Edmunds CarPool

I think it's an interesting idea. It wouldn't have to be 10,000 dollars to work, either. Even 3 or 5 thousand would probably spur things a bit.

I think it would be better to give the buyer the money much later, perhaps as a tax credit or even a tax credit over the next 2 or 3 years. Why not just give it right away? Because this prevents people who really can't afford a new car from rushing out and buying one. Wait, that's not what we're trying to do, is it?

I'm sure it would work temporarily to some extent, although I am not sure how much of the money would go into additional sales and not just subsidize sales that would have happened anyway.

Moreover, wouldn't we just artificially inflate another bubble? What happens if the program ends??? I think most of us agree that capacity is currently too big for the steady state. If that's the case your solution would make things worse in the long run.

Finally, as much as I like cars, I must question the wisdom of favoring one industry so strongly. Why not give everybody $10,000 for plane tickets (to bail out the airlines), $10,000 for computers (to bail out Intel and AMD), $10,000 for food (to bail out the farmers), and while we are at it, $10,000 for a college education in a useful field such as engineering (now this might actually be a smart move in the long run)?

How about this:

1.) Get the government to stop spending money it doesn't have.

2.) Quit throwing billions at unproductive and unprofitable car manufacturers; let the dinosaurs die, and let the people and resources they've been sucking up go to more profitable, more productive uses.

3.) Quit assuming that one overarching plan can "fix" the economy. It never can, and we will waste billions more until people let go of that pipe dream.

It's an idea, to be sure. You might make a stronger case for it with less pontificating on why it would never be implemented. The government has already had cashback stimulus programs of money direct to taxpayers, so there is a precedent for such a thing.

$10000 is too much -- the incentive should not be more than the tax credit offered to spur hybrid sales. Such a program could certainly be ripe for abuse and costly to administer.

You have to wonder what would happen to the used car market. It might become flooded with the trade-ins and drive prices down. And what would happen to depreciation on incentivized vehicles?

I think car sales are spurred by good products at reasonable prices -- something entirely in the domain of the automakers.

A better way to spur car sales would be to eliminate (or reimburse) the sales tax. Car sales jumped before California's sales tax went up, so there's precedent for this, too.

Your solution is much more fun to read than anyone else.

But there are a few things that will go wrong.

Starting with the car dealers. I am sure most of them are pious folks who only care about making a middle class living while their main purpose of existence is to make sure that all people drive in safe and luxurious cars.

But then there is that rotten car dealer who is a greedy bastard. Now, for the first month or two this bugger is sure to appreciate all the extra sales BUT after that it is a story of the goose with the golden egg.

He is going to jack up the car prices to make more profits. In short he is going to become a victim of greed. It is human nature.

And the car manufacturers/parts suppliers/tom/dick/harry are going to want a slice of it too! So they jack up their prices.

In the end after this program is long gone the new sales prices will probably look like this:

Accord/Camry/Altima/Malibu: starting a low of $39,968.99

Civic/Corolla etc.: starting at a low of $29,998.97

You see, a more dangerous thing than the human greed is the ability of a human's nature of habit. If this whole "get used to" attitude did not exist we would currently be questioning why the Civic (at Invoice) should cost around $20,000 instead of just feeling glad that we only paid $500 above the invoice.

If throwing money was the solution to all problems in this world then USA would never be this successful or this great.

tiruvan and levyrob are right-- human greed (not that it's bad, just that it's always there), would make this $10K giveaway a joke. I think bepperb is on the right track.

"2.) Quit throwing billions at unproductive and unprofitable car manufacturers; let the dinosaurs die, and let the people and resources they've been sucking up go to more profitable, more productive uses."

In this current market no automaker is profitable. Most major automakers will report losses this year and likely next. What's your point?

$10k is way too much money and there is no way the government would allow such a hefty rebate. I would think $3k-$5k would the most people could expect and that would be enough. Any such program is going to be tied to the age of the car you own the mileage of the car you buy. If the environmentalists get their way (and they will) the rebate will be open to hybrids made in the Japan so we can keep the Japanese working. That makes perfect sense- offer incentives for vehicles made 10k miles away while US factories are underutilized and shedding workers. One thing we have to remember is that environmental activists don't believe in gradual increases in fuel economy, it's hybrids or NOTHING. If the program has to be tied to efficient cars is should be for four cylinder cars and four or 6 cylinder CUVs made in North America.

