#OT#: Results of "Cash for Clunkers" program

690,114 new vehicle sales generated ain't bad.
Only problem is that the majority of the new vehicles sold appear to be foreign made, but the fuel economy did increase by quite a
bit. "The average fuel efficiency of new vehicles purchased was 24.9 miles per gallon, an increase of 58% over the average mileage of the vehicles traded in."
http://www.latimes.com/business/la-fi-clunkers27-2009aug27,0,2161518.story?track=rss
Unka' George [George McDuffee] ------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
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That's great! A bundle of US taxpayer $$$ helped some foreign companies turn a profit!
Who is the administration helping here?
F. George McDuffee wrote:

http://www.latimes.com/business/la-fi-clunkers27-2009aug27,0,2161518.story?track=rss
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wrote:

You really don't want to know...
I have a bad feeling on where it all went, and I don't want my "Faith" in our Elected Congress-Critters shaken any more than it aready is. So I really don't want to know either, at least not till I have secured the exclusive Pitchforks and Torches Sales Franchise on all the roads leading to D.C.
They could have put a 'Made in USA Vehicles Only' caveat on the Cash For Clunkers program, but that would have instantly tied it up in the courts - where it probably belongs anyway.
Besides, a healthy percentage of the "Foreign" cars are built in US plants with US labor and a pretty high percentage of US made parts. THe labor might cost them more, but the work ethic and competence of the workers more than makes up for it.
And "Foreign" car companies do pay US taxes on the business they do here, don't let the UAW fool you on that account. The UAW has an ulterior motive behind their complaints - they want to Unionize all those car plants in Iowa and Tennessee, and put the Foreign car companies on the same road to ruin they have Detroit firmly planted on.
If you wanted to get picky, you might even find the US Made Content percentages HIGHER on the "Import" cars than some of the "Made In USA" cars, because Detroit has been shipping as many jobs away to Mexico, Canada and elsewhere as fast as they possibly can.
--<< Bruce >>--
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On Wed, 26 Aug 2009 16:49:36 -0500, Louis Ohland

===Good point, however many of the vehicles sold under CfC had high domestic labor and parts content, even if the company was a transplant.
It appears one of the major effects of CfC was to purge the system of existing 09 inventory, avoiding the typical end of year "fire sale," [for other than SUVs, etc.]
One of the major problems is the apparent refusal and quite possibly the [psychological] inability of the domestic US manufacturers to manufacture a durable, quality, fuel efficient compact vehicle. Think Vega and Pinto, and note the absolute refusal of the automobile companies to import or produce the diesel versions of their vehicles, many of which get 50-60 miles per US gallon.
As one of the major requirements for a vehicle purchased under CfC was economy and efficiency, this was a serious handicap for Detroit's domestic production. Note that many of Detroit's CfC qualified vehicles were *NOT* produced in this country, just badged with a domestic name, and it may well be that the "transplant" CfC vehicles had more actual domestic parts and labor content [and generated more domestic US economic activity].
The CfC program should have never been required, but given the domestic socio-economic situation, it more than likely was the best of a bad bargain.
The response of Detroit to this opportunity will indicate if domestic vehicle industry can remain viable, or if it is going to go the way of textiles, shoes, consumer electronics, etc. If you see business as usual, wave bye-bye to this economic sector and the tax payer funds "invested" in it.
Unka' George [George McDuffee] ------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
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F. George McDuffee wrote:

typical end of year "fire sale"
Which means that Detroit builds too damn much, then has to sell the excess at reduced prices. Why does the taxpayer have to finance the overproduction of vehicles?
What machine shop can afford to made parts and have to sell them at loss? You sink machine time, tool wear, labor, storage costs, and tax liabilities into making more parts than needed.
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On Thu, 27 Aug 2009 08:27:56 -0500, Louis Ohland

=======You make several good observations/questions.
The overproduction and gross production overcapacity [2X to 3X if production *AT A PROFIT* is the criteria] are key problems in the automotive industry [and many other consumer product sectors] world wide, and more capacity is coming on line all the time.
Your question "Why does the taxpayer have to finance the overproduction of vehicles?" has no answers, easy or otherwise. We have allowed/promoted vehicle production to become too concentrated and too basic to our [US] and the world economy in that many of the individual companies in this sector are now "too big" and "too important" to be allowed to fail, because in doing so they may well bring down the entire [global] economic "house of cards."
One alternative to taxpayer support may governmental vehicle production quotas and capacity restrictions, but this "cure" may well be worse than the disease.
This is yet another indication that the "business as usual" model for vehicle design and manufacture is no longer viable [and has not been for several decades]. While "build to order" may or may not be a viable alternative to the existing "build to stock" system, it is clear that something must change and change quickly.
It appears that the "invisible hand" of the free market is impotent when there are too few suppliers with too much economic "clout."
Unka' George [George McDuffee] ------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
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On Wed, 26 Aug 2009 21:29:01 -0500, F. George McDuffee
<snip>

