Wednesday, June 10, 2009

Another automotive company bailout

They thought they could slide this one past us!

WASHINGTON (AP) - The House on Tuesday approved a "cash for clunkers" bill that aims to boost new auto sales by allowing consumers to turn in their gas-guzzling cars and trucks for vouchers worth up to $4,500 toward more fuel-efficient vehicles. ... Since the yearlong vehicle program is expected to cost $4 billion, lawmakers would attempt to find the additional money later this year.

This is a just plain bad idea. But the House of Representatives bought it, 298-119, and it will probably sail unopposed through the Senate as well.

Exactly what are Congress and the automakers trying to accomplish here? Reduce CO2 emissions? Stimulate auto sales (as they say)? Or give General Motors, Ford and Chrysler another handout?

Um, maybe buy votes in Michigan, Kentucky, New Jersey and every other state that stands to lose automobile-related jobs?

I don't know exactly what they're trying to do, but it's very clear what they're doing.

They're subsidizing people's poor decisions again.

They're rewarding past bad behavior and reinforcing current bad behavior.

And it's another bailout. A $4 billion bailout.

The Big Three pushed their gas-guzzling vehicles in past years. In fact, all three of them showed commercials touting their gas-guzzling pickup trucks last summer during the $4 per gallon gasoline mini-crisis, and in the fall and winter during the onset of the current financial crisis, and they're still doing it. American automakers have never been serious about selling more fuel-economical vehicles, and their advertising campaigns prove it.

So do their showrooms. Drive past any Chevrolet, Ford or Chrysler/Dodge dealer and compare the number of trucks, SUVs, and big cars with the number of small cars, hybrids and economy vehicles. That's right. They're pushing the big machines. It's as if nothing has changed in the last 12 months, as far as the Big Three automakers are concerned.

That's because that's where the big margins, and hence the big profits, can be found. It's all about money. For Detroit, it has always been all about money.

We must lay some blame on the consumers who bought these vehicles. They're the ones who had to suffer through the gasoline price crisis last summer, remember? I say, let 'em suffer. They chose to buy those big machines, now let them live with their choice.

But now the government wants to ease these buyers' remorse by subsidizing their purchase of more economical vehicles. These consumers are getting a government-subsidized $4500 discount, in addition to the trade-in value on their old cars, to buy new cars. (Okay, in some cases it's only $1500, but the article says "up to $4500," and that number shows up several times in the details. Live with it.)

Problem 1: Not everybody's gonna buy American.
Problem 2: Sellers are greedy.
Problem 3: Hey! What about the rest of us?!

Allow me to elaborate.

Problem 1: I predict that many people will dump their big American cars to buy smaller, lighter cars from Asia or Europe. I didn't read anything in the article that said the $4500 goes towards the purchase of an American car. So this won't help GM, Ford or Chrysler nearly as much as people think it will.

Problem 2: Car dealers won't be able to resist the temptation to jack up the price of the vehicles they're selling, to get their own piece of that $4500 pie. They won't be satisfied with just moving more vehicles through their lot. Don't be surprised to hear about salesmen negotiating with the buyer to "split the difference," so the buyer ends up paying $2,250 more than he should for a new car.

Problem 3: Once again, the good people of the United States are getting screwed. Let me explain that one in more detail.

First, it was home prices: those of us who bought houses within our means, who went responsibly through the traditional loan approval process, have seen our home values plummet because of the irresponsible actions of the borrowers, lenders, and investment entities who are really at fault for the current financial crisis.

Then, it was jobs: as the economy tanked and corporate profits fell, over 13 million hard-working Americans lost their jobs, while the executives who were truly responsible for the losses in corporate profits held onto their jobs, fired those 13 million, collected undeserved bonuses for their actions, and did absolutely nothing to relieve the suffering of their former employees. Do you know how many production workers you can keep employed if you replace an overpaid CEO with one who's willing to take a smaller bonus?

Then, it was tax dollars: while no politician has yet had the audacity to raise taxes on us, the politicians have been happily writing checks against our (future) taxes to pay for so-called "bailouts" for private industry: first the banks, and then the automakers.

(You may or may not remember, but when Congress said "no" to the Big Three the first time, General Motors tried to disguise itself as a bank (GMAC, its financing arm) and sneak in the side door, to get a piece of the bank "bailout" funds. Congress finally gave GM and Chrysler some money, but not as much as they wanted.)

Now, it's tax dollars again: this latest move by Congress is another attempt by somebody to give Detroit the rest of the money they wanted. If this plan works the way it's written, then every person who buys a new car under this plan will be shoveling more government money, $1500 to $4500 at a time, to the carmakers.

Hey! That's my money! Don't you go giving it to that Hummer driver! He's got more than enough money to replace that Hummer -- if he really wants to replace it.

Not only that, but: Hey! When are you going to reimburse me for my purchases? While so many other people have been buying trucks, SUVs, Caddys, Lincolns, and muscle cars, I've been driving economy vehicles since 1984! No government entity has ever given me a nickel for my good citizenship. Just like with the mortgages and everything else, the government is punishing good behavior and rewarding bad behavior.

GM is no longer "too big to fail." And Fiat almost gave up on their Chrysler acquisition because of meddling by the feds. I say, let 'em fail. Let the market sort it out. Enough with the government "intervention," already. You're making things worse, not better.

If you are as outraged as I am, please send this article's URL to your friends. Then print this article (yes, on paper) using Internet Explorer, and snail-mail a copy of it to your Senator, Representative and President. Make sure to include a cover letter expressing your outrage, and including your name and address so they know you're serious.

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