I would counter that the new and reduced sales figures are more realistic than the ones we used to have back when everyone had an unhealthy amount of credit card debt.

A big giant sale like yours would have the same effect - pull sales forward and prepare us for another car sales crash.

"This would be taking taxpayer money and giving it directly back to the taxpayers." And that's exactly why it's completely bogus. You need to tax the productive part of the economy to subsidize another- temporary increases in car sales we be met with a corresponding decline in every sector that is taxed more as a result. Government spending can never have a net increase on the economy, it can only spur one sector in the short term at the expense of others. The 'multiplier' is nonexistent, if it was greater than one, the government could just spend 100 trillion dollars and we'd get back 100 trillion plus more!

He's a better idea, as advocated by jkp1187:
"Quit assuming that one overarching plan can "fix" the economy. It never can, and we will waste billions more until people let go of that pipe dream."

The best way to 'fix' the economy is to get out of it's way. Stop thinking that the ideas of 1 person or one President or the collective 'mind' of congress or the group collaboration of this discussion board can produce any success for a planned economy. The USSR proved that planned economies don't work. Having a handful of people make decisions is stupid: having 300 million consumers and voters make decisions on what they know best is smart. That's capitalism and that's democracy. Get out of it's way.

1487,

"In this current market no automaker is profitable. Most major automakers will report losses this year and likely next."

So be it. It is the survival of the fittest. Let's not rescue (bailout) anyone including the Detroit 3 and see who survives ... got balls for that?

I am tired of people like you whining about how the Germans/Japanese are taking away all your money. You know what is worse than a loser? A f***ing loser who cannot stop whining. So stop thinking that your talk is offering any "support" to the Detroit 3.

Americans are smart people and know a good product when they see one. I just wish the execs (past and present) of big 3 realized that sooner.

JB, continue to flesh out the idea.

What will you do to deal with used car values?

What will you do with quick buy and sales to collect lots of $10,000 by one person?

What will you do with the sudden huge influx of used cars piling up?

What will you do with "stupid" people who take this opportunity to buy cars they couldn't afford before, and now find out they can't afford the maintenance?

Does the $10,000 Nissan Versa and Hyundai Accent now become FREE cars?

What will you do with these cars that are FREE, or cost $10, or $50? Will they be treated like clothes and tossed away every week?

tiruvan... You know what I'm tired of? People that keep lumping Ford in with GM and Chrysler. Bill Ford saw what was happening, tried to fix it, and then realized he didn't have what it takes. So he stepped down as president and CEO, and brought in Alan Mulally to fix Ford. He shook up Ford down to its very core, and shifted how Ford operates. Back then, everyone was sure Ford would be the first of the Big Three to go... but now, Ford is the only one that has not taken a single government bailout penny, and Ford's future gets brighter with every passing day.

I used to be a supporter of bailing out GM and Chrysler. But I have yet to see either of them come close to restructuring like Ford did on its own to stay in business. So now I say let them go bankrupt without any further bailout money. They haven't made the necessary changes to stay out of bankruptcy, so let's stop wasting taxpayer money trying to delay the inevitable. The same goes for companies like AIG.

Karl's program would never work, because it will never happen. The current administration gets its power from a dumbed-down population that believes government is the answer to everything. And the monarchy giving money to the peasants to help fix the economy would be conceding that consumers control the economy, not government. So, it ain't gonna happen.

I join jkp1187 and jr1m90 in saying keep the government out and let the economy fix itself. Let those companies that stayed in business by riding the bubble die. There is no way to support the number of automakers and all of their plants unless we have another bubble... and bubbles always burst.

"tiruvan... You know what I'm tired of? People that keep lumping Ford in with GM and Chrysler. Bill Ford saw what was happening, tried to fix it, and then realized he didn't have what it takes. So he stepped down as president and CEO, and brought in Alan Mulally to fix Ford. He shook up Ford down to its very core, and shifted how Ford operates. Back then, everyone was sure Ford would be the first of the Big Three to go... but now, Ford is the only one that has not taken a single government bailout penny, and Ford's future gets brighter with every passing day."

jstandefer,

I certainly agree that Ford should not be clubbed in with the other 2. Ford has made some drastic changes to its line-ups (I just love the Edge BTW) and has gotten its act together for the better.

