Romney Was Right: GM to Make Electric Cadillacs in China

General Motors’ recently deceased, plug-in electric Cadillac ELR had not even officially been declared dead before word was out that GM has plans for another plug-in Cadillac for American markets; this one to be built in China. It seems that the brass at GM believe that the Chinese can succeed where American manufacturing has failed regarding being able to build electric Cadillacs that appeal to American consumers.

It has now been about seven years since taxpayers sunk about $50 billion into GM to fund the Obama Administrations’ auto sector bailouts which rewarded the Obama-friendly UAW while hosing less politically-popular classes like GM bondholders. That time span seems to be long enough for GM to feel that moving manufacturing jobs to China will not face criticism as the move to build Cadillacs in China follows earlier announcements that the Buick Envision SUV would also be built there.

During the 2012 presidential campaign, GOP nominee Mitt Romney charged that GM was planning to build cars in China for the American market, undercutting claims by President Obama that the purpose of the auto bailout was to save American manufacturing jobs.

Because it was receiving taxpayer money, GM should have been carefully neutral. But a GM spokesman blasted Romney by saying, "We've clearly entered some parallel universe during these last few days. No amount of campaign politics at its cynical worst will diminish our record of creating jobs in the U.S. and repatriating profits back to this country."

While Americans should rightfully be outraged that GM is moving American jobs to China after receiving billions of taxpayer dollars that supposedly went to save those same jobs, shareholders of GM should be equally dismayed at the latest decision to resurrect a failed, plug-in Cadillac. The Cadillac ELR has been an utter embarrassment for GM, which was predicted here when the vehicle was rolled out. In fact, the idea of building a Cadillac version of the poorly received Chevy Volt was criticized here when the vehicle was in the development stage in 2011.

GM continues to lose huge amounts of money in its continued quest to build politically-popular electric vehicles that have little mass market appeal. The new Chinese-built Cadillac CTS is described as a plug-in hybrid. Technically, that is what the Cadillac ELR and Chevy Volt are. GM may be floating the term “hybrid” over “electric vehicle” to try and differentiate the new Caddy from the failed ELR version. An important question is, what are the significant differences in powertrains to the present generation of hybrid system used in the Volt and ELR?

Another big question is, will the car qualify for the $7,500 federal EV tax credit that goes to each sale? If so, insult is added to injury as taxpayers will now subsidize affluent buyers of plug-in Cadillacs to benefit Chinese manufacturing workers!

GM will also have to up the ante when it comes to performance if they expect the new Chinese Caddy to succeed. The outgoing, unloved ELR did a 0 to 60 time in the embarrassing area of 9 seconds. Proponents of GM should hold off on the “Tesla Killer” proclamations until there is some evidence that the car has made a huge jump in performance from the Chevy Volt and failed ELR.

Perhaps most important to consider is the safety concerns of lithium-ion based powertrains. The worries are serious enough that GM has a special response protocol for Chevy Volts that are in accidents. Vehicle safety is enough of a concern without adding the volatile lithium-ion factor. Can China be trusted to have safety standards as high as America? Given GM’s failures in the safety area, hopefully higher.

The bottom line is, GM is going to lose more money producing a plug-in Cadillac CTS built in China. Given current lithium-ion battery technology, the savings from building in China will still not make the vehicle economically feasible. It is likely that more taxpayer money will be lost in the form of tax credits in an effort to force a politically-popular electric car technology (that does little, if anything, to help the environment) on the public. GM and shareholders will lose money, once again, as they are forced to sell the unwanted vehicles at a price that is far below the cost to manufacture. Let me be the first to predict, the Chinese-built Cadillac plug-in CTS will be another failure for GM.

Mark Modica is an NLPC Associate Fellow.