Speedzzter

Was Cash for Clunkers Worth It?

On Sep 03 09:04 AM Ben B. wrote:

> Here's another way of looking at it: CfC sold 690k cars with an average
> fuel economy improvement of 9.1mpg. Using an average annual vehicle
> mileage of 12k miles/year and $70/barrel oil*, these vehicle trade-ins
> will keep roughly $2.0B annually onshore**. Obviously, some of this
> is just pull through from sales that would have occurred without
> CfC, but it's hard to make a set of assumptions starting with that
> $2.0B figure that result in this not being a cashflow positive for
> the US economy. I very seldom defend government programs, but this
> one could have gone a whole lot worse.
>
>
> *1 barrel oil ~= 19.5 gallons gasoline (depending on heaviness of
> oil)
> ** The US imports 62% of its oil

This analysis is speculative and probably flawed:

1. The average fuel economy improvement assumed seems too high (given that less than 10% of the C4C welfare "deals" have been funded, it's premature to project the fuel economy effects. Some $3,500 "clunker" deals could have yielded minimal real fuel economy improvements).
2. Ignores that higher M.P.G. cars tend to be driven more, which reduces their net decrease in fuel consumption (Makes sense because the "opportunity cost" of driving goes down and consumers already have a "budget line" for fuel).
3. Ignores the effects on the used car market -- some of the "clunkers" would have undoubtedly went in the used car market to replace less fuel efficient older vehicles or as donors to improve the efficiency of older vehicles (i.e. "hot rods"). Now these replacements will not necessarily occur.
4. Assumption on the "clunker" miles driven may be too high. A number of the "clunkers" traded were undoubtedly seldom-driven second and third cars, while their replacements will likely become primary cars -- often for the children of the welfare voucher recipients (at least until some of the drivers tire of motoring in tiny, imported FWD deathtraps or die in crashes that would have been surviable in a larger vehicle)
5. Ignores the offshoring of perhaps as much as 50 percent of the profits, 60-70% of the fixed production and development costs, and a huge percentage of the interest on the 50% of C4C funds that were borrowed.
6. Ignores the percentage of diesel powered vehicles traded and purchased. There are only approximately 9 gallons of diesel per barrel of imported oil, so any reduction effects should be adjusted accordingly.

Clearly, there would have been more efficient ways to reduce oil imports. There is no way this program allocates resources more efficiently than the not-so-free market otherwise would have.

Was Cash for Clunkers Worth It?

Of course it was not worth it.

What the cost-per-sale analyses usually fail to factor in is the debt cost. Half of the welfare money wasted buying up good used cars and destroying them was BORROWED. (Who knows if it will EVER be paid back)

When you calculate the interest cost on $1.5 Billion and spread it across the mostly foreign FWD wimpmobiles sold under the CARS program, the true cost is going to be a lot more than ~ $7,800 per unit.

Cash for clunkers was more wasteful than the infamous "$800 toilet seat"

Ford Takes Advantage of Cash for Clunkers

"Ford, having not taken direct government assistance in dealing with the downturn over the last year . . . ."

Cash for Clunkers IS "government assistance!" It's bailout money laundered through a bureaucratic welfare program.

The Orwellian newspeak "Consumer Allowance Rebate System" [sic] is a wasteful attack on the free market (and is state-sponsored vandalism of thousands of potentially collectible vehicles) funded by the printing press and money borrowed from Communist China.

MORE THAN 50 PERCENT OF THE CARS WELFARE VOUCHERS ARE GOING FOR THE SUBSIDIZED PURCHASE OF FOREIGN BRANDED VEHICLES!

But William Clay Ford, Jr. and plenty of other dole-seeking looters will be back for more "government assistance."

"How about if Ford wants to sell [more] cars, how about they sell their cars on merit, rather than on welfare assistance."

Automakers: Forget America, Think China and India

" I think the automakers should do as they've done in America...tell the consumer what he or she wants. That's how they got these little soccer moms to drive the kids to school in a truck. I guess the proper name is SUV. Before all the advertising most women wouldn't consider driving a four wheel drive truck to do shopping in."