The only thing that makes me wonder is what was Ford's executive doing at that infamous session asking for bailout money?

Many say GM is the big one but I have always felt that Ford and Mercedes-Benz are the "real" auto companies.

"The only thing that makes me wonder is what was Ford's executive doing at that infamous session asking for bailout money?"

I believe the reasoning was two-fold. First, to say Ford doesn't need any bailout money right now, but to reserve the ability to receive bailout money should any catastrophes happen. Second, to voice support for GM and Chrysler--one of those catastrophes would be a failure of one or both of them, and taking out the suppliers with them, leaving Ford with not enough parts to build cars. Of course, another catastrophe would be a GM and/or Chrysler failure taking the world economy down with them, leading a great many companies (Ford included) down the road of irreversible ruin.

I must say, you guys are (mostly) offering excellent counter arguments.

The truth is that I hate all government "solutions" because they typically cause more problems than they solve (I'd start listing examples now, but I haven't got all day...).

In the face of hundreds of billions wasted trying to save various corrupt financial institutions it seems reasonable to ask for $10 billion to aid the auto industry, but if I'm staying pure to my core beliefs than hundreds of billions of wrongs don't make a right, meaning even after wasting all the money they've already spent they should JUST STOP NOW and not shovel even more into yet another industry (even if I think it would be a far more efficient use of money they don't have than trying to save AIG -- they still shouldn't do it).

My original copy actually read, "The latter means shuttering factories, suppliers, dealers and (most assuredly) at least three or four major automotive corporations. Yikes! Nobody likes that idea, even if it is the more responsible and long-term sustainable solution."

Should have left that line in, but I generally agree with most of you. The government should stop trying to "fix" the economy.

Here's another way to look at it:

What got us into the current mess? Too much credit and overspending, right?

What is the government trying to do right now? Loosen up credit to get consumers spending again, right?

(sigh)

"How about this:

1.) Get the government to stop spending money it doesn't have.

2.) Quit throwing billions at unproductive and unprofitable car manufacturers; let the dinosaurs die, and let the people and resources they've been sucking up go to more profitable, more productive uses.

3.) Quit assuming that one overarching plan can "fix" the economy. It never can, and we will waste billions more until people let go of that pipe dream."

+1!

Karl,

Okay, in hindsight, would it have been better for the President to take temporary ownership of any failing banks, chop them up and sell off the profitable bits, axe the profits of shareholders (so shareholders are incentivized for future to discern what they are investing in and foster accountability), and not give a dime to corporations? Perhaps only increase public infrastructure (e.g. highways, sewers, etc.) to increase jobs where we will need them anyway, eventually, before it all crumbles apart?

This would be a better free-market solution, in my opinion. And, it doesn't have the Government arbitrarily picking winners and protected classes.

Any solution should not encourage the easy-credit spending ways of the past. I know thats an easy statement to make, whereas in reality its never going to be so cut and dry. I don't know that the current car sales are slumping, per say. It might be more realistic to say that they're down to a more realistically sustainable level.

This is proving tough for the manufacturers, but that's how the market works. History is full of companies that have seen market changes destroy [some or all of] their businesses - Kodak, IBM, etc.

These companies adapted - it wasn't easy, jobs and pride were lost, but they're still around. GM doesn't need to worry about being the largest car manufacturer in the world. GM needs to worry about selling what it can, and re-structuring to suit the current market supply demands.

The $10,000 from the government is simply money taken from me and other tax payers (i.e. productive people) under the threat of force.

jkp1187 - standing ovation

The thing is, we should be really careful in picking our next bubble, to ride its coattails until the drunk beast collapses. I mean, these things have to be timed perfectly...

I like doug's post.

I disagree with just about any bailout, but I'm not so niave as to assume that the market operates in its own best interests. Like evolution, competition is a powerful tool for increasing the effectiveness of all players in an ecosystem. But what happens when all players are effective? Essentially, a bubble is born. Evolution stops. Even worse, the players might enter mutual agreements that deteriorate their effectiveness (ie, monopolies, price gouging, extortion of suppliers).

Unfortunately, the auto industry has reached this zenith. Suddenly the carrying capacity of the ecosystem has shrunk and resources are scarce. For all other players in the system, this is a great blessing. Suddenly, these bohemoths are suceptible to collapse. Survival drives them to be competitive again instead of cooperative. Consumers can only benefit from such a climate. Additionally, the most advanced players will gain huge market share. Expect the likes of Honda and Hyundai to grow tremendously.

