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New Math: Cash for Clunkers Numbers Don't Add Up (AutoObserver)
Here is the suspect list from the NHTSA:
Top 10 New Vehicles Purchased
1.Toyota Corolla
2.Honda Civic
3.Toyota Camry
4.Ford Focus FWD
5.Hyundai Elantra
6.Nissan Versa
7.Toyota Prius
8.Honda Accord
9.Honda Fit
10.Ford Escape FWD
They could have put the Fit and Prius in the top 10 to raise the fuel economy gains that were claimed. According to Edmund's the Fit did not even make it into the top 20. How many unscrupulous dealers submitted cars they had sitting on their used car lots that were not worth $4500. They could have tied them to a conventional sale of a new car that qualified and who would know the difference? A dealer that would cheat a customer would not have a problem cheating a flawed government system left wide open for fraud.
Although car dealers across Germany are thrilled to have their showrooms buzzing with customers again, manufacturers of German cars are a little less excited.
As of the end of March, only 24% of the bonus money had been spent on German-made automobiles, mostly by Volkswagen and Opel. The lion's share of buyers took their taxpayer-funded vouchers to dealers for Hyundais, Renaults and other foreign brands.
Such "leakage," as economists call it -- when a government's efforts to stimulate demand benefits firms in other countries -- is unavoidable in today's world of globalized markets and consumer choice.
"We live in open economies, and whatever type of fiscal stimulus package that you adopt, you will always have those leakage effects," said Henrik Enderlein, a professor of political economy at the Hertie School of Governance in Berlin. "It's inevitable."
http://articles.latimes.com/2009/jun/16/business/fi-czech-cars16
I passed up on this program because my clunker is only a second car,so as long as it runs it just didn't make economical sense.
The modern European economy doesn't really recognize nationalities, at least within the EU. The only exception is for certain food items (wines, cheeses, etc.) that are identified uniquely with particular regions.
For that matter, it makes very little sense to refer to VWs and Opels as "German" cars. VW has plants in Hungary and Slovakia, and Opel has plants in Belgium. And what about Ford? "German" Fords are built in Spain, Portugal, and Belgium too. Renault, Citroen and Peugeot build their "French" cars in Spain, Turkey, and elsewhere. Nissan and Honda build "Japanese" cars in the UK. Kia also has European plants.
More to the point, VW is considered a "premium" brand in Europe. To a lesser extent, so are Ford and Opel. Renaults, Peugeots, Fiats and Hyundais are all significantly less expensive within any given size range, and in both Germany and the US, hhe bottom of the market benefits tremendously from C4C programs.
I hope it has some massive mechanical malady or rust issue (they can rust hard in the right area) and will be turned into good parts for other cars.
Oh boy, does this mean our Congress is going to gear up for C4C phase II? After all, if Europe is doing it :P
Seriously though, do think Congress is going to try to extend this further? Or just keep switching industries?
If there's extra money in the pot...maybe we will see C4C extended.
I'd cut it in half and make it last next time.
It's not like the government makes any money, they get all their money from citizens
While I agree that such leakage is inevitable at the corporate level, it doesn't mean that we couldn't support American employment directly by restricting the rebates to vehicles with a "1" as the first digit of the VIN. Even if the profits go overseas, at least some of the jobs would remain here.
By CHRISTOPHER S. RUGABER AP Economics Writer
"Taxpayers face losses on a significant portion of the $81 billion in government aid provided to the auto industry, an oversight panel said in a report to be released Wednesday.
The Congressional Oversight Panel did not provide an estimate of the projected loss in its latest monthly report on the $700 billion Troubled Asset Relief Program. But it said most of the $23 billion initially provided to General Motors Corp. and Chrysler LLC late last year is unlikely to be repaid.
'I think they drove a very hard bargain,' said Elizabeth Warren, the panel's chairwoman and a law professor at Harvard University, referring to the Obama administration's Treasury Department. 'But it may not be enough.'
The prospect of recovering the government's assistance to GM and Chrysler is heavily dependent on shares of the two companies rising to unprecedented levels, the report said. The government owns 10 percent of Chrysler and 61 percent of GM. The two companies are currently private but are expected to issue stock, in GM's case by next year.
The shares 'will have to appreciate sharply' for taxpayers to get their money back, the report said.