This is completely wrong.

Corporate Average Fuel Economy regulations killed the traditional RWD station wagon and reduced market choices for sedans large enough to carry American families.

While the minivan stood in the gap for a while, public perceptions of them became that they lacked style and adventurousness. Minivans became a cliche not by any fault of the OEMs (most of which were vigorously marketing minivans)

Truck based vehicles became popular because consumers could see for themselves that they were better values. Lower CAFE standards for trucks meant that RWD and V8s could be retained and that simpler, cheaper-to-repair, more durable mechanical systems could be used. Mechanically, these trucks were similar to the large cars that CAFE had reduced the supplies and artificially inflated the prices of. Trucks also became less utilitatarian as sales pressures over four decades forced option proliferation.

Once many drivers became reaccustomed to the higher 1950s "h-point" through minivans and pickups (the higher seating position that was never abandoned in trucks) and gasoline prices stabilized, SUVs became popular because of their style, value and practicality. Since Jeep and Land Rover built the first SUVs decades ago, they've always been associated with rugged individualism, adventure, and practicality.

The SUVs of the '90s merely built upon this heritage and provided customers with an interesting and exciting vehicle with the functionality of old, CAFE-killed station wagons at price points that were more attractive than cramped FWD sedans and boring minivans. As trucks and SUVs proliferated, many bought them merely to stay "competitive" with their neighbors and/or for enhanced visibility.

Advertising actually had little to do with it. Word-of-mouth, direct personal experience, and social imitation was much more important. Obviously, if Detroit advertising could work such miracles, Detroit could have pushed the Japanese back into the sea long ago. Consumers are smarter than that.

Car Allowance Rebate System: Ford Bounces Back

Cash for clunkers is still welfare.

It's laundered bailout money. It's another abandonment of free market principles. It's still borrowing money we don't have to redistribute it to people who haven't earned it. It's still the pillaging and vandalism of thousands of potential collector and parts vehicles built after 1984. It's still a war on V8s and against grassroots motorsports (which depend on the sorts of "clunkers" that Welfare/Beer Bust King Obama, the environmentalists and the greedy public dole sucklings are destroying).

Ford vigorously campaigned for the CARS legislation, so they ARE benefitting from "bailout" money (i.e. Dealers get the CARS welfare vouchers they then spend to help buy the vehicles from Ford -- only the most myopic can't see that this is "bailout" cash to Ford)

A note for ThomasC: It is undisputable that the labor costs (including legacy costs) of the foreign "invader" assembly plants were far below the Detroit 3 before this crisis. How could UAW-assembled vehicles be competitive with "scab" vehicles assembled in "right to work" states for $1,000-$1,500 less per unit?

Regardless of one's position on the value of unions, the UAW clearly did not put the Detroit 3 on a level playing field with the invaders. The UAW failed to unionize the invaders. Nor did the UAW convince the American public to shun non-union "transplant" vehicles.

The invaders thus set the "market price" for assembly labor and benefits. The pre-crisis UAW "pattern" contracts exceeded the market price for assembly labor. Moreover, it's been widely reported that UAW work rules also put the Detroit 3 at a considerable disadvantage to the "Japanese" way. You may not like these facts, but they are the harsh reality.

I Was Wrong About GM Bankruptcy

User 158164: "I know there are some retards talking boycotting, yeah that makes sense. Put Americans out of work solely because you don't like the President and drive down the value of the company so that you the taxpayer loses money in some kind of childish hissy fit. Fortunately I think those numbers are small and their job at the car wash does not buy a new car anyway."

Actually, its the folks working at the car wash who were more likely to vote for the current administration and who will have few objections to government ownership and greater receptivity to "bailouts" and other forms of welfare subsidies.

A fair number of regular and loyal Detroit 3 buyers (many of which did not vote for Obama and and who tend to be disproportionately among the upper middle and upper classes) are objectors. If only a plurality of these regular customers abandon GM or Chrysler in the current depressed market, it may have measurable effects on the recovery of these automakers.