My argument is: I don't want to save the auto industry. I want to save the buying public.

=======

The flaw with my argument:
Corporate leaders do not abide by these rules. They are not significantly tied to the companies they run. As such, they are not compelled to succeed as managers. $1 salaries are great, but only in conjunction with limits on bonuses.

For those that state the shareholders make appropriate decisions about who leads a company, you're flat wrong. For one thing, most investors do not deal with the day-to-day actions of the companies they are invested in. Additionally, there isn't much information attached to the balloting process. Thirdly, shares are bought and sold at an extraordinary rate. I could buy tons of stock in Ford, make awful decisions, then sell and buy GM stock. Fourth, most shareholders don't even buy stock directly. I'm talking specifically about mutual funds. Fifth, the real decisions are made by folks who have what are called "preferred shares." These completely disenfranchise the average investor.

Goverment will never give $10K just for nothing, no benefits to the goverment. But I think even $10K can only go so far. Sounds very tempting, but if you think about it, what will it do? Dealers need to make profit right? So, they'll just jack up prices to compensate for the discount. And what happens when this $10K incentive goes away??? I strongly feel that the big 3 need to improve not just their car line up but their treatment of customers. I've always owned american cars until recently and now I see what I've been missing. It is that extra step (or two) that luxury car makers (BMW, Lexus) take in order to go above and beyond any expectation. This will not only retain the customer, but will keep bringing them back for subsequent vehicle purchases. The problem with GM is that it wanted to satisfy each and every segment of consumers and hence created a line up of cars from Chevy Cavalier all the way up to Cadillac Escallade. You know what they say, you can't satisfy everyone. Also, look what happened at Chrysler, why did they ever need 7 jeeps? Let's compare them to Toyota. Toyota found their consumer base and kept catering to that base by improving 3 or 4 vehicles they have. While GM has very nice vehicle selection, the perception that all their cars are not as good as Toyota stems from the fact that there is no consistency between brands. New Chevy Malibu got lots of praises but just few years ago the same Chevy Malibu was a piece of junk, according to consumer reports. In order for GM to become profitable again, they must shed thousands of jobs, close down factories, and scale down production and engineering. But by laying off employees, are you really stimulating the economy? How can you afford to buy a car when you just lost your job? Something else needs to happen. There needs to be an influx of newly created jobs and that is where goverment and state agencies need to come in. But to answer the question how to fix slumping car sales is very simple - create new jobs in other sectors and offer incentives of 3 to 5K to buy GM, Ford, and Chrysler.

"So be it. It is the survival of the fittest. Let's not rescue (bailout) anyone including the Detroit 3 and see who survives ... got balls for that?

I am tired of people like you whining about how the Germans/Japanese are taking away all your money. You know what is worse than a loser? A f***ing loser who cannot stop whining. So stop thinking that your talk is offering any "support" to the Detroit 3."

You need to calm down and worry about what I actually said and not what you think I said. I have said nothing about Germans/Japanese taking our money. I tell it like it is and you may not like that. You are apparently incapable of understanding issues are not simply black and white you you go on with your "American automakers need to die because they suck" 5th grade mentality. I wish I could think like you but it's just not in the cards. I look at the big picture. BTW, Ford isnt really "losing" so I am confused as to how you even got into an anti Big 3 stance in your comment. As for your first comment, not I don't have the "balls" (how eloquent) for an American auto industry with no American players. If the market must force some companies to fold or withdraw from the US market I would prefer to be companies with minimal employment footprints in the US.

