesn’t supply the Volt.
And the per-vehicle tally considers all aid awarded at a time when Volt sales are just beginning. That figure will fall dramatically -- a point the study’s author concedes -- as more Volts and cars that use its technology are sold, with one analysis citing a figure of $25 per car if projected out over the next 25 years.
On the Truth-O-Meter, Jordan’s claim rates Half True.
House Oversight and Government Reform Subcommittee on Regulatory Affairs, Stimulus Oversight and Government Spending hearing on Chevrolet Volt vehicle fire investigation, Jan. 25, 2012
House Committee on Oversight and Government Reform staff report titled: "Government Motors: A Preliminary Report on the Effects of Bailouts and Politics on the Obama Administration’s Ability to Protect American Consumers, Jan. 25, 2012
Chevrolet’s website on the Volt electric car.
Emails with Meghan Snyder, press secretary for U.S. Rep. Jim Jordan, Jan. 25, 2012
Interview with General Motors spokesman Greg Martin, Jan. 26, 2012
Interview with Creighton University economics professor Ernest Goss, Jan. 26, 2012
Emails with James M. Hohman of the Mackinac Center for Public Policy, Jan. 27 -30 2012
Mackinac Center for Public Policy, Chevy Volt Costing Taxpayers Up to $250K Per Vehicle, Dec. 21, 2011
Internal Revenue Service information page on tax credits for electric power vehicles acquired after 12-31-2009, accessed on Jan. 27, 2012
The Street, Setting it Straight: Chevy Volt vs. the Government, Dec. 22, 2011
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