To be sure, some of the "I'll never buy another GM car" talk from some Republicans and independents is overblown. But some of these customers really mean it. Add on the dealer terminations, which may degrade customer loyalty in some smaller and rural markets (e.g. not as many small GM and Chrysler dealers selling to their friends and neighbors at the small town country clubs, little league, and "chamber of commerce" meetings), and its clear that a potential image problem looms.

Marketers know that purchasing decisions involving vehicles are not completely rational. Emotions, brand image and other subjective perceptions play material roles in the retailing calculus. Thus, while talk of "boycotts" strikes some GM and Chrysler fan boys as irrational and "childish," it is unreasonable to expect that all or even most of GM and Chrysler's former customers will ignore the extraordinary linkage between these companies, the federal government, and the future political fortunes of the Democrats.

I Was Wrong About GM Bankruptcy

The biggest long-term problem for GM and Chrysler is partisan politicization. A significant percentage of their most loyal "buy American" customers were alienated by the Obama-UAW-Democrat "seizure" of these companies and the stage-managed "show" bankruptcies. Many also vehemently object to "bailouts," notwithstanding that decades of failed regulatory policies and unfunded mandates crippled Detroit's competitiveness.

Now GM and Chrysler are viewed by perhaps as many as thirty percent of potential customers as clients of big labor and the Democrats. GM and Chrysler will have a difficult time luring these conservative "conscientious objectors" back into the fold.

Chrysler Models Already on the Chopping Block

The RWDs (Challenger, 300, and Charger), the Minivans, the RAM pickup, and the Jeep Wrangler are the only essentials in Chrysler's line-up. All the rest are generally unloved and should be in-filled with FIAT products or new designs.

Of course the problem for Chrysler (other than the universal cash flow problems of the current automotive depression, the taints of bankruptcy and foreign/UAW ownership, niggling quality concerns, and the massive compliance costs created by President Obama's acceleration of Corporate Average Fuel Economy standards) is hanging on until any FIAT platforms are available.

Good Auto News: Chrysler Restarts Production, Ford Confirms Profit Plans

Interesting that the first assembly plant "Fix-It-Again-Tony-Chr... Group" is reopening in the VIPER PLANT!

More than likely there's a backlog of orders for Vipers, anticipating that the model and the plant that builds it will be short-lived.

Of course, limited production Vipers ought to be nearly pure profit machines for "FIAT-C Group" and they need to get busy building as many as current CAFE averages will allow before the 2012-2016 CAFE hikes kill off the 600+ h.p. sports car niche forever.

Foreign Carmakers More Domestic than Detroit's Big Three

I agree that this article is very misleading. The Detroit 3 clearly provide more American value-added content (i.e. design, engineering, testing, management, marketing, manufacturing, parts and components) than any of the "invaders." Unfortunately, the "domestic content" labels are too narrow to reflect this.

But with respect to the narrow measure of assembly, Ford is poised to assume the honor of building more vehicles in America than anyone else (and but for the arcane and obsolete "two fleets" CAFE rule, undoubtedly even more vehicles would have been built here).

"Ford . . . will rank first in 2009 with 1.9 million units, according to data from forecasting group IHS Global Insight, which released its North American light-vehicle production forecast this month."

"GM . . . is idling most of its plants over the next couple of months and will produce an estimated 1.7 million vehicles this year" which is good enough for second place.

What about predatory foreign invaders like Honda and Toyota? PLEASE! They'll still be behind Chrysler (which is in the midst of a total production shut-down during its bankruptcy) when the 2009 counting is done. And the domestic content of Honda and Toyota still lags far behind the Detroit 3.

"[A]mong the most popular U.S.-built cars and trucks, the models with the highest domestic content ratings come from Detroit automakers. Of the 35 most popular U.S.-built 2008 and 2009 models — based on sales through May 31, 2008 — 43 percent of GM, Ford and Chrysler contenders had domestic content ratings of 75 percent or higher. In comparison, just 25 percent of the Nissan, Honda, Hyundai and Toyota models on the list achieved that."