<snip> Looks like its business-as-usual and bye-bye time. Back to the production push model of production scheduling rather than demand pull, i.e. trying to sell what you can make rather than making what [and as much] you can sell. ................ U.S. Automakers Small-Car Output May Outstrip Demand
By Keith Naughton and Jeff Green
Aug. 28 (Bloomberg) -- General Motors Co., Ford Motor Co. and Chrysler Group LLC, primed by government incentives to make fuel-efficient models, plan a 63 percent boost in small-car production capacity by 2015 that may outstrip demand.
The U.S. automakers will be able to assemble 2.71 million small cars annually in North America in six years, rising from 1.66 million now, according to consulting firm CSM Worldwide in Northville, Michigan. Industrywide capacity for the segment will rise to 7.5 million vehicles from 4 million, CSM estimated. <snip> ................
Gross light vehicle production overcapacity remains a serious and growing problem, even as more car plants come on line....
Unka' George [George McDuffee] ------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
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On Wed, 26 Aug 2009 21:29:01 -0500, F. George McDuffee
<snip>

<snip> Looks like its business-as-usual and bye-bye time. Back to the production push model of production scheduling rather than demand pull, i.e. trying to sell what you can make rather than making what [and as much] you can sell. ................ U.S. Automakers Small-Car Output May Outstrip Demand
By Keith Naughton and Jeff Green
Aug. 28 (Bloomberg) -- General Motors Co., Ford Motor Co. and Chrysler Group LLC, primed by government incentives to make fuel-efficient models, plan a 63 percent boost in small-car production capacity by 2015 that may outstrip demand.
The U.S. automakers will be able to assemble 2.71 million small cars annually in North America in six years, rising from 1.66 million now, according to consulting firm CSM Worldwide in Northville, Michigan. Industrywide capacity for the segment will rise to 7.5 million vehicles from 4 million, CSM estimated. <snip> ................
Gross light vehicle production overcapacity remains a serious and growing problem, even as more car plants come on line....
................... Update and PS -- I just came across this gem.
Toyota is in the process of closing their joint venture [GM] assembly operation in Freemont, California because of excess production capacity, apparently exacerbated by anti business policies of the state. http://online.wsj.com/article/SB125140108628564449.html
VW is in the process of *ADDING* light vehicle production capacity. http://www.freep.com/article/20090826/BUSINESS01/90826068/1014/business01/VW-lays-out--U.S.-strategy <snip> Volkswagen of Americas top executives outlined a strategy today to turn the European automakers money-losing U.S. arm into a pillar of its plans to surpass Toyota Motor Co. as the worlds largest and most profitable automaker.
With a goal of selling 800,000 VWs in the United States by 2018 a threefold increase from this years levels the automaker will add several new models designed specifically for American buyers, including a new sedan, a seven-seat sport utility and an updated version of its iconic Beetle. <snip> also see http://www.forbes.com/feeds/ap/2009/08/28/business-specialized-consumer-services-eu-germany-volkswagen_6826624.html http://online.wsj.com/article/SB125113187412854197.html http://www.businessweek.com/globalbiz/content/jul2009/gb20090720_048461.htm ========What are these people smoking??? This is not the free market, its an insane asylum run by the inmates.
Is a ban on the use of Federal funds to build additional or expand existing light vehicle production capacity required? Should state and local governments be prohibited from providing subsidies, grants, and tax abatements for new or expanded light vehicle production capacity? Should the FRB, FDIC, etc. prohibit any lending for or investment in expanded light vehicle production capacity by the companies they regulate? Should companies such as VW that wish to build new/additional U.S. LV production capacity be required to buy and demolish/liquidate existing U.S. LV production capacity, possibly at more than 1:1 ratio?
Unka' George [George McDuffee] ------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
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Wouldn't most of the buyers have bought anyway, even if later? Won't the market be saturated temporarily? Won't the workers recalled be out of work again? Who paid the billions? I think the idea could have been better implemented.
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Buerste wrote:

No Tom, they wouldn't have. Most of these cars were purchased by people that would have just fixed what they had. That is just a fact.

