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sticker shock


GM says electric car will cost $41,000, a notch above its gas-fueled counterparts


SUSAN WALSH/ASSOCIATED PRESS by Peter Whoriskey T


he long-anticipated Chevrolet Volt, General Motors’ electric car, will cost $41,000, the com- pany announced Tues-


day, leaving consumers to decide whether its environmental appeal is worth a price far above that of similarly sized conventional au- tos.


Electric-car technology has been around for years, but the high cost to make the vehicles has prevented automakers from pro- ducing them for the mass market. The price announcements for the Volt and its electric rival, the Nis- san Leaf, have been highly antici- pated as a result. Nissan, the only other major manufacturer expec- ted to bring such a vehicle to mar- ket this year, said the Leaf will cost $32,780.


GM and Nissan are relying on a


$7,500 federal tax credit for buy- ers of electric vehicles to offset some of the added cost, and they’re hoping that the allure of their novel power source will make up the rest. “The Volt is a game-changing


product,” said Tony Posawatz, GM’s vehicle line director for the Volt, which is expected to hit showrooms in November 2011. Although the prices are high, enthusiasts say that electric cars can reach a large, untapped mar- ket for vehicles with little or no tailpipe emissions. The Volt can travel 40 miles on


its battery charge and an addi- tional 340 miles on a gasoline- powered generator. The all-elec- tric Leaf has a range of 100 miles. During the 2008 presidential campaign, then-Sen. Barack Oba- ma pledged to put 1 million plug- in vehicles on the road by 2015. But some analysts said they doubt that electric cars can reach a broad audience in the near term. Hybrid cars took about eight years to reach the million- unit sales mark in the United States, according to Energy De- partment figures. “I’m not sure the Volt is going to be a volume vehicle,” said George


Magliano, director of automotive industry forecasting for North America at IHS Global Insight. “The technology still isn’t there to make them cheap. At the end of the day, the consumer pays a hefty premium to make a statement.” To move the industry along and bolster U.S. manufacturing, the Obama administration has put its weight, and billions of dollars, be- hind an effort to develop electric cars and batteries in the United States. In developing the Volt, GM is seeking to fulfill its promise to Congress during the government bailout to move beyond gas-guz- zlers. The company had been planning the Volt long before it neared bankruptcy last year, how- ever, as an attempt to leapfrog Toyota in the quest for fuel-effi- cient vehicles. The president has expressed optimism that automakers will be able to lower the price tag of elec- tric-vehicle technology. Earlier this month, he suggested that ma- jor reductions in battery costs, one of the primary reasons elec- tric cars are more expensive, are on the horizon. “Because of advances in the manufacturing, [battery] costs are expected to come down by nearly 70 percent in the next few years,” Obama said at the site of a planned battery factory in Michi- gan. “That’s going to make electric and hybrid cars and trucks more affordable for more Americans.” Both the Volt and the Leaf will cost considerably more than rival gasoline-powered compact se- dans, such as the Honda Civic or the Ford Focus, each of which costs under $20,000. Price is only one potential bar- rier to mass adoption, however. Consumers must also get accus- tomed to plugging the cars in at home. It takes hours to recharge the vehicles, and in the absence of a network of public recharging stations, drivers that run out of juice may need a tow truck. Both Nissan and GM are plan- ning relatively low production levels at first, especially compared with the more than 11 million ve- hicles expected to be sold nation-


President Obama sits inside a Volt in a Michigan battery plant. Obama has pledged to put 1 million electric cars on the road by 2015.


Comparing price tags


Two major car manufacturers are competing in the electric-car market with incoming models, whose prices are driven by their expensive car batteries.


Nissan Leaf Chevrolet Volt For Volt, a


S


KLMNO ECONOMY BUSINESS &


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10-YEAR TREASURY DOWN $4.50 PER $1,000, 3.05% YIELD


CURRENCIES $1 = 87.93 YEN; EURO = $1.299


DIGEST ECONOMY Consumer confidence dims; home prices rise


Job worries drove U.S. con- sumer confidence in July to its lowest reading since February, according to data released Tues- day. One in six people said they were expecting lower income in the next six months, underscor- ing the precarious state of the economic recovery. The Conference Board, a New


York-based business and eco- nomics research group, said its index of consumer attitudes fell to 50.4 points in July from an up- wardly revised 54.3 in June. Home prices rose more than


expected in May, according to the Standard & Poor’s/Case-Shiller index of prices in 20 U.S. cities, helped by robust spring sales and


INTERNET $32,780


($25,280 with federal tax credit) $349 a month


($2,000 due at lease signing) 100 miles on battery


Price


Lease price Range*


5 24 kilowatts


20 hours 8 hours


Built by Nissan in Japan; in Tennessee in 2012


SOURCES: GM, Nissan wide next year. GM plans to produce 10,000


Volts next year, and 30,000 in 2012, company officials have said. Nissan has indicated that it will sell about 25,000 Leafs in the United States next year. As the only two major manufac- turers preparing to mass-produce cars that can run on batteries, GM and Nissan are engaged in a de- bate over price and capability. On purchase price, the Leaf is


significantly less, though the leas- ing prices are very similar. The


Passengers


Battery capacity Charging time: At 120 volts At 240 volts Manufacturer


$41,000


($33,500 with federal tax credit) $350 a month


($2,500 due at lease signing)