Nice thought but I don't recommend it for many reasons - some stated above. The real problem is that market interference creates market chaos. Over stimulating the market now means killing it in the future. That's how we got in this mess to begin with. Supply and demand flucuate naturally.
Sales were normal and growing reasonably until 9/11. The shock of 9/11 scared everyone and Vehicle sales came to a screeching halt. The incentive on a New Chevy Suburban was $1500. Then cam 0% financing - the incentive cost went from $1500 to $5000 overnight - sales boomed until 2005. When sales started to decline back in 2005 the response should have been to reduce production thereby reducing supply. Instead the manufacturers, ALL OF THEM (domestic and foreign) ramped up incentives to the point that they caused buyers who would normally have waited until 2006 or 2007 to buy in 2005. This created a huge increase in supply of late model low mileage vehicles in the used car market which caused a deep decline trade-in values which in turn makes trading up more expensive which in turn reduces new car sales. It's time to let the market work it's magic. No more artificial stimulation, let's get our collective (customers, dealers, manufacturers, suppliers, everyone)financial houses in order, reduce production to be inline with demand, quit spending so much money trying to artificially stimulate demand and sales growth will begin. Because cars do wear out over time and the driving population is growing at a rate of 2-3% per year for the next 10 years or so, There is a huge NATURAL surge coming in 2011-12. Batten down the hatches and wait it out. Patience and faith my friends - all will work out as it should.
Andy Budd - President, Country Chevrolet, Inc. Warrenton, VA.

"Americans are smart people and know a good product when they see one. I just wish the execs (past and present) of big 3 realized that sooner."

I just reread that part of your statement. I had to lauhgh out loud. Americans are smart when it comes to cars? Oh yeah? The same Americans that gobbled up SUVs in the 90s and 2000s and then started bashing the Big 3 (along with the media) for not offering enough 30mpg cars? Americans are sheep by and large. I am always wary of lynch mobs and that includes the pro import lynch mob who is working hard to convice everyone that there will be no consequences for the failure of the American auto industry. Just remember, this is the same group think mentality that existed when the Iraq War started or when the housing boom was supposedly a permanent and healthy phenomenon. I'll pass but I'm sure if I ever need help gathering a crowd to burn some D3 CEOS at the stake I can give you a call.

"My original copy actually read, "The latter means shuttering factories, suppliers, dealers and (most assuredly) at least three or four major automotive corporations. Yikes! Nobody likes that idea, even if it is the more responsible and long-term sustainable solution."

Here is the problem with this theory about letting the market rule and watching Detroit go under to fix the overcapacity issue: it will force American automakers to take the brunt of the plant closings. The entire auto industry needs to downsize, not just the detroit automakers. Due to structural cost advantages and unevitable government support the foreign automakers could weather this storm while at least 2 of the Detroit 3 went under. It would have nothing to do with better product or lower operating costs. It would be a matter of who has the most cash on hand and the most government support during the recession. Toyota, Honda and every other automaker in this country needs to scale back operations and reduce capacity. BTWm shuttering suppliers isnt in anyone's best interest. The fact that suppliers are struggling has nothing to do with overcapacity, it has to do with them not receiving any new orders or payments for product already delivered. If they go under the entire US auto industry would be in trouble. A new supplier chain isn't going to pop up overnight. Letting them go under would only prompte the foreign automakers to shift more production to thier home countries.

"The best way to 'fix' the economy is to get out of it's way. Stop thinking that the ideas of 1 person or one President or the collective 'mind' of congress or the group collaboration of this discussion board can produce any success for a planned economy. The USSR proved that planned economies don't work. Having a handful of people make decisions is stupid: having 300 million consumers and voters make decisions on what they know best is smart. That's capitalism and that's democracy. Get out of it's way."

You need to wake up. Americans are not a fan of sitting back and waiting out depressions. I dont understand how people (including Karl) miss this. I know free marketeers hate Obama and all that but the bottom line is people want action not inaction. Obama and any other politician has to do what they think will get them re-elected. If Obama thought Americans wanted him to sit back and play golf while 600k jobs a month disappeared he would do that. The fact of the matter is the people (and the media) have decided that an effective president is one who is seen as taking action to get the economy moving again. An over controlled economy can fail and so can an economy without any regulation. The ideal is somewhere in the middle. Many people point to Europe as an example of how the US does not want to be. Funny thing is you don't hear Europeans pining for a US style of capitalism. European countries are democracies and they can vote out their leaders and install leader who will lower their taxes, cut healthcare and try to achieve better growth rates. People vote based on their well being at the time of an election. As Americans were are generally encouraged to feel sorry for unproductive and poor Europeans but I'm not sure they feel sorry for themselves. People install the leaders that they feel will set the course they deem best for their country. If folks here want less regulation and truly desire a complete free market economy (which hasnt existed yet) they will eventually vote for people who will make that happen.

While right wing conspiracy theorists are working feverishly to keep the notion of government regulation = economic meltdown alive most Americans dont buy that. At this juncture in time Americans trust the "free market" or big business less than they do the government.