No, you wouldn't saturate a 400 billion dollar per year market with these sales.
You know this.

How?
--
John R. Carroll



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With sales of 700,000 in less than 1 month, the pipelines are empty. There is no inventory left to speak of, of the most popular vehicles of the program. It will take at least 2-3 months to get inventory levels back to where they should be. This will provide a buffer of the manufacturing section for the next month or two when sales will be back to or slightly less than pre CARS. Almost everyone in the market projection business sees a very slight upturn in sales in the 4th quarter, with steadily increasing, abiet slowly, sales into and through next year and 2011. What this did was keep a bunch of suppliers from going bankrupt and even more jobs hitting the block. There were a bunch on the verge...thousands of them...mostly caused by cash flow issues. Suppliers are in a real fix, in that now with all the previous cuts in volume and inventories, demand was coming back even before CARS, but since the automakers don't pay but every 45-90 days, they have to "front" all those parts with no cash coming in to pay bills with. There is a huge amount of cash flow tied up in parts awaiting payment.
--
Anthony

You can't 'idiot proof' anything....every time you try, they just make better
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On Wed, 26 Aug 2009 18:24:06 -0400, "Buerste"

Indeed, and in a perfect [or even a "pretty good"] world the directors, executives, officers, CEO, CFO, banksters etc. responsible for the collapse of the domestic US automotive manufacturing [and other] sectors would be arrested, water boarded until they told where the money went (and who got it), and then publicly executed, after all their assets were confiscated as the proceeds of ongoing criminal enterprise.
This ain't gonna happen....
Undoubtedly the CfC program could have been better implemented, but a well proven engineering maxim states "the better is the enemy of the good, and perfection is the mortal enemy of them both."
While it is difficult to project, it appears the reduction in the amount of foreign exchange needed for imported petroleum for the new fuel efficient vehicles, over their service life, will result in considerable cost avoidance, and reduction in the current account trade deficit.
Given both the "high value added" and the high economic multiplier of vehicle manufacturing, the limited amount of "Cash for Clunkers" [ONLY!!! three billion$], was most likely a good one-time shot of stimulant joy juice.
Now if we can just keep Detroit and Congress from doing a Michael Jackson....
Unka' George [George McDuffee] ------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
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F. George McDuffee wrote:

Difficult to project means nobody can prove it, just like all the jobs that the stimulus bill have saved. Again, you trot out savings accrued over the lifetime of the vehicles. Damn hard to do.
In what fields are you an expert in? How about a CV for us?

If this approach is so good, why hasn't deficit spending made our economy strong? That 3B was extracted through taxes, doled out based on what the government thinks is needed. Why do we prop up inefficient businesses that saddled themselves with to many costs? Let the market decide where to apply resources.
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On Wed, 26 Aug 2009 20:22:21 -0500, Louis Ohland

Indeed. It all depends what you mean by prove, but very few things in economics/financial forecasting, other than in a mathematical sense, can be "proven." As you point out, its all in the assumptions.
In this case, how much the CfC vehicles are driven, what is their service life, [compared to the vehicles they replaced], what is the value of the cleaner air, what is the value of the additional safety features (how much are a few lives worth?), how much will be saved on repairs, and perhaps most important the price/availibility of [imported] petroleum.
If I had "provable" answers to any of these items I would be in Stockholm picking up my Nobel Prize in Economics and then my Fields/Abel prize in Oslo.

If expert means being from out of town and on an expense account, none, [I'm retired] but see http://mcduffee-associates.us/vita.htm
Unka' George [George McDuffee] ------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
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F. George McDuffee wrote:

Great, you're another citizen. Technically minded, but I see nothing in economics. Considering the effects of mandates on the economy without considering the human equation will lead to a bunch of money being shoveled into a hole.
Please point out one command-controlled economy that is efficient AND responsive.
In this case, how much the CfC vehicles are driven, what is their service life, [compared to the vehicles they replaced], what is the value of the cleaner air, what is the value of the additional safety features (how much are a few lives worth?), how much will be saved on repairs, and perhaps most important the price/availibility of [imported] petroleum.
At what point does the nanny state stop? The safest vehicle would be a totally immobile one with no engine. Sort of like the Flintstones car, but with far more belts, roll cages, etc...
We could use less imported petroleum with more domestic drilling. Gas would cost less with fewer boutique blends being produced. We can send a few billion dollars to help Brazil's state run petroleum industry to drill for oil, yet we won't let US companies even drill in the US.
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On Thu, 27 Aug 2009 08:45:18 -0500, Louis Ohland