Ford is quietly emerging out of the Obamanomics chaos as the only true AMERICAN CHOICE.

Obama's Sweeping Changes for America's Cars

Dreamkilling Barack Obama may have conducted his propaganda photo op announcing the death of automotive liberty in America in the White House Rose Garden, but it's a different kind of flower that will proliferate under the 42 M.P.G. automobile Corporate Average Fuel Economy standard: FUNERAL FLOWERS.

* * * *
Of course, it doesn't take a Harvard-trained physicist to figure out that: (a) weight and fuel economy are inextricably linked; and (b) smaller and lighter loses out every time to bigger and heavier. The pre-Obama CAFE was a proven killer. Now the Obamanator and the "Governator" have just made it even worse.

However, the mere mention of hiked fuel economy standards and more "hamburger on the highway" was enough to cause the granola-eating, all-natural-fiber high priests of the environmental left to kowtow Obama into sacking his initial nominee to lead the National Highway Traffic Safety Administration,Charles "Chuck" Hurley.

(However, sporting motorists were hardly sorry to see "MADD Chuck" go, given that he was poised to be the Obama Administration's stalking horse for a return of the 55 m.p.h. national speed limit)

FoMoCo's face of appliance motoring (other than William Clay Ford, Jr.), Vice President for Environment and Safety, Sue Cischke weighed in with the obvious:

When regulations establish requirements on what people buy, not what we make, if people aren't buying those, we have to offer incentives . . .We can't force people to buy what they don't want to buy.

We already know FoMoCo's favorite incentive is a draconian federal fuel tax . . .

Cischke also gave a clue about the butchering up of the next generation Mustang:

"Though it'll be expensive, Ford's Cischke says, a lighter car can be made as safe as a heavier car."

Even before the new regulation, Ford Motor was planning on 'taking between 250 and 750 pounds from (each of) our vehicles. That's a huge challenge,' she says."

"'It's all about managing the energy, protecting the crash cage,' she says. 'There are ways you can design a vehicle to be very strong, to provide the same crash safety as a heavier one.'"

Although anyone familiar with NASCAR racing knows that a "cage" can provide remarkable strength-to-weight and protection, the cost and the inconvenience is enormous. Thus, "taking between 250 and 750 pounds" out of the Mustang without using cost prohibitive methods, such as aluminum unibodies and carbon fiber, while at the same time beefing up the "cage" MEANS DOWNSIZING, CANNING THE V8s, AND FRONT WHEEL DRIVE.

If that happens, most Mustangers probably won't care if the ObamaMobile FWD "Mustang IIs" aren't as safe, because they'll be so depressed at the death of the "real" Mustang (V8 & RWD) that they'll WISH THEY WERE ALREADY DEAD!

Across-the-board downsizing is virtually a certainty in the lower-priced ranks because it does no good to build rolling high-tech fortresses of carbon fiber, magnesium, aluminum and dozens of airbags if regular wage earners cannot afford to buy them.

The $1,300.00-per-vehicle average price "tax" that will be extracted from new vehicle buyers to cover the fuel economy technology doesn't take into account the hidden costs of the Obamanator CAFE hike, such as higher insurance premiums that will be required to cover increased personal injury payouts, lost productivity, and manifold pain and suffering that will occur when the ObamaMobile hybrid minicars collide with working trucks or vintage vehicles that survive the Billy Ford and the Democrats' war on historic vehicles (a/k/a "Cash for Clunkers").

But as the highway carnage inevitably rises with the downsizing of the fleet, the radical Obamamaniacs and the freedom-hating EnviroNazis will certainly be waiting in the wings with the final piece of 1970s greeniac nostalgia: The federal 55 m.p.h. speed limit.

Obama's New Mileage Standards: Let's Wait and See How the Final Rules Shake Out

The 35.5 m.p.g. fleet average will force a 42 m.p.g. average for cars. There won't be anything remotely like an M3 as we know it possible under that freedom-killing plan.

