Bob Lutz Speaks Out On Chinese Aid To A123 Systems

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?


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  • PJS

    Funny – Bob never mentions the 25.1 BILLION TAXPAYER DOLLARS (revised up today by the Treasury Department according to “The Hill”) that so far has been LOST by his old company, General Motors. “Self accountablility and ditching an “entitlement” philosophy”?? Methinks he’s calling the kettle black.

  • CML

    I agree with Bob’s points about a Chinese takeover of America, however I disagree with his opposition to government support of new technology. The problem with A123 and many electric vehicle companies is that many are expecting a sprint, when this is really a marathon. One quality which the Chinese possess that Bob left out is, patience . We don’t seem to have any, and this is a reason that China is the major threat to the US as the world’s leading super power.

  • usd777

    Is it really funny?

  • c_harnett

    First, it is sad to see how far Forbes has fallen that they will print dreck like this.

    Second, you didn’t hear El Lutzbo complaining about any of this back when he was in charge of GM’s Volt program and kept busy full-time Hoovering up government cash by the carload in an effort to bring to market a car that can’t sell 2,000 units per month, even when accompanied by a minimum of $7500 in further government bribes and, often enough, a priceless HOV sticker (which is, yes, another government subsidy).

  • AP

    Rather than “killing the messenger,” I will say that Lutz is exactly right. The environment is important, we need to develop these advanced technologies, but wastefully throwing money at it through crony capitalism is the wrong way to go.

    (That said, we have long competed with countries that have governments subsidizing their industries, often putting the US at a disadvantage. We could put tariffs on them, but US consumers prefer cheaper goods to keeping jobs.)

    The problem is that the government thinks developing new and affordable products is just a “finger snap” away, and that everyone is just dragging their feet. Many others think this too.

    Much of the technology we have today was barely dreamed of 30 years ago, and much of what we are dreaming of now may take 10-years to make it to market, and 20-30 years to be cheap. It not only takes money, but time, to make a competitive product.

    For the record, I’m a GM employee. But rather than criticize me, consider the logic of the arguments.

  • TrasKY

    Lutz is probably correct in that in this marathon toward environmentally responsible energy independence we shouldn’t be selling our precious technologies to our main economic competitor, but I think he might mis-locate the problem. It is only in a free-trade, international, multinational capitalism that such a thing as what Bob decries could occur. No other economic system in history that I can think of would let it’s superior technology relocate to it’s chief competitor without military threat or sabotage.

  • AP

    TrasKY, the problem is that our country has lost its financial and political leverage. We have gone into massive federal debt, especially to the Chinese, and now it’s hard to push back against their currency manipulation, trade practices, technology purchases, and often outright theft of our innovations.
    We have sold our country’s soul for cheap electronics, clothes, and toys.

  • John K.

    Funny how quickly the most self-centered, pampered and egotistical generation the US has ever produced, the Baby Boomers, have destroyed this country’s economy. That is even more funny than all the supposed tree-hugging environmentalists I saw in the SF Bay Area driving huge SUVs when I moved back here in ’00. Back in the despised by liberals 1950s — too white, too heterosexual, too Christian — plain old station wagons were big enough for a family of 6 to go on road trips across the US on the new interstate highways. But nowadays people claim to need big SUVs to shuttle their 2 little spoiled brats around town….

    Back on topic….

    What Bob says is right.

    Obama isn’t God and his arrogant decree in 2008 re. having 1,000,000 plugin vehicles on the road in the US by 2015 showed his glaring lack of business and economic sense. But what do you expect from a lawyer who main occupation was as a “community organizer”?

    Hopefully, we’ll get someone who knows something about business as our next president in November. Now that will be change I can believe in.