For example, GM's market value would have to reach $67.6 billion, the report said, a 'highly optimistic' estimate and more than the $57.2 billion GM was worth at the height of its share value in April 2008. And in the case of Chrysler, about $5.4 billion of the $14.3 billion provided to the company is 'highly unlikely' to ever be repaid, the panel said.
Treasury Department officials have acknowledged that most of the $23 billion provided by the Bush administration is likely to be lost. But Meg Reilly, a department spokeswoman, said there is a 'reasonably high probability of the return of most or all of the government funding' that was provided to assist GM and Chrysler with their restructurings.
Administration officials have previously said they want to maximize taxpayers' return on the investment but want to dispose of the government's ownership interests as soon as practicable.
'We are not trying to be Warren Buffett here. We are not trying to squeeze every last dollar out,' Steve Rattner, who led the administration's auto task force, said before his departure in July. 'We do want to do well for the taxpayers but the most important thing is to get the government out of the car business.'
Greg Martin, a spokesman for the new GM, said the company is 'confident that we will repay our nation's support because we are a company with less debt, a stronger balance sheet, a winning product portfolio and the right size to match today's market realities.'
The Congressional Oversight Panel was created as part of the Troubled Asset Relief Program, or TARP. It is designed to provide an additional layer of oversight, beyond the Special Inspector General for the TARP and regular audits by the Government Accountability Office.
The panel's report recommends that the Treasury Department consider placing its auto company holdings into an independent trust, to avoid any 'conflicts of interest.'
The report also recommends the department perform a legal analysis of its decision to provide TARP funds to GM and Chrysler, their financing arms and many auto parts suppliers. Some critics say the law creating TARP didn't allow for such funding.
The panel's members include Rep. Jeb Hensarling, a Texas Republican, who dissented from the report. Hensarling said the auto companies should never have received funding and criticized the government for picking 'winners and losers.'
Other agencies have also projected large losses on the loans and investments provided to the industry. The Congressional Budget Office estimated in June that taxpayers would lose about $40 billion of the first $55 billion in aid."
Makes what GM and Chrysler got seem like a drop in the bucket.
The goal was to preserve jobs and give the auto sector a crutch until the economy gets back in shape. Stimulus, remember?
It's entirely possible that the entire investment is lost yet the program still succeeds.
Would you mind explaining how this could be?
Pretty low bar there on the definition of success.
I guess if you set the bar low enough, anything the gov't does could be successful. My bar is set much higher. Even a single cent lost to bailing out GM & Chrysler (and that includes opportunity costs) is a wasted cent and a travesty in my book.
:mad:
C4C is over. Is everyone paid now? All those that bought cars under the program happy as clams with our tax dollars I hope. Hate to see anyone disgruntled with such a well thought out program. Well planned by the auto industry and well executed by the NHTSA. :sick:
As we know from all the messages messages on this topic, this is hugely controversial. Those who favored the auto industry bailouts contend that the consequences would have been enormous, horrendous, calamitous. While we'll never know how ugly things would have gotten, those who opposed the bailouts, me included, feel that the long-term consequences of letting those companies fail, while bad, would have been less bad than what will ultimately play out with the bailouts.
There's one thing of which I'm certain, and it's that regardless of how things play out, virtually all those who favored the bailouts will justify them. Those of us who are more free market oriented, and favor less government intervention, in terms of letting poorly managed companies fail, be sold, reorganized, or whatever the chapter 11 path would have led to, will continue to feel that we pursued the wrong strategy.
This is one of those issues where people have very strong beliefs.
What I mean is that the government doesn't only have to look at share values to measure success.
If this crutch keeps Chrysler and GM alive, in the long-term they will preserve jobs and collect tax revenues from them, their employees, their suppliers, their suppliers' employees, etc. Again, talking long-term here.
You almost have to look at the alternative - what if both companies failed completely and, say, a chinese car company purchase the distressed assets for a fire-sale price?
The Domestic share should shrink to whatever Ford has now, and Chery or Geely or CMW or some newcomer would pick up the slack.
The alternative would be a "let 'em fail" mentality, massive bankruptcies, assets sold at pennies per dollar, and foreign ownership.
Not only that, but the under-funded pensions of all the Big 3 retirees - who would pick up that tab? Probably the government. Selling would not defray those costs, it would merely externalize them.
