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By BOB GRITZINGER AND GREG KABLE
"Cash for clunkers: it's been tried in Europe, but would it work in America? One proposed solution to prop up new-car sales in the United States involves paying bonuses to owners of older vehicles who send their cars to the scrapyard and buy new ones.
Proponents say that not only does the auto industry benefit, but so does the environment, as emissions decrease and fuel economy typically improves in newer models.
Critics, however, say that scrapping older vehicles hurts collectors by reducing the number of older models available and also hurts those least able to afford to buy newer vehicles by driving up the price of used cars.
'It definitely could have a negative effect on the collector community,' said McKeel Hagerty, CEO of Hagerty Insurance, which specializes in insuring collector vehicles. 'What’s sitting out there now that’s not too appealing that might be a collector in the future? Lots of future collector cars could be destroyed.'
Hagerty and others say that the scrappage idea really is an auto-industry bailout masquerading as a green program--most cars scrapped are more likely to be the third or fourth cars in a family, which are rarely driven and therefore contribute little to environmental problems.
'Scrappage programs don’t work. They affect collectors, hobbyists and lower-income people,' said Stuart Gosswein, director of regulatory affairs for the Specialty Equipment Market Association, an automotive aftermarket group. 'Our mantra has been to just give vouchers to people to buy a new or a better used car, without tying it into scrapping an older one.'
As proposed, the Consumer Assistance to Recycle and Save bill, or the CARS Act, would offer vouchers ranging from $3,000 to $7,500 to owners of vehicles eight years old or older to scrap their cars and buy new models that are more efficient, including electric cars. Variations on the theme limit the vouchers to buyers of North American-built models, or the vouchers pay less to those who buy foreign-built vehicles. But the central idea--a sliding payment scale based on the fuel efficiency of the replacement vehicle--is consistent in seeking to boost struggling auto sales under the guise of improving fleet fuel economy and lowering emissions.
It sounds promising, and results from a similar idea in Germany show that the kind of money the U.S. government is suggesting would be enough to move a lot of people out of their old clunkers and into new sheetmetal.
In Germany, the program, known as Umweltprämie (literally, 'environmental rebate'), appears to have produced a 21 percent increase in February car sales compared with the same month in 2008, according to the German Automobile Association. In the midst of what some call the worst economic downturn since the Great Depression, the 278,000 new passenger cars registered in Germany in February represented the single biggest volume for that month in more than a decade.
Dealers say strong sales demand continued in March, with buyers hoping to get in on the program, which rewards car owners who scrap vehicles that are more than nine years old and subsequently purchase new ones with a payout equal to about $3,388. The program has been so successful that the government has voted for additional funding (beyond the $2 billion already exhausted) to extend it through the end of 2009. Other European countries may follow suit, although a more modest French plan that offered about a $1,762 scrapping rebate didn’t prevent France’s new-car sales from dropping 13 percent in February.
Even if such a scheme gained traction in North America, there are no guarantees that it would bolster production in North American factories. The German program boosted sales of the German-built Opel Corsa, but the majority of sales have come from cars such as the Volkswagen Polo, which is built in Spain.
Critics of Germany’s scrapping program also argue that it has begun to affect the profitability of small businesses. Local auto mechanics are up in arms, saying that the policy robs them of potential business by taking older, higher-maintenance cars off the road.
Germans also are concerned about seeing sound but aging cars disappear.
'It breaks my heart seeing perfectly good versions of the Golf GTI going to the press,' said one Volkswagen Golf GTI fanatic. 'They’re highly sought after by collectors, but all their owners care about is receiving written confirmation from the scrapyard so they can collect their rebate.' "
Besides that new wrinkle, we have the problems of 2009 that weren't there in 1979---extremely high restoration costs (thereby condemning every banged up 80s 4-door car to oblivion) and in most parts of the country, expensive storage costs.
Most people who are "collecting" old cars in the hope they will be valuable someday are usually collecting them in the Back 40, or in other words, just junking them more slowly than a wrecking yard---it's Mother Nature's Auto Recycling at work.
You're more of an authority on classic and collector car matters than I am, but the arguments against clunker plans go beyond the issues of concern to hobbyists.
It's really a battle between doing nothing and doing something isn't it? So it's a question of WHAT to do, not WHETHER to do, IMHO.
I'm not arguing FOR the Clunker Plan at all--I'm just commenting that not all criticisms about it are valid, while some certainly are.
I'm totally opposed to junking perfectly good cars. That is KER-RAZY!
