Published August 14, 2012
By Jeff Cobb
If by some cosmic time warp Bob Lutz had found himself juxtaposed into American revolutionary history in place of Paul Revere, school kids today might have been taught that famous character said, “The Chinese are coming! The Chinese are coming!”
The difference is GM’s former vice chairman, “father of the Volt,” purveyor of VIA Motors plug-in series hybrid trucks, and more is saying something like this now regarding an investment by Wanxiang Group Corporation in battery maker A123 Systems.
In his Forbes editorial posted last week –– “A123 Goes Chinese - Will Washington Learn It Can't Mandate A Market?” –– Lutz expresses words of concern that read more like the foretelling of an anti-revolution or a close of the age of America brought on by the actual Revolution.
“If we can’t get our act together soon, the country will ‘go Chinese’ company by company, institution by institution, industry after industry,” says Lutz. “There will be no need for a military conflict against an overwhelmingly superior force: the Chinese will simply buy the country, a little piece at a time. And we seem happy to let them do it!”
Lutz is often good for a colorful quote.
He has had choice words to say about other subjects such as belief in global warming – yet he is a green car advocate who has done more tangibly for the industry than many.
In his post retirement years he remains with the cause, not in small part because electrified vehicles stand for energy security and weaning away from oil, which regardless what you think of greenhouse gases and climate change, is an argument unto itself.
But how did Lutz come to such an alarming conclusion? ... Yes, we posted his editorial’s final words first, but will give you the rest of his views below.
Lutz’s tirade launches off of the recent assistance received by Massachusetts startup A123 Systems. The off-shoot of research from MIT, and recipient of a $249 million “green technology” federal loan was essentially rescued by Wanxiang, but for a price. In return for $450 million, the aspiring Chinese EV supplier gets 80-percent of a Yankee-born success story when some are still indulgently congratulating themselves over “hope” and “change,” Lutz essentially says, and fail to take on challenges realistically.
A123, believing their own (and everyone else’s) hype about the millions of electric vehicles that would soon be filling the nation’s highways (it will happen, but not soon) set about proving an old adage: stupidity and waste increase with the amount of money available. Production capacity was set at a level that was way overly optimistic, and the headquarters complex, with its magnificent office suites and marbled lobbies, was something only a company with tons of money would dream of. But I’m sure the risk seemed low: After all, the “green revolution” was upon us. Even Nancy Pelosi said it was so!
But, as always in this vexing, over-regulated, over-taxed but still-twitching private enterprise system of ours, the marketplace overwhelmingly voted for the speed, range and lower price of conventional cars, even at $4 per gallon. It’s another example of a government-directed “green jobs” initiative which, while environmentally praiseworthy (especially if you believe in manmade global warming), was economically idiotic: when capital is spent on a product for which there is insufficient demand, negative economic value is created and jobs, green or otherwise, are lost. To make matters worse, not only is the capital lost, but, had it not been squandered on green “hope and change,” that same capital could have been spent productively, creating something that the public actually wants and needs.
That’s the real crime of the “green jobs” initiative: it destroys capital that is so badly needed elsewhere to revitalize our economy.
“But thanks to a Chinese white knight, all is well,” Lutz continues.
And, Wanxiang got superior battery technology at fire sale prices that will pay dividends in its home economy, he says, as it and other Chinese entrepreneurially spirited companies seek to be part of China’s efforts to see five million EVs on Chinese roads by 2020. But, Lutz says …
The Chinese have all the money in the world, and if they ever called the loans they have out to the U.S., the global economy would stop, and our nation would be in foreclosure. The Chinese are intelligent, industrious, products of a superior, disciplined education system. They are, despite the occasional misleading “Commie” rhetoric, old-fashioned capitalists, producers, investors, traders, designers and engineers. They are a lot like we used to be.
What is then needed now in this dire hour? Lutz says self-accountability, ditching an “entitlement” philosophy, hard work, focus on exports and emphasizing value-added production instead of import-driving consumption.
If not, then we’re back to his opening quotes about the Chinese buying American industry one piece at a time and winning without firing a shot.
Pretty heady stuff, eh? Bob Lutz does not mince words. What do you think? Is he right on? Off base? Has it partially correct? What constructive steps could be taken to see things become more like people would want in a story that instead ends happily ever after?