The average cost of compliance to be passed along to consumers is $1,300.00 per vehicle. Which means that for low-volume sporting and high-performance vehicles, the cost of compliance will be $5,000.00-$10,000.00 or more. Moreover, volume limitations inherent in an "average" will mean that OEM and dealer gouging will be rampant for anything that remotely resembles a "performance" car.

The liberty of regular wage-earners to purchase a large SUV or a high performance car is being regulated away.

Under the quick proposed time-frame, V8 muscle cars are most certainly going to be slaughtered in the headlong rush to build soulless, happy, smiley FWD Obamamobiles that are acceptable the appliance motorist greeniacs and their steroid-addled RINO lap-dog, California Governor Arnold Schwartzenegger.

Detroit, humiliated, humbled and beholden to corporate welfare will meekly comply, mostly out of the horror that could have arisen had the 9th Circuit and the soon-to-be Obama-ized Supreme Court had permitted the Peoples' Republic of California and thirteen other freedom-hating fellow-traveler police states to set their own fuel economy standards.

Thus, the long, gloomy nightmare that will be a redux of the 1970s, albeit about ten times more expensive and repressive this time, has now been assured.

For some of us, the EnviroNazis will get our "antique" V8s only as they pry the pistol-grip shifters out of our cold-dead hands. We are too old to wait out this long, dark, repressive nightmare. They may crush our collector cars and our bank accounts, but the power-mad looter vermin in charge will never crush our spirit and our resourcefullness.

Others, someday, may anticipate a new birth of vehicular freedom. Whether it occurs is up to a number daunting factors, such as advancements in alternative fuel technology, geopolitics and whether a sufficient number of courageous, freedom-loving voters can overthrow this approaching midnight of our discontent.

To say "see, I told you so" would be accurate, but it would not be helpful. We must fight in the short term to preserve as much of our automotive history as possible and in the long term to recover as much of it as we dare.

While the smokey, back-room Obama-Schwartzenegger-... power grab will dissuade millions of casual automobile enthusiasts from any defiance (mostly because pre-packaged muscle and sports cars will soon become neutered, sanitized, homogenized, and priced out-of-reach), a defiant core of resourceful believers in vehicular freedom and self-determination will reject the compromised, store-bought motoring appliances and hack together "freedom machines" that send but one unmistakable message to those who would attempt to crush our liberty and our dreams.

While the going will become much tougher and the way less traveled, rest assured that some of us will keep on keeping on, if only to gouge the eyes of the "Governator," the Obama-nator, and other pansies of motoring.

GM and China: What Are They Thinking?

Wedging open the floodgates to the future dumping of Chinese cars in the U.S.A. may make short-tem sense to GM's green-eye-shade gang (who are desperately trying to figure some way a mess like "Government Motors" can earn a profit while complying with 35-40+ m.p.g. Corporate Average Fuel Economy Standards, EPA, OSHA, greedy unions, trial lawyer pirates, platinum health care plans and other costs of building consumer products in overregulated, overtaxed 21st Century America)

However, from a strictly political standpoint, it's outrageously tone-deaf.

Moreover, while it's somewhat speculative that Americans will immediately rush in to buy Communist Chinese-made "Buicks" and "Chevrolets." It does, however, lay the foundations for Chinese domination of the U.S. light vehicle market in 15-20 years, as GM teaches the CHI-COMS all about U.S. regulatory compliance and breaks down nationalist/political resistance to Chinese vehicles. A collaborator makes that process much easier. Once that happens, the Chinese will take advantage of the grossly undervalued yuan (based on purchasing power parity analysis) and virtual slave labor to blow everyone else out of the low and low-middle ends of the market.

What was it that Vladmir Ilyich Lenin said? . . . "The Capitalists will sell us the rope with which we will hang them." Apparently GM and the Democratic Obama Administration want to be in the "rope selling" business. While U.A.W. complaining may extract a few concessions and some featherbedding, don’t look for anyone in the federal government to nip this threat in the bud. We’re simply too dependant upon CHI-COM purchases of U.S. debt and too beholden to multi- nationalist ideology.

