My son (who works for Ford) visited us over the weekend and commented that the Cash For Clunkers program was working exceedingly well. There is the typical confusion and forms to be completed that accompany any government program, but in the Detroit area at least, many dealers have as many as 100 pre-sold cars, awaiting only Senate approval of the additional $2 billion for the program. I've seen some reports that even the additional $2 billion might not last more than a week, if approved.

While maybe not intended as a stimulus, this program is working quite well in that respect. Not only are people ordering more fuel efficient cars--the more fuel efficient the new car is, the more of the $4,500 maximum government support the buyer gets. So, the effect is that the fleet of cars on the road will get slightly more fuel efficient. At the same time the program--if increased by the $2 billion being considered--will result in roughly 1 million new car orders.

One million new car orders is still less than 10% of industry projected sales for the year. But it sure will put lots of people back to work in a real hurry. This is exactly the kind of stimulus that, if it could have been replicated with the other $785 billion in stimulus funding, would have had an immediate economic effect.

Some will argue that the program is another "transfer of wealth", with the taxpayers helping new car buyers pay for a new car. In normal economic times, this kind of program should have been funded by the car companies themselves. But with that not being a possibility right now, I can't see very much wrong with this program at all.

Originally Posted by Villages Kahuna

My son (who works for Ford) visited us over the weekend and commented that the Cash For Clunkers program was working exceedingly well. There is the typical confusion and forms to be completed that accompany any government program, but in the Detroit area at least, many dealers have as many as 100 pre-sold cars, awaiting only Senate approval of the additional $2 billion for the program. I've seen some reports that even the additional $2 billion might not last more than a week, if approved.

While maybe not intended as a stimulus, this program is working quite well in that respect. Not only are people ordering more fuel efficient cars--the more fuel efficient the new car is, the more of the $4,500 maximum government support the buyer gets. So, the effect is that the fleet of cars on the road will get slightly more fuel efficient. At the same time the program--if increased by the $2 billion being considered--will result in roughly 1 million new car orders.

One million new car orders is still less than 10% of industry projected sales for the year. But it sure will put lots of people back to work in a real hurry. This is exactly the kind of stimulus that, if it could have been replicated with the other $785 billion in stimulus funding, would have had an immediate economic effect.

Some will argue that the program is another "transfer of wealth", with the taxpayers helping new car buyers pay for a new car. In normal economic times, this kind of program should have been funded by the car companies themselves. But with that not being a possibility right now, I can't see very much wrong with this program at all.

I agree. Anything which helps market the product is crucial.

The next time you speak with your son, please ask what's happening with the two-plus years of stockpiled inventory. That "non-asset" has stock value repercussions, depending how it's handled.

Originally Posted by SteveZ

....please ask what's happening with the two-plus years of stockpiled inventory....

I will ask him. But I think I know the answer, at least as far as Ford is concerned. There is very little unsold, new-car inventory on Ford's books. For several years now, they only built cars to orders placed by dealers. Then other OEM's have pretty much done the same. When the vehicle leaves the assembly plant lot on a car carrier, it is immediately paid for in cash by the ordering dealer using "floor plan" financing provided by banks or finance companies. There are always a few odds and ends in unsold inventory, assembly plant repairs or cars damaged in preparation for shipment, etc. But very few new and unsold on Ford's books. That's not to say that there is unsold new vehicle inventory on the dealer's lots, but nowhere near a "two year supply".

Potentially, unsold truck inventories are a bigger problem than cars. As of June, Ford is in better shape than the other manufacturers. Ford had a 39-day supply of Rangers and a 54-day supply of Escapes which helped lower their truck inventory average to 80 days by month's end. The F-Series' dealer inventory jumped from April's 97-day end-of-month supply, to May's 129 days. The Expedition's inventory rose from 67 to 98 days. Even though it's one of Ford's best-selling models, the Edge went from a 69-day to a 107-day supply.

You'd think GM's production "hiatus" would have reduced the General's truck inventory. But the U.S. automaker ended May with a 109-day supply of trucks, up from the previous month's 98-day supply. The Buick Enclave's and GMC Acadia's low dealer stock (38 and 54 days, respectively) couldn't offset stagnant Chevrolet Silverados (122-day supply), Tahoes (125 days), GMC Sierras (122 days) and Yukons (188 days). All four trucks were more abundant than they were during the month previous.

With Chrysler's plummeting sales, it's no surprise their inventory is up. The lame duck Dodge Ram's inventory jumped from 99 days to a 109-day supply. Dealer stock of the unloved Dodge Dakota ballooned from 73 to 110 days' supply. After starting with an 81-day supply, Jeep ended May with a 102-day stock of Grand Cherokees. The new Dodge Journey was Chrysler's sole bright spot. The CUV started April with a 130-day supply and ended with 57 days' supply on the lots.