I agree with this. The Obama administration was faced with bad choices, and from what I've read by economists and financial professionals whom I respect, the bailouts, for all their negatives and risks, were the lesser of evils. My opposition to a clunker plan is that I think this specific type of plan is flawed, and the politicians explain it with half-truths.
Insofar as the deficit is concerned, there are times when they are called for, such as now. My concern is that we could go beyond the tipping point.
It's happened many many times in history, and countries have weathered much worse---look at the UK (run to bankruptcy after WWII) or Germany (bombed into a shake 'n bake bag industrially) or even Italy, which seems to run pretty well on chaos, tax evasion and corruption.
For now, the idea is to COAST downhill, not plummet downhill...then level off and see how we are, and how we might rebuild for the future. We are still rich in talent and resources.
A bit of a rehash at this point, but check out the accompanying photo:
I estimate 4 to 5,000 cars in that shot.
I understand how my comment about the deficit could have been misleading, if it was interpreted as meaning that the cost of a clunker plan would seriously aggravate our national debt. It would add to the budget deficit, but it wouldn''t be large enough to seriously aggravate the national debt. Put another way, It would be relatively small potatoes, compared to TARP and whatever the other components of the stimulus and bailout packages are called.
Yes, our country will survive and eventually recover from this nasty recession, as it has previous crises. I believe the ballooning deficits are likely to cause a devaluation of the dollar in the coming years, and an accelerated rate of inflation after the eventual recovery gets under way. While the consequences of these outcomes are likely to be huge, they're probably less painful than a meltdown. Therefore, I agree that "for now, the idea is to COAST downhill, not plummet downhill...then level off and see how we are, and how we might rebuild for the future. We are still rich in talent and resources."
http://zfacts.com/p/318.html
You can also see from the graph that Reagan/Bushes liked to spend money just as fast as Obama plans to.
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Look again - they're stacked 5 deep. :shades:
Japan Adopts Scrappage Program In Its Economic Stimulus Plan (Auto Observer)
Don't see any links yet.
It is not enough for me, I'm in love with 370Z :shades:
Here is the best way to beat that horse. Drive a friends old $1000 clunker GM to Las Vegas where it breaks down on you. Trade it for a new VW Jetta TDI and bring it back to CA. After the tax credit is taken put it in your name. With this bunch in DC it should be easy to come up with creative ways to beat their ignorance.
That way you only pay the tax on the Low BB trade-in value. Probably save another grand on CA's horrible sales tax.
Hell NO I'm not junking a good car for a $3000 rebate, nor $6000 for that matter.
$10K? I'd seriously consider it. (I hope my car doesn't see this).
As anyone who's read my messages knows, I don't like clunker programs, for numerous reasons, but I'm afraid we're going to get one.
You think a new MINI is overpriced and I think it's overpriced, but, as you once pointed pointed out to me, the price of used MINI's say otherwise. I might swallow hard and buy a new one, but I'd find it more difficult to justify the market price for a used one. All rules have exceptions, but my general rule is that you buy slow depreciating cars like Toyotas, Hondas and MINIs new, and buy the faster depreciating cars used.
The MINI appeals to me on an emotional level, but after driving a previous generation naturally aspirated one, I found the steering to be even too direct for my taste. The steering was a little too go-carty for me. The thought that came to my mind is that this is a case of the better being the enemy of the good. I prefer the VW Rabbit's steering over the MINI. Both are well weighted and responsive, with good on-center feel, but the Rabbit's steering ratio (and the Subaru's too, for that matter) is more to my liking. I also found the MINI's ride to be marginally acceptable. I probably wouldn't like the boosted MINI's ride. Neither of these things would be deal breakers for me, but they do detract some from the MINI's charm, in my opinion.
The Rabbit is a nice driving car, albeit with below average reliability.
Shoot, I would PAY a little extra each year to get some of those stinking, rusted REAL clunkers off the road, but I'm not going to support a program that junks perfectly good safe cars.
This is so American. Socialization of liabilities for the taxpayer, and capitalization of assets for the businesses. We are a screwy people. :P
I don't want to "bail out" the Big Three. I WANT part of the big three. I want to own something for my money. I want some of my taxes to go into shares of GM.
It looks like your wish will be granted, Shifty. In the last couple of days the Washington appointed car czars have said that to improve GM's debt to equity ratio, the government may convert its loans into an equity stake. This would also be done to persuade bond holders to do the same. The thinking here is that If the U.S. government does it first, it'll strengthen the capital structure, and reduce the risk for reluctant bond holders to follow suit.