Besides, if GM doesn’t do it, somebody else most assuredly will.

Ford: Will Mulally Be Able to Continue His Masterful Job?

Just like racing last Saturday at Darlington (where bankrupt Chevrolet swamped Ford on the "Track Too Tough to Tame"), whether “Mulallyism” will continue working (and how well) depends a lot on forces beyond FoMoCo’s control.

Will appliance motorist Americans pay more for value-added, European-quality small cars, or will they abandon American cars in increasing numbers for cheaper soulless Asian “commodity” sleds?

Will possible nationalization of GMAC give “Government Motors” and FIAT-Chrysler a huge advantage in financing?

Will the U.A.W.’s plea to “turn off lights in Tokyo and Seoul” end up in a trade war?

Will the $7,800,000,000.00 loss by the Evil Empire (Toyota) awaken them to a new round of brutal predatory moves?

Are we in for a “lost decade” of stagflation and constrained credit?

Will Ford’s bloated and greedy dealer network offset advances in product?

Has Ford’s failure to adequately tend the youth market for a generation written off millions of vehicle purchasers for a lifetime?

Will Ford’s myopic shilling for a “Cash for Clunkers” bailout alienate vintage vehicle collectors, hot rodders, and enthusiasts?

Will the import-centric automotive press give Ford’s new products a fair shake?

Are these outside forces “too tough to tame?”

It is alarming that according to some estimates, Ford only stands to gain one in every four sales lost by GM and Chrysler. Losing seventy-five percent of the “conquest” sales to the import invaders is even worse than Ford’s disappointing record against the Hendrick Chevrolet juggernaut. It is emblematic of Ford’s decades of uncompetitiveness in certain market niches and the built-up brand capital of the predatory invaders.

Thus far, Mulally’s sold a lot of chair shuffling, reductions-in-force, and blue sky futurism. While thankfully Ford is not in as bad of shape as its crosstown rivals (much because of Mulally’s cash-conserving/mortga... instincts), it is not clear whether Ford’s next generation of value-added cars will reverse the flow of red ink.

However, if the current Mustang/Camaro/Challenger and Hendrick/Roush-Fenway battles are any indication, Ford still may not have learned how to throw a knockout punch. Or dominate. Or cross the finish line first when conditions are “too tough to tame.”

Feeling the Buzz: Ford Goes Electric

Undoubtedly the new Wayne plant tooling and line will be flexible, so that FoMoCo can dump the electric toy cars on short notice.

On the other hand, building small cars in America is one of Ford's few potential strategic advantages. Even if the next-gen Focus is not profitable under the UAW-Obama-Radical Green captivity of Ford's microeconomics, it is necessary because of the "two fleets" rule to offset the sorts of larger and high-performance vehicles consumers really want and need.

It is also good business as an active counter to the backlash against perceptions of a predatory Asian invasion of the U.S. auto market (As quality American jobs become more scarce and unstable, it is inevitable that some consumers will turn more "nationalistic" in their durable goods purchases out of a feeling that we're losing too many "good" jobs overseas. Purchase of an "all-American" vehicle instead of an import or "invader"/transplant will seem to many as a symbolic show of support for the American economy and America's industrial future)

It's also a necessary hedge for opposing unreasonable regulatory adjustments of the Corporate Average Fuel Economy standards. Pressure from the courts, California, and Obama's environmental constituents will be to jack fuel economy averages to as much as 40 m.p.g. or more. Ford has to at least try to build and sell small cars in the U.S.A. before it can credibly argue future regulatory increases in these standards are wildly unrealistic. Increasing the U.A.W.'s stake in this debate is brilliant.

Finally, it fits with the "touchy-feely" corporate narrative that FoMoCo is pushing at the present time. (See the Ford Story website) While most of the profits may still come from the working (e.g. trucks) and fun (high performance/sporty) sides of the business, Ford needs a strong smokescreen of "Good Green Global Citizen" claptrap to placate politicians, activist shareholders, special interest groups, and certain members of the Ford family.