“Cash For Clunkers” Drives into Reality

Posted January 30th, 2009 at 9.39am in Enterprise and Free Markets.

But for handing over gobs of cash with no strings attached, it would be harder to imagine a more sweetheart deal for the auto industry: According to the Wall Street Journal, Congress is considering a proposal to pay consumers to buy new cars. It could wind up as part of the stimulus package now pending in the Senate.

The program, dubbed “cash for clunkers,” would provide tax credits of up to $4,500 for trade-ins–especially those with poor fuel efficiency. With barely-running clunkers available in many areas for as little as $100 apiece, the credits would be a direct subsidy to auto manufacturers and dealers. (In reality, more than getting old, fuel-guzzling cars off the road, the program would probably pull abandoned autos out of the junkyard or off the front lawn for a single day’s service.)

But the leaders of Detroit’s ailing automakers are having second thoughts:

It isn’t clear that auto makers and Congress will strike a deal. Detroit Three executives haven’t signed off on a plan, in part because they worry that the plan would encourage people to replace their older, American-made cars and trucks with new vehicles made by overseas-based rivals.

This insecurity runs perfectly counter to the Big Three’s displays of confidence in their model line-ups and ability to compete at the recent Detroit Auto Show.

The message this sends is simple and unfortunate: You can’t pay people to drive our cars. That’s something to ponder when General Motors and Chrysler return to Washington next month bearing (still more) turnaround plans and seeking (still more) taxpayer dollars.

6 Comments

January 30, 2009 Ozzy6900, CT (The Blue State) writes:

Quote “You can’t pay people to buy our cars. ”

I have owned six American made cars. Four were GM products, one was a Ford product and one was Chrysler product. I leased a Nissan product in 2004, another in 2007 and the wife gave up her Ford product for a 2009 Nissan product. Why did we go to Nissan? Because every American car we owned started as a new car (properly maintained) and quickly turned into a box to pour money into! In other words, the Big Three make junk, junk and more junk! Maybe if the Big Three would swallow their pride and take a look at companies like Nissan, they might learn a few things!

January 30, 2009 Dr Olds writes:

American automobile manufactures have some of the best vehicles in the world. I am familiar with the GM product line. Cadilliac vehicles are worl class. consumer reports has been biased against americian cars for decades. When you read the new test they are hard pressed to find faults with chevrolet, cadillac, ad other GM products.
Its true that some of the 1980’s forays into smaller vehicles may have not been successful. but the big 3 have adapted and overcome.

January 30, 2009 They want to crush our trucks!!!!! - Page 5 - Nissan Frontier / Navara Forum writes:

[...] for Clunkers". This article came out this morning. Check out the comment below the article. ?Cash For Clunkers? Drives into Reality The Foundry "It isn?t clear that auto makers and Congress will strike a deal. Detroit Three executives [...]

January 30, 2009 Stimulus Package: Tax Cuts Versus Spending - Page 12 - BuckeyePlanet Ohio State Forums writes:

[...] “Cash For Clunkers” Drives into Reality ? The Foundry Quote: [...]

February 2, 2009 Michael, Pa writes:

I have owned 2 cars for several years now, and they are both Fords (granted, one is a 1966 Mustang and the other is a 1998 Mustang). They are both great cars.

But I can see where the Big 3 would be worried. We used a rental to go to Michigan 2 years ago. We were supposed to get a Mercury Grand Marquis. Instead they gave us a brand new Hyundai Azera Limited. It was a great car, with a lot of room, and nice features. We accidentally hit a deer with it at 80mph, and the only damage was the bumper, hood, and headlight. We took it to the closest rental agency, and they gave us a Grand Marquis. It was awful. It was cramped, cheap quality, and it was uncomfortable. When we got home we looked up to see the prices. The fully equiped Azera was cheaper than the non-equiped Grand Marquis.

February 2, 2009 Thomas Gray South Carolina, writes:

Michael, it just goes to show don’t buy it until you drive it,

I’m not much on complaining but my four cylinder chevy is coming up for my one hundred thousand mile spark plug change , I bought this 2004 new but I must admit I had one breakdown I did not know it does not tolerate MBT gas formulation soooo the gas filter plugged and burned up the fuel pump. one has to know that traveling or else. otherwise I’m going to mention when I go for the plug change the antifreeze is getting low and I only have had the car for five years,,,, no complaints here on my cavalier that said on the window 34 mpg and it gets better miles per gallon than that if I drive it right.

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