Your objective is different from the government's. The main purpose of the government's program is to support UAW jobs, while masquerading as an environmental and energy independence program. That largely explains why they'll crush as many cars as possible - clunkers as well as "perfectly good, safe cars" - so that more cars need to be replaced. The government isn't being forthright with us. The UAW (union and members) supported Obama in a big way, and now it's pay back time. Since the clunker law wouldn't pass if they described it this way, they have to frame it differently.
Incidentally, I'm not against Obama. He's very likable and, given the mess he inherited, is doing a lot of things right, in my opinion. I just happen to disagree with him on the clunker issue, which is a relatively minor matter in the scheme of things.
U.S. ‘Cash-For-Clunkers’ Plan May Cover Overseas Cars (Bloomberg)
"The biggest savings are in getting true gas-guzzlers off the road. Replacing them with vehicles that get better gas mileage can make a huge difference in the amount of fuel burned and emissions released.
“The difference in gasoline saved between a 35-m.p.g. car and a 30-m.p.g. car is much less than for, say, a 20-m.p.g. car and a 15-m.p.g. car,” he says"
Would cash-for-clunkers be good or bad for the environment? (Christian Science Monitor).
Have to read the link for the bad. :shades:
While the comparisons in the Christian Science Monitor article are useful, they probably overstate the benefits of clunker plans, by not factoring in that old, low mileage cars are frequently driven less than newer, higher mileage ones. Mileage driven can makes a significant difference in the carbon footprint, of course.
I like and benefit from clean air as much as the next person. My objection is that when all is said and done, money and resources will be wasted without achieving much, if anything, in the long run. That's because most of the gross polluters built in the '50s, 60's, 70s, and even '80s have already been retired, and the relatively few that remain aren't driven much. As new, more eco-friendly cars are sold, and more old cars are retired because of age, mileage or accidents, the problem will take care of itself, without a clunky, porky clunker plan.
It's correctly structured as a stumulus measure by directing the funds through the buying public. In order to take advantage of it the public has to actually go clunking along to a showroom in a $500 piece. Then the public has to buy something - a new vehicle. This is better than a pure gift to Detroit or Torrance in that in this program creates more activity.
A pure cash infusion would only make the bottom line of the vehicle makers better and it would likely keep more autoworkers on the job. But if there's no incentive for the buyers to go to the showroom then we're back in the same place we were in Nov/Dec when everyone was sitting on their hands at home. By getting the buyers out of their homes it creates work for clean up people, clerks and sales people, state revenues flow better as more vehicles are bought, truckers do more trucking and autoworkers do more building. The Germans got it right and the figures indicate how well it works. Caveat: At some point the available supply of clunkers will run out and then the incentive will disappear. Hopefully by then the economy has rebounded.
It's not intended for the older vehicle that's in good working order that has a trade value of about $2000 but that can be sold for say $4000 locally. It really is intended for those clunkers that smoke and belch down the road that have a trade value of $100-$500. Even an older vehicle like a 99 Taurus with say 120,000 miles on it is only worth about $500 in trade. It may run pretty well but the owner is always on tenterhooks about some catastrophic issue suddenly arising that will cost $2500 out-of-pocket. We prolly trade one or two of these pieces every day. They bring money for parts at the auctions....about $200.
Be careful, you are starting to sound like a fiscal conservative. As was pointed out this program will only help those that really don't need it. The guy that would like to buy a new car and has a backyard filled with worn out junk cars that have not been driven since the 1990s. Do you have to drive the clunker to the dealer for the trade?
And yes, I think the loans to GM and Chrysler were asinine. Ultimately, GM is going to have to go through a structured bankruptcy unless the government is willing to "lend" it $30-$40 billion per year.
Also, to anyone who wants an equity stake in GM, why don't you buy GM stock? Why should the tax revenues of all Americans be used to purchase a couple of poorly run auto companies that would be even more poorly run by the DC pinheads. The government should have provided funds to allow GM and Chrysler to enter a structured bankruptcy, rather than allowing them to remain in a zombie state over the past few months.
I'm all for nationalization of the auto industry...trim 'em down, spruce 'em up, and then re-privatize them.
These various bail outs and clunker plans only prolong their agony. Ford is doing better because it has interesting product diversity right now.
It still comes down to the ugly truth eventually---people have to WANT your cars without stuffing money in the glovebox for them.
