DavidR

Cash for Clunkers: Sham Du Jour

An observation from the front lines with an attempt to be neutral.
1. A person who previously couldn't afford a car loan is no closer to buying a new car just because they have $4500 of down payment "handed" to them. They still aren't able to get a car loan on low income. The lenders are being as strict at underwriting car loans as they were three months ago.
2. There are very many frugal people with good credit who drive 10 year old SUV's because that SUV is paid for. They have justified the extra expense of poor fuel economy for the trade off of no car payment. Those people CAN get credit, and recieving $4500 for their 150,000 mile $500 Explorer is hopskotching them OVER buying another used car and into a new, fuel efficient (by comparison) car.
3. The nearly instantanious removal of 750,000 older, high mileage Explorers, Grand Cherokees, MiniVans, and 1/2 Ton pickups from the pool of available used cars is having an upward pressure on used car values. Even people who have cars worth more than the $4500 threshold are benifiting from this upward movement in trade-in values when they trade up.
4. The mindset that current new Ford/Chevrolet/Dodge cars are less fuel efficient, or of poorer quality is false, and based on the fact that 15 years ago, they were of lesser quality. Removing 750,000 reminders of past manufacturing sins from the automotive pool will have an almost instant effect on the perception of CURRENTLY available vehicles. Bringing perception into line with reality will improve the prospects for future sales and profits.
5. Current sales are depleting inventory. The rebuilding of inventory is usually the first step in economic recovery. Momentum is a powerful force.

GM Forcing More than 1,000 Dealerships to Close

Trying to explain any process to someone that just doesn't get it is generally a lost cause. Kind of like explaining Catholic Mass to an athiest. The dealership is a necessary link in the auto supply chain. The role of the dealership is to broker the transaction for multiple parties from start to finish (especially more complicated transactions). Trade-in purchases, floating the payoff on the trade while waiting for the new loan to fund, securing lien release, title work, lost title applications, multiple owner trades, agent to the DMV, securing financing on the new vehicle (not always as easy as it seems), warehousing a selection of vehicles, locating vehicles more efficiently. The dealer streamlines these processes; they do this multiple times every day. The buyer does them once every 3 to 6 years.
You could buy a new car without a dealer,
You also could buy a house without a real estate agent,
You could get a college degree without a teacher,
You could defend yourself in court without a lawyer,

but...
A man who represents himself in court has a fool for an attorney.

I don't believe that dealers deserve some kind of free ride; they don't. The original point was that a dealer who has been forced to borrow money to invest in expensive facilities by the manufacturer under threat of loosing their franchise, only to have the franchise pulled shortly thereafter anyway has a right to compensation for loss of value caused directly by that manufacturers negligent business practices.

GM Forcing More than 1,000 Dealerships to Close

On Apr 28 05:39 PM mrmillergd wrote:

I can't imagine that business is good enough
> for most of the dealers to fight hard against a shutdown.

Then imagine this:
In 1955, your grandpa opened a standalone Chevy dealership in a rural town 75 miles away from metro Anytown, USA. Your father inherited the business in the 70's, and slowly, Anytown grew by adding suburbs, it's boundaries moving closer to your fathers dealership. His sales grew, thanks to the urban sprawl. When you grew up, your father brought you into the business. As the late 90's approached, the suburbs of Anytown had engulfed your small town, so General Motors pressured you and your father into building a brand new $8 million dollar facility on prime real estate next to the freeway. Business was good, so you and your father took your life savings and invested it into the store. Higher volume was necessary to cover the new loans, but as long as you could pump out some units back into Anytown, the store was profitable. But in getting those extra sales, your customer satisfaction dropped. As GM stock began dropping in value, so to, did the value of the "blue sky". No longer in an equity position, your bank began raising your floor plan interest rates. Still, business is ok, suplimented with a profitable service department and use car sales, so cash flow is covering the bills. Today, GM calls and says that you are one of the dealerships they are going to close, because there is another Chevy dealer 75 miles down the road that is selling more units, has higher CSI, and a better balance sheet. Your $8 Million investment, your grandfather's heritage, your family retirement, your life. Do you think you'd fight for fair compensation?......

