Michael J. Golde

Bailout Nation Mentality: Ford Workers Reject Further Concessions

Please, no SPAM. Take it somewhere else.


On Nov 02 05:23 PM maketalwaysgoesup.. wrote:

> This market always goes up. DJIA 10,600 soon
>
> good articles: financeopinionss.blogs.../

Bailout Nation Mentality: Ford Workers Reject Further Concessions

Thanks for all the commentary (95% of which I agree). Also, a note of apology. I realized this morning that the article contained a variety of grammatical errors. I have changed them on the Instablog but am unable to update the article accordingly unless someone knows how to modify a "published" article.

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

I am not sure I understand the math in the article, but I do think it is fair to say the some reasonable percentage of the people who will receive rebates would have otherwise bought a new car without the rebate. Therefore, the only real benefit of the program is the incremental number of cars sold than would have otherwise been sold without the rebates. Maybe, as another posted suggested, that is how the figure of 22,000 new cars was derived or $45K+ per those vehicles.

The program is also obviously speeding up temporarily the car buying cycle. The program is obviously intended to get people to buy new cars now as opposed to the future. But, what happens when the incentives are gone? Future months could easily show a decline in sales because some of the sales that are occurring now, will take away from sales in the future.

The danger of a program of this sort is that it doesn't really create a sustainable growth model. And the worst thing would be if the automakers ramped up for potential demand that doesn't materialize because the government "juiced' sales now.

Third Quarter Auto Production Expected to Boost U.S. GDP

Of course the auto companies can increase production if they're giving the cars away. The question for the long-term is whether the sales are being driven by the incentives or whether demand will still be there once the incentives are reduced or go away.

I'm concerned that once the current crop of buyers is gone, the "easy" sales are over and Detroit will actually be in a worse position as it will either have to cut back production or maintain it will a never-ending stream of incentives. This a true recovery is not made of.