That's exactly what they did. However they couldn't show favoritism for GM over Chrysler. So they gave each a chance to prove that there was some reason to save one or the other or both. Chrysler proved that it was a corpse with no chance of living. It's parent confirmed that by refusing to lend it any more money to restructure. That was an easy call. The Feds became parties to an assisted-suicide.
GM on the other hand has some viable parts. It does need to resturcture in bankruptcy and it will with Federal assistance...then the Feds will leave collect their belongings ( our loans ) with a profit and GM will be smaller, leaner and more profitable for the future. That's actually good prudent use of our money. Rather than waste money Chryler gets none because it would be like feeding a corpse and GM is brought back to life.
Well then, if that's how it's going to come down, a Clunker Plan seems a) premature for GM cars and b) too late for Chrysler cars.
So maybe this should just apply to Ford? Best use of the money and all that......?
Toyota's numbers haven't been so great BTW.
GM could certainly use the infusion. But does the money go to the 'New GM' or the 'Old GM'? That's another reason to rush the BK decision along.
And yes it would be beneficial to me ( us ) and to all of the ( us ) in and related to auto sales for the buyers to return to the market. That's the purpose of the whole program..a stimulus to increase sales as opposed to just a gifted cash infusion.
So any Clunker Plan could conceivably just work along with this ABRACADABRA CH 11 scheme, IMO.
Is this simply an example of legalized theft?
Is this authorized by the US Constitution?
Why is it that Washington seems to be accelerating us towards bankruptcy and the destruction of our lifes work?
You know, Americans have got to get used to a new economic system of some sort. Free market capitalism keeps getting chances to work, regardless of the enormous failures and collapses, but other systems get no chance to work in this country. Even Greenspan, Ayn Rand's worshipper, now admits to the system's "serious flaws".
I"m willing to give anything reasonable a try at this point.
To quote George Will, you can measure a country's greatness by the number of people trying to get in versus those who are desparate to leave (not his exact words, but that's the idea). Millions take enormous risks each year to get into the U.S., while the relatively few who wish to leave are free to do so.
Our socio-economic system may not be perfect, but, for all its warts, it's about as good as it gets, in my opinion. Maybe it can be improved, but changes are accompanied by risks. Of course, we'll have to continue to adapt to ever changing conditions and challenges, and that may have been the point you were making.
The American auto industry is just a microcosm of this problem, and I don't think japan or Europe or China will have any better luck unless it adapts as well.
These various clunker plans are just the first experimental steps in trying to do what, quite honestly, nobody knows how to do just yet. Anybody these days who tells you they have a complete and rapid solution to the economic crisis is full of you know what.
As for leaving the US, just count the # of Americans now living in Mexico. The number will shock you. Again, even this demographic is shifting. Mr. Will is still in the last century on that issue IMO.
It's been suggested that shipping our old cars to Cuba and other countries that don't have an auto industry to protect would be preferable to scrapping them. Maybe, but there's the cost of shipping, and various other issues to consider.
I doubt most Cubans could afford the cars or the gas. It's a wonderful place, but poor.
Now if you wanted to fly the UAW to India for medical care, and then 1 week post-op in Cuba---that's just crazy enough to make sense right now. (I bet you'd get a lot of them signing up for that actually)
That's a larger percentage than I would have thought.
"I doubt most Cubans could afford the cars or the gas."
Since they'd be scrapped anyway, the cars could be donated or, at most, cost only the nominal amount to cover any difference between the cost of shipping versus scrapping them. The idea would be to help Cubans and others upgrade from their real clunkers to like-new clunkers. As for the gas, I believe Venezuela is selling oil to Cuba at below market prices, or otherwise subsidizing oil shipments to Cuba.
"fly ...to India for medical care, and then 1 week post-op in Cuba..."
A sweet deal, especially for elective procedures - low cost medical care plus a vacation.
ALL Retired. Mexico is one of many places a person can retire on SS. Not many places here fit that bill. You still have to have at least $1500 per month income to get a visa to live down there. You will not get a job. You may start a business if you like.
I dunno...I'd like to see a Clunker Plan that works for the COMMON GOOD, not just one niche.
Basically, as I see it, if the current proposal were to be implemented, and if it were to work (nobody knows) then the major beneficiaries would be Michigan and Ohio, for the most part.
If you or I don't buy a car, we get no benefit per se unless one believes that this "surge" in car buying is going to end the recession.
I have not read the proposal. How can they just help the D3? Many of their vehicles are not US made. In fact the high mileage cars are not US made. I would think the imports built here would get equal shot at the corporate welfare.