GM Forcing More than 1,000 Dealerships to Close

General Motors is going to look to technicalities within the dealer agreements to justify and support the dealer closings. In the past, GM has looked the other way if customer satisfaction, market penetration, capitalization, non-compliant facilities, or other violations of the dealer agreement were not being met. Today they made it clear that these would be the criteria that would assist in targeting "underperforming" dealerships. With that amunition, they are fully within their right to close those dealerships for just cause.

Chrysler: Looking for a Miracle to Survive

How is it that everyone is so quick to forget the world class quality of the Yugo (a rebadged Fiat), but so slow to forget the past mistakes of the US auto industry? Wow, Fiat... I can just see the new advertising slogan: Jeep, designed by American Motors, modified by Chrysler, facelifted by Mercedes, and bailed out by Fiat. I guess that makes it a true world car.

Detroit: Please Bring Back the Stripped Car

One of the best "stripper car" ideas to come out of US car makers a while back was when Jeep came out with the new Grand Cherokee, they kept building the old Cherokee and called it the "Classic". The engineering was paid for, the tooling was paid for, and a new fresh model was available for those who had to have the newest thing. The old model soldiered on along side the new one for YEARS. GM did the same thing for one year when the Malibu was re-designed. They continued building the old Malibu, changed its name to "Classic" and sold them to rental agencies and governments.

GM does still build a "stripper". It is called the Cobalt XFE. It comes with roll down windows, no cruise control, a 5 speed manual transmission, and hubcaps. It has a 3/36 warantee with 5/100 powertrain, gets 37 MPG highway (2MPG better than Corolla) and is in the $14,000 price range after rebates.

Detroit: Please Bring Back the Stripped Car

On Jan 08 05:14 AM Markham Lee wrote:

<snip>
> Speaking of which:
>
> I would buy a Ford Mondeo if I was looking at a midsized family car,
> too bad it isn't sold in the U.S. and some dolt at Ford thought that
> the American consumer would prefer the Fusion...
>
> ...even though European customers are buying Mondeos instead of Accords.
>
>
> -M


Ford tried to sell the Mondeo here...TWICE. Once as the Ford Contour/Mercury Mystique, and the second time as a Jaguar. Both times were a flop.

Detroit: Please Bring Back the Stripped Car

On Jan 07 11:15 AM Chris B wrote:

> When you are facing the possibility of a layoff or foreclosure, you're
> not looking to pay thousands of dollars extra to have DVD players,
> GPS, subscription radio, leather, 4WD, and alloy rims. <snip>


If you are facing the possibility of layoff or forclosure, you aren't looking to pay ANYTHING...

Run some quick math. The auto maker has to average about $2000 profit on each car to justify the risk and expense of being in business, the transportation company charges $800 to ship the car, health care legacy costs are $1600 per car, the dealer has to average $1000 profit per car (more really, but I don't want to start another flaming thread). That's $5400 in cost structure before GM even builds the darn thing. Can you engineer the car, buy the real estate, build a factory, crash test, train the workers, obtain the financing, and actually build a car for the remaining $4600 so it will sell profitably at $10k?..... NO. Content is what builds value in the car and justifies the price necessary to sell the car profitably. Strip away the content and you loose far more value than the sum cost of the items removed. The ONE business case for an entry level car was to bring 1st time buyers into your brand. Now that 1st time buyers can't get financing (that's what Ford Credit and GMAC used to do) there is nobody in line to buy entry level vehicles. Rental car companies shun stripped down cars because even they know that the small additional cost of popular options increases the return they receive when they resell the car at auction.

Detroit: Please Bring Back the Stripped Car

Completely wrong. A cheap model was a necessity when a) used cars were unreliable, and b) you could only get financing for first time buyers on a new car. Who in their right mind would buy a new Focus with plain steel wheels, vinyl interior, roll down windows, no a/c, no radio and a vinyl floor for $9995 when you can buy a two year old, 30,000 mile Focus with alloy wheels, sunroof, A/C, power windows and locks and a CD player for $9995? As for government sales, there are special order versions that delete many of the extra features, and fleet incentives that push the price to the government far below what you can buy the same car for. Also, the government agencies aren't as dumb as you are, as I have recieved bids from local government agencies and districts specifying one year old vehicles so that they can save money too. Research your facts before you publish this rubbish.