Did you know that all 3 major american breweries are now foreign owned? ImBev (Belgian) owns Budweiser, South African Breweries owns Miller, and Molson Canada owns Coors.
Good luck finding a truly domestic draft!
What if that were the case with automobiles? You could get a Chery Mustang or a CMW Camaro or a Geely Challenger. That doesn't even sound right.
The funny thing is I'm not even pro-domestic. It's just that I don't think the economic crisis was their fault at all, so they deserve a crutch far more than AIG or Merryl Lynch did.
I think one could make a good case that no one, including the gov't should of had to pick up the tab for the pensions and retirement packages of the Big 3.
First, it seems clear that the workers and Big 3 management knew all along that the pensions were being grossly underfunded by those who would later benefit. Furthermore, the companies have not been making any kind of profit for years and years now that would justify or fund those lavish pensions.
Lastly, You could accuse the workers of fraud and "driving the companies into the ground" with negligence and/or incompetence by poor product production and management decisions combined. Therefore it is either fraud or incompetence, either of which gives the gov't grounds to deny claims towards pensions by Big 3 workers.
If I'm sitting in the courtroom as the judge, that would be my decision to Big 3 workers suing the gov't for their pensions. The suit would be denied.
We didn't need GM and Chrysler to be the owners. I don't know why you fear foreign ownership eliminating any of the jobs and revenues. For if BMW, Honda, Toyota, Subaru, Hyundai, or the Chinese bought up the assets of GM and Chrysler, they would still employ workers, suppliers and have the same revenues. All those companies do so now in their U.S. auto plants.
The problem is that the D3 and all the other auto companies in the U.S. used to make X-number of autos. And there was over-capacity even then, such that many companies lost money - especially GM and Chrysler. The market now is 60% of X.
So whether everyone stays in business working at 60%, or 40% of the factories and workers close, and the rest work at 100% - We only need enough auto plants, suppliers, and workers to produce 60%. It's a smaller pie.
It doesn't really matter to me whether it is a Subaru plant that stays open using U.S. workers, suppliers, and factory or a Chevy plant. The problem I had with this whole thing is, is that I have to pay for the Chevy plant to stay open, when the market has decided 1) we don't need so many new vehicles, and 2) we prefer other vehicles to the Chevy so that should close.
We're paying for failed companies, using failed business practices and strategy, with a failed pay/benefit/retirement package, to make historically poor quality cars, that are not needed, as their are already excess number of auto workers and factories.
Bingo! I had an interesting conversation the other day with some bozo about what would be best to buy for the US economy, a Chevy Aveo or a Honda Accord. He emphatically stated the Aveo. When I told him it was assembled in Korea, he says, "doesn't matter, it all comes back here". Doh!
Those folks have money and power. Political influence galore.
You really think the government would not help them out?
No way.
I'm not saying right or wrong, just that it would happen - the government would end up picking up that tab, either way.
At least this way the companies have a chance of paying it themselves.
Now this thread has gotten interesting again. :shades:
I have nothing against Hoosiers building Subarus, we've owned 3 and that's not counting my dad, brother, or sister. Add them and it's 6.
I also have a Sienna built in the US. Again, no beef with Toyota.
But this would be very different. The Chinese have extremely low overhead costs. They're not afraid to blatantly copy the competitors. They are pros and cost cutting, too, and would slash and cut mercilessly. They would milk the good name of popular nameplates dry and leave nothing behind - nothing, all to gain entry to the US market.
In the next post I'll share some example of what I'm talking about.
Now imagine a Mustang look-a-like, built in China, not in the USA.
It would have crash test safety more of less like this recycled Isuzu Rodeo copycat (to their credit I think they actually bought the rights to continue producing it):
http://www.youtube.com/watch?v=DZWy_fASSiQ
or this:
http://www.youtube.com/watch?v=PHZqcKj7jNM
or this:
http://www.youtube.com/watch?v=PHZqcKj7jNM
Here's a CR-V clone from China, hard to tell which is which because they actually use Honda body panels to build the stampings:
I'm looking for the CMW logo, but as you might guess, it's light blue, white, and black, like BMW. With a circle. Coincidence?
Now, keep all that in mind, when you have a fire-sale on Chrysler and GM assets. Who has the money to buy these up cheap, and use the distribution channels to sell the sort of crap you see above? With no respect for copyright or safety.