Of the two truck-producing transplants Toyota fared best. They don't list inventory by model, but they finished the month with a 52-day supply of trucks, up only two days from the end of April. Nissan's numbers represent the nadir. Murano (76 days) and Rogue (82 days) clogged dealers lots the least, while Armada (203 days), Titan (232), Xterra (198) and Frontier (137) were more abundant than any other truck models.

All of these inventory numbers will be substantially lower in early August because very few assembly plants have been operating for the past 4-6 weeks.

Thanks! Sounds like there may be a copper (if not silver) lining in all of this....

What am I missing? I just caught the end of a panel discussion on television and most of the experts said the Clunker Bill is just more wasted taxpayer money. Do the taxpayers get the money back? Or is this another government transfer of taxpayer money distributed?
Money going out from the government has to be paid by someone right? I guess all these trillion dollar deficits are over my head. I don't pretend to know how to get the jobs back but I do know that alot of the stimulus jobs are temps and then what happens?
Seems to me that business is waiting to see what is going to happen before any real jobs are put on their payroll. I sure hope this isn't the 70's all over again.

Originally Posted by SteveZ

I agree. Anything which helps market the product is crucial.

The next time you speak with your son, please ask what's happening with the two-plus years of stockpiled inventory. That "non-asset" has stock value repercussions, depending how it's handled.

SteveZ Sorry, this is one time I disagree with you. These consumers made THEIR choice of buying a gas guzzler and now their near worthless, so I'm supposed to help them get rid of that clunker with my tax money!! How are our countrymen ever going learn anything about their mistakes if our government is always bailing them out? Its time that the populace live buy their mistakes and drive those clunkers into the ground themselves.

On the local TV station here in Ohio one dealer said that the cash for clunkers program is doing more for the overall auto industry than the billions that was given to them a few months back to bail them out.

1. This is clearly another bailout program.. bailout people who own older cars and want a new one.
2. It puts operational cars in the junk yard prematurely.. is this really environmentally smart? A 2 mile per gallon increase is not enough gas savings to justify filling landfills with working cars.
3. MOST IMPORTANTLY: Most people drove clunkers because of their financial situation. It is NOT smart to use taxpayer money to encourage clunker owners to buy a new car on CREDIT. I predict there will be a large number of repossessions of these new cars within the next year. How does someone who can afford only a clunker suddenly afford a new car? They don't. This is another financial crisis in the making.

I think those who oppose stimulus programs which provide an extra benefit to a specific group of citizens, like people who bought a gas guzzler many years ago, or because the stimulus comes from "my tax money!", completely miss the point.

The point is, stimulus programs can work, to the degree that they put the money back into the economy. The best stimulus starts an economic ball rolling which results in that money being spent over and over. The clunker concept is that the money gets to the folks to buy the car which helps the industry which employs more workers who spend virtually every dollar they make at stores and businesses which order more goods and hire more staff who spend... etc. It's the middle-class American machine which has made our economy the strongest in the world, despite our colossal mistakes and wasteful practices.
The Germans, who rely even more than we on a healthy auto industry, invented the clunker concept, and it has worked very well for them. Our program is pretty good, way better than AIG bailout funds by comparison, but it has one flaw - that some of the dollars are being siphoned off by car dealers who are tricking customers into paying higher prices while mesmerized by the clunker rebate. To the degree that those crooks take that ill-gotten money and salt it away off-shore or vacation in Tahiti, the program is failure. Overall, as angry as I get that those abuses certainly occur, I recognize the relative merits of a stimulus like the clunker program.

For those of you who just get angry at the government for any stimulus program, or at those who are earlier in line for benefits than you, why not direct your venom at those who deserve it, the individuals and companies who redirect or steal the money before it has it's ripple effect.

My concern with cash for clunkers is that it does not require the the car be assemble in the US/NAFTA with a minimum of 75% US/NAFTA components including drive train. I'm really not interested in stimulating other countries around the world with US tax dollars.

Originally Posted by gnu

SteveZ Sorry, this is one time I disagree with you. These consumers made THEIR choice of buying a gas guzzler and now their near worthless, so I'm supposed to help them get rid of that clunker with my tax money!! How are our countrymen ever going learn anything about their mistakes if our government is always bailing them out? Its time that the populace live buy their mistakes and drive those clunkers into the ground themselves.

I'm not thrilled with the entire auto bailout, and the main reason is that nothing was done up front to make cars more sellable. The good coming out of this is that the cost for the clunkers is still less than paying unemployment and welfare to even more folk.