40 miles on battery; 340 more with gasoline- powered generator


4 16 kilowatts 10 hours Less than 4 hours


Built in Michigan by General Motors


*Variable depending on outside temperature and flatness of driving surface. THE WASHINGTON POST


Volt will also be available by lease with a monthly payment of $350 for 36 months and $2,500 due at signing, the company said. “The Chevrolet Volt will be the best vehicle in its class . . . because it’s in a class by itself,” said Joel Ewanick, vice president of U.S. marketing for GM. “No other au- tomaker offers an electrically driven vehicle that can be your everyday driver, to take you wher- ever, whenever.” whoriskeyp@washpost.com


Google to power Yahoo Japan’s searches Yahoo Japan will use Google technology to run its search en- gine and search ad delivery sys- tem, after a similar deal in the United States was derailed by regulators concerned about a mo- nopoly. Google and Yahoo Japan, which runs separately from its California-based namesake as a subsidiary of SoftBank, a Japa-


EARNINGS


U.S. Steel posts narrower loss; challenges loom United States Steel narrowed its second- quarter loss, to $25 million from $392 million a year earlier, as sales more than doubled, but it said there are hurdles ahead for the steel in- dustry and it gave a shaky outlook for the current quarter. Sales more than doubled, to $4.68 bil- lion, but that was off- set by higher operat- ing expenses, which nearly doubled. The company said declining orders from spot market custom- ers may weaken third-quarter results. — Associated Press


ALSO IN BUSINESS On tax fight, Obama can’t afford to lose B


arack Obama is at another make-or-break moment in his presidency. The last was when his health-care reform plan was nearly heckled to death at town hall meetings. In the end, health reform was signed into law, as were financial reform and the massive economic stimulus. But the toll for getting them through was so high that the president now faces the biggest challenge of all with his political capital depleted. That challenge: driving a stake through the heart of the anti-tax monster that has cast a menacing shadow over American politics for the past 30 years. The idea that it is bad to raise any tax on any taxpayer at any time under any circumstances is a pernicious fallacy that is so ingrained in political conversation that it prevents the country from addressing its most pressing problems.


When Senate Majority Leader


Harry Reid announced last week, in the midst of record-breaking temperatures, that the Senate was unable to address climate change, it was a capitulation to ideologues and special interests determined to characterize any approach as an energy tax. It is the refusal to put any tax increase on the table that has impeded much-needed reform of the tax code and rendered impotent a bipartisan commission charged with figuring out how to rein in the budget deficit.


And it is the tax bugaboo that stands in the way of an investment agenda to match the global challenges we face. If Obama fails to alter the political dynamic and finally slay the anti-tax dragon, it’s game over for his economic agenda. Those are the stakes as Congress now considers what to


reduce employment by 300,000 in 2012 and raise the unemployment rate by one-tenth of 1 percent. That’s more like statistical noise than the economic calamity conjured up by Republicans. The reason for this muted


STEVEN PEARLSTEIN


on washingtonpost.com Secrets and lessons


Business columnist Steven Pearlstein


discusses how the recent revelations of The Washington Post’s Top Secret America project serve as a teachable moment for America’s policymakers.


do, if anything, about the Bush tax cuts that are set to expire at the end of this year. Given the fragile state of the economic recovery as well as the competing imperative to bring deficits under control, the right policy would be to extend the lower rates for another two years while limiting them to lower- and middle-class households.


Republicans, of course, are already vowing that they won’t support anything less than a permanent extension for all taxpayers, claiming that anything less would be a “massive” and “jobs-killing” tax increase. A few centrist Democrats have already succumbed to the anti-tax pressure. In reality, raising marginal tax


rates on the rich wouldn’t be a huge deal. Even Douglas Holtz- Eakin, top economic adviser to John McCain’s presidential campaign, told the Senate Finance Committee earlier this month that excluding upper- bracket households from a one- year tax-cut extension would only


impact was explained by two other witnesses at that day’s hearing, Len Burman and Donald Marron of the Tax Policy Center. Marron noted that because of


the way the tax code is structured, even the rich would benefit from the lower rates applied to the income they earned under $250,000. Along with other extensions, that would mean that even households with incomes up to $1 million would still get to keep almost half of their Bush tax cuts. And Burman’s point was that spending by rich people wouldn’t change much even after a modest tax increase because so much of their income is saved rather than spent. That certainly seems to have been the case when a nearly identical increase in top tax rates took effect in 1994, during another “jobless” recovery. In the ensuing years, personal consumption fell in just one year, and by the end of the decade was growing at the torrid rate of 5.5 percent a year. Indeed, if Republicans were truly interested in stimulating the economy and creating jobs, cutting marginal tax rates turns out to be one of the least cost- effective strategies. In January, the Congressional Budget Office calculated that $1 million in tax cuts would generate between on and four additional jobs in the economy, compared with six to 15 jobs from increasing