How ethical do you think they would be with GM and Chrysler?
Would you trust these companies to take over the american auto industry?
If anyone can find that CMW logo please share a link. It's my favorite.
I like the Geely fake C-class, myself:
Gee I am glad the west does business with this criminal racket. All so a few can gain more undeserved wealth.
Mini is not safe...
Nor is Mercedes...
(edit: image removed, fintail beat me to it - THANKS!)
Scare tactics, I know, sorry.
It's just that...can you imagine if any of these companies actually legally purchase the design rights to American classics? Imagine the bastardization of a Corvette. Or a Viper. Or a...well you get the point.
Anyone else - keep 'em coming! This is fun!
These are the companies that would be in a position to buy distressed assets from Chrysler and GM.
Geely's copycat Benz is positively FRIGHTENING because they've actually displayed cars at US auto shows in the past and are in a position to break in to the US market.
Anyone still think it can't happen?
Edit: it's worse than I thought - Geely actually had a display at COBO, in Detroit, folks:
http://www.monstersandcritics.com/lifestyle/autos/features/article_1386935.php/I- - n_photos_USA_Detroit_Auto_Show_15_January_2008
So the company that makes fake Benzes is in the Big 3's back yard, with an intent to sell cars here.
The dull and invisible "Brilliance" is already offered in Europe, where nobody buys it and it is regarded as a pile. It also crashes well:
But in the American market, with ever-declining real incomes, unsafe slave-labor vehicles built by irresponsible criminal states could become a necessity.
There are an endless number of Chinese knock-offs out there, covering everything from Smarts and Toyota/Scion to Rolls Royce:
A brave new world...where's my Soylent Green :sick:
Giugiaro actually penned that sheetmetal. What a shame to see it break apart like that.
Geely copied Rolls too? Not just Benz?
Rather amazing that they had the guts to display at COBO.
Sad, sad fate if GM or Chrysler ends up in those hands.
Rolls are so revered there that there are actually two Chinese copies. Geely:
And Hongqui:
If you thought a Caliber or Cobalt was cut rate now, wait til these guys get through with it.
Hongqui - what a name!
I found a clone of the Subaru Forester but the link doesn't work properly.
Funny thing is if you Google "Chinese car clone" you get millions of hits.
It doesn't look anything like a Subaru! Really! It's a coincidence. :P
I suspect there are at least as many clones made by the domestic Chinese auto industry as "original" designs. I shudder to think how they'd modify something like a Camaro or Challenger.
LOL, I'll let that slide by because it is funny. And I certainly didn't buy my Sienna for looks.
That's the Chinabaru I was talking about, thanks.
I shudder to think how they'd modify something like a Camaro or Challenger
Me too. Now let me ask....
Is anyone naive enough to think that won't happen? Anyone? :confuse:
So even the sky-is-falling scenario you paint is far better under CARS than it would be without it.
Good job pointing out a benefit of C4C. LOL
Maybe I'm missing your concerns over someone buying the assets of the D3. Let's look at your main concern of the Chinese getting their hands on GM's assets.
1) You point out the Chinese would make copies of the cars, but
2) the copies would be cheapened.
Well you and others have done a fine job of posting that this HAS already happened with many cars. In fact many GM products have already been reverse engineered in China.
All the Chinese needed to do was buy a vehicle, buy some shop manuals, and maybe hire a few ex-GM engineers/designers/workers.
If the Chinese want to sell vehicles in the U.S. they must pass U.S. regulations and laws concerning patent and trademark infringement. If they want to use GM's physical assets they are going to need to follow the local, state, and national laws and regulations for the factories and workers. They might have to do deal with the UAW and the European counterparts if they were to buy GM assets.
So you're concerns have basically already happened, or there are easier ways to get and copy the technology then to "buy GM even at fire-sale prices". And I also don't see how the Chinese could use the GM assets - factories and buildings in the U.S. and Europe without having to pay competivie wages and benefits, and obey environmental laws.
The Chinese are happy reverse engineering Western technology and producing using their assets, where the costs are low. The Chinese would be stupid to pay billions of $ for technology they can more easily get, or to buy factories in the more expensive/regulated U.S. market.
So don't lose any sleep over it.