Additional good point is in any state (like Florida) which does not have periodic vehicle inspections, it will get a large number of vehicles off the road which shouldn't be out there anyway.

Also, Let's say the person is buying a 25,000 car and getting a $4,500 C4C credit to use towards the purchase. If the person kicks in $500 cash, that's 80% of the vehicle price, so the person just needs to qualify for a car loan of $20,000, and the vehicle value makes the deal for the finance company/bank a better deal. Money is moving!

And, let's not forget that because of the first bailout, "we, the people" now have a big investment stake in the auto industry, and participating in a "sales incentive" to prime the sales pump makes the potential of recovering the bailout moneys downstream more feasible.

Cars get sold, banks give credit, jobs are maintained, money actually gets circulated in communities which results in more jobs, more people keep their health care coverage (giving another reason why HR 3200 is "wrong time now"), maybe even more jobs come back in the auto industry and that would spawn ancillary support and service jobs, and the economy perks.

Yeah, I'm for anything that actually causes money to circulate, rather than just be paid in big bonuses or squirreled into offshore accounts. The $300-600 incentive checks did nothing. This has enough bite to really make a difference since it allows credit to be given, high-end products sold, and the circular effect spawns more jobs.

This would have been a better idea 6-12 months ago than the original auto bailout plan, because it would have been an economic boost rather than debt relief at the top corporate levels.

This is one time I think the Administration and Congress (Finally!) got it right.

Hey , What about the other side of the coin ........this program also has another benefit that hasn't been brought up here...........removing autos that get 9 miles per gal. and replace them with auto's that get 30 mpg.....OPEC thinks its a lousy idea so right there I'm for it.........any program that reduces our dependence on foreign oil is bound to be a boon to this country..........

Besides a couple of weeks ago when I checked in on the clunker program at my local dealer ...I found out that My car didn't qualify , my mileage was to high and the reason was it was only running on three cylinders but they felt so bad for me they took up a collection and told me never to come back.......
they called me a cab .........fumar

Originally Posted by BBQMan

My concern with cash for clunkers is that it does not require the the car be assembled in the US/NAFTA with a minimum of 75% US/NAFTA components including drive train. I'm really not interested in stimulating other countries around the world with US tax dollars.

Kinda makes you wonder why such language wasn't included in the bill, doesn't it? If it's so logical to us, why not those in Congress who created and passed the bill?

This is a bit like the legislation which is being considered by Congress--actually it may already have been passed--that exempts vehicle models whose sales are less than 400,000 per year from inclusion in the "average fleet mileage" calculation required in the new CAFE standards bill passed a number of months ago. The bill is known as "the German Provision" among the lobbyists in Washington. The practical effect of this amendment is that Mercedes and BMW can sell all the 13 mpg sedans they would like; Porsche, Maserati and the other sports car makers can sell all the 500 horsepower speedsters that get only 10 miles per gallon that they'd like; even the new owner of Hummer can sell all of those beasts they'd like--all so long as they don't sell more than 400,000 of them. None of those models need be included in the calculation of average fleet mileage prescribed by the CAFE standards law. Read the maddening blog posting describing the bill at http://www.autoextremist.com/

Those who follow these things in Detroit know that this week's legislation was the product of a couple of lobbyists for the foreign car companies and their U.S. dealers "getting to" enough Congress members to get the new bill passed.

Just per chance--do you think there might be some lobbyists might have gotten inside the language of the cash for clunkers bill so that their foreign OEM clients could benefit, just like their U.S. competitors, even though the money comes out of the pockets of U.S. taxpayers?

Just wondering.

Originally Posted by The Great Fumar

Hey , What about the other side of the coin ........this program also has another benefit that hasn't been brought up here...........removing autos that get 9 miles per gal. and replace them with auto's that get 30 mpg.....OPEC thinks its a lousy idea so right there I'm for it.........any program that reduces our dependence on foreign oil is bound to be a boon to this country..........

Besides a couple of weeks ago when I checked in on the clunker program at my local dealer ...I found out that My car didn't qualify , my mileage was to high and the reason was it was only running on three cylinders but they felt so bad for me they took up a collection and told me never to come back.......
they called me a cab .........fumar

It sounds good on paper....trade car with lousy mileage for one that gets good mileage....but figures show that people just put more miles on the more efficient car, therefore they use the same amount of gas.

Originally Posted by Keedy

It sounds good on paper....trade car with lousy mileage for one that gets good mileage....but figures show that people just put more miles on the more efficient car, therefore they use the same amount of gas.

Now Greedy where did you ever read this ???????
It certainly wasn't in the news media that I've read...... and I read a lot ,especially things concerning the Michigan auto Ind....


fumar