unemployment assistance, three to nine jobs from providing aid to states and four to 10 jobs from investing in infrastructure — all


ideas that Republicans opposed as unaffordable. Go figure. When all else fails, the last


refuge for the anti-tax crowd is to claim that raising the top tax rate reduces employment because that is the rate paid by many small businesses — which, according to Republican myth, create all new jobs. In fact, fewer than 3 percent of tax returns with business income fall into the top brackets. And even for those, it’s hard to understand why a profitable company, seeing an opportunity to expand, would forgo hiring because the profits generated by new workers would be taxed at 40 percent rather than 35 percent. It’s not just the economics that


favor raising the top tax rate — so do the politics, according to pollster Peter Hart. “The public is all in favor of


raising taxes on the wealthy,” said Hart. That would be particularly true, he said, if voters could be assured that the extra revenue would be put to good use, such as reducing the deficit. What moderate Democrats need to understand is that it won’t do any good to keep playing defense on taxes. There is no thoughtful middle ground on the question of whether to raise taxes modestly on the wealthiest Americans when their incomes are going up and everyone else’s are going down, even as budget deficits remain at record levels. The only choice is between political courage and cowardice. What moderate Democrats need to understand is that if the president loses on this one, there will be no middle ground on anything else they care about, from deficit reduction and tax reform to trade and immigration. At that point, all there will be is stalemate.


pearlsteins@washpost.com


 Disney buys social-gaming de- veloper: The Walt Disney Co. said it is buying online social-gaming firm Playdom for $563.2 million, expanding its domain in the vid- eo game industry. The purchase will help bring


Disney’s characters, stories and brands to Facebook and My- Space. Playdom, based in Mountain


View, Calif., has about 42 million active monthly users. In addition to the purchase price, Playdom shareholders may earn $200 mil- lion if the company meets certain financial targets. The deal comes less than a month after Disney announced it had bought Tapulous, the maker of the popular iPhone music game Tap Tap Revenge. And Dis-


ney bought the popular online kids hangout Club Penguin for $350 million in 2007.  Univision to settle pay-for-play charges: Univision Communica- tions has agreed to pay $1 million to settle allegations that the com- pany’s radio stations and its em- ployees accepted secret cash pay- ments to give more frequent air- play to artists with a former Univision recording label. The Federal Communications Commission and the Justice De- partment announced separate settlements with the Spanish-lan- guage media company late Mon- day. The agencies had charged that the illegal payments were made from 2002 to 2006. — From news services


nese Internet and mobile phone provider, said enough independ- ence would be maintained to keep the market competitive. Yahoo Japan said it had con- sulted with Japan’s Fair Trade Commission before the deal was announced, though specifics of the agreement were still being worked out.


— Associated Press


the last purchases that qualified for a federal tax credit. But the market may not sustain its re- bound as long as unemployment hovers near 10 percent, and a rec- ord stockpile of foreclosed houses may also stall a recovery. The S&P/Case-Shiller index rose 0.5 percent in May, season- ally adjusted, after an upwardly revised 0.6 percent gain in April. It was up 4.6 percent from May of last year, S&P said.


Still, single-family house prices remain 29.1 percent below their peak four years ago. Seven out of the 20 U.S. cities in the index saw home prices decline.


— Reuters


WEDNESDAY, JULY 28, 2010


U.S. STEEL VIA ASSOCIATED PRESS


Post Tech CECILIA KANG Excerpt from voices.washingtonpost.com/posttech Momentum building for federal online privacy rules


Sen. John F. Kerry (D-Mass.) said Tuesday that he plans to introduce an online privacy bill that would create standards for how consumer information is collected and used for marketing. It would also give users more control over how their Internet activity and profiles are accessed by advertisers and Web sites. Kerry’s bill, announced in a news release during a hearing on online


privacy held by the Senate commerce committee, follows two privacy bills introduced in the House in recent months aimed at protecting sensitive information such as health and financial data. Kerry said he hopes his bill will be passed at the beginning of the next Congress. The legislative proposals add momentum to a push by consumer groups to create stronger federal rules for how companies such as Facebook, Apple, Amazon.com and Google can track user activity and place ads based on that information. Facebook faced criticism for creating complex changes to its privacy polices last year that made some data more publicly available. Apple and AT&T were criticized for a data breach that revealed the network identities of iPad users. Google said it accidentally snooped on residential WiFi networks as it collected information for location-based applications. Federal Trade Commission Chairman Jon Leibowitz, meanwhile, noted during the hearing that Web sites and advertisers have been working to come up with their own rules for how to collect and use information in a way that doesn’t violate privacy rights. “If they want to do a better job of ensuring consumers have clear choices going forward and rules and notice, it is in their hands to avoid legislation,” he said in response to questions from lawmakers. “If they don’t, we will see in the next Congress more interest in moving forward on more proscriptive rules.”


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