Why the U.S. Automakers Should Get a Bailout

Wow, the people I share oxygen with really dissapoint me. OK, lets allow the US auto industry to dissappear. LOL. Most of the 3.1 Million newly unemployed will have to let their houses go into forclosure. They won't have an income to buy new Honda's and Toyotas, so those two companys might as well go down the tubes as well. We're talking about a LOAN to the Automakers to bridge a recession. We're talking about repayment with interest. Trust me, the last thing you want is the government taking an ownership stake in the companies (can you remember British Leyland?) Just a loan. Shesh. Not like most of you people never took out a loan?

The Autos and Mentality That Ruined Detroit

Gee, you mention the Pinto as a bad car. Lets compare it to it's import contemporaries. How many remember Simca, or Fiat, Renault 10, or Austin America? There are probably more Pinto's left on the road TODAY than there are Datsun B210s and Toyota Corona's combined. The Pinto was simple, cheap and reliable. Would you rather drive a VW bug, with the gas tank located infront of you and the metal dashboard inches from your face?? The bug had a dismal heater, unless you upgraded (?) to the Gasoline fired heater, that instantly dropped VW fuel economy to single digits if used in a freezing Michigan winter. Your memory is very selective. To be competitive, products have to target the same demographic, provide the same service, and be at relatively the same price point. You compare Civic to Cavalier, yet Civic and Cavalier did not sell at the same price point. In the 1990's, hundreds of thousands of first time buyers were able to enter the new car market because the Chevy Cavalier and the Ford Escort were built, engineered, and priced to be accessable to people who could not afford a Honda Civic or a Toyota Corolla. Even today, the Cobalt and Focus, which are excellent cars, cost thousands less than a Honda Civic. Based on that fact alone, they are not direct competitors.

Are Cars Loans Our Next Problem?

Nobody here seems to understand what makes a lease senario bad. Cars, trucks, and SUVs are traditionally worth about 50% of their new car value at the end of 3 years (some a little more, some a little less). But since MSRP is no longer the TRUE new car value, ie the true value is MSRP less rebates and discounts, the residual (resale) value of every used car suffers. There are Dodge dealers RIGHT NOW advertising new Ram trucks at 50% off MSRP. How can you guarantee a 3 year residual of 50%, if you are selling them new for 50% off??? YOU CAN'T. The next big storm IS that you can't trade in a used truck you paid $35000 for two years ago if you still owe $29000 and the new one is selling for $25000. Honda WILL take a hit on Pilots when they come off lease, and Toyota WILL take a hit on Sequoias when they come off lease. The next three years should be very interesting. If you want a preview of the US auto industry, just research BRITISH LEYLAND. Same problems, different decade.

How Gas Price is Affecting Pickup Trucks

While everybody scrambles to make electric cars and plug in hybrids, does ANYBODY seem to remember that our electric grid is maxed-out and out-dated? What good is an electric car in California when all the air conditioners are running and there are rolling blackouts? Doesn't anybody remember when the entire grid on the north east went dark? When the efficient powerplants can't keep up do you know where electricity is generated???? (hint: stationary Diesel generators). Do you really thing that when all 3 million cars in Los Angeles are plugged in at night that it won't trip the system? Plug in cars are NOT the answer, no matter how far the battery range is. Lighter cars, driven less often, mass transportation, urban centralization, things like this. Cars used to be built that got 50mpg. Honda Civic CVCC, Fiat 850, Morris Minor. The problem is WEIGHT. Air conditioning, roll over standards, crash standards, big wheels, 4 doors. And the need for speed. Sure, a VW bug couldn't get over the grape vine at 45mph, but so what? It got over it. You don't need a truck to pull a 5th wheel if you take a train and stay in a hotel. You don't need a V-10 to pull your boat if it is 12' long, and aluminum. Just strap it to the roof of your VW bus.