Straw man????? =======Wrong news groups for economics. AMC and RCM are about metal working, not economics, economic growth/development, or [political] econmetrics [although this can be difficult to see at times].
In usenet try alt.economics.austrian-school alt.politics.economics uk.politics.economics also see http://www.econometrics.org / http://www.oswego.edu/~kane/econometrics / http://www.elsevier.com/wps/find/journaldescription.cws_home/505575/description#description http://jfec.oxfordjournals.org / http://ideas.repec.org/p/are/cudare/548.html
also see my webpage http://mcduffee-associates.us/PE/Econometrics.htm

======More B/S -- this was a loan from the Export-Import bank to Brasil to finance the purchase of US produced goods and services. The Ex-Im bank is a government sponsered enterprise [GSE] but is not the government. see http://www.exim.gov /
The US oil companies are not drilling on many of the domestic leases they already hold. One suggestion is a "use it or lose it" provision. If you get a oil/gas lease from Uncle Whiskers you have 3 years to start drilling and 5 years to start producing or the lease reverts back.
Unka' George [George McDuffee] ------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
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F. George McDuffee wrote:

Which is the point I'd like you to embrace.

When I want to save the world, I'll surf.

Freddie Mac and Fannie May are government sponsored but not "government". BUT they have the ability to tap into taxpayer's pockets just as well. Why do American products need an offset from the US taxpayers? Thomas Sowell has a book out on the housing bubble and how government officials ramrodded non-market policies through. The Housing Boom and Bust

What of the ultimate safe vehicle, sans engine? I bet it would save a lot of lives.

What regulatory and environmental factors are in play? There's a silent elephant in the room.
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On Thu, 27 Aug 2009 13:23:41 -0500, the infamous Louis Ohland

The Internet or wet, salty water?
This just in:
--snip--
News at 6... AP news brief just released:
Democrats, realizing the success of the President's "Cash For Clunkers" rebate program, have revamped a major portion of their National Health Care Plan. President Obama, Speaker Pelosi, and Senator Reed are expected to make this major announcement at a joint news conference later this week.
An advanced copy of the proposal reveals it is named "CASH FOR CODGERS" and it works like this: Couples wishing to access health-care funds in order to pay for the delivery of a child will be required to turn in one old person. The amount the government grants them will be fixed according to a sliding scale. Older and more prescription-dependent codgers will garner the highest amounts. Special "Bonuses" will be paid for those submitting codgers in targeted groups, such as smokers, alcohol drinkers, persons 10 pounds over their government-prescribed weight, and any member of the Republican Party. Smaller bonuses will be given for codgers who consume beef, soda, fried foods, potato chips, French fries, lattes, whole milk, dairy products, bacon, brussel sprouts, or Girl Scout cookies. All codgers will be rendered totally useless via toxic injection. This will insure that they are not secretly resold or their body parts harvested to keep other codgers in repair.
--snip--
-- A striking fact of the last two years of financial trouble is how accountability has differed in the public and private spheres. On Wall Street and across the country, decades-old firms have failed, fortunes have vanished, and some former captains of finance face jail or fines. In Washington, meanwhile, most regulators and Members of Congress remain on the job, often with enhanced power. -WSJ "Bernanke's Second Chance" 26aug09
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On Aug 27, 6:30pm, F. George McDuffee <gmcduf...@mcduffee- associates.us>

Really bad idea. Oil companies lease large areas where they think there is a possibility of finding oil. Then they have to drill wildcat wells to find out if there is any oil there. Sometimes they contribute dry hole money to another company. That is money they pay if the wildcat well does not produce oil. They usually get access to the drilling logs and have learned where there is no oil at a lower cost than drilling themselves. At any rate one does not drill a wildcat well hoping to find oil, unless one has a good deal of land leased so that if the field is found numerous production wells can be drilled.
If the US gov went to a use it or lose it, there would be much less land leased and less exploration in the US. So the gov would get less money from leases.
Dan
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snipped-for-privacy@krl.org wrote:

I think you might be right...

Oh no. Those leases would bring a price that would make your nose bleed and they'd be worth it. There would just be less interest in shutting out competitors.
--
John R. Carroll



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