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Republicans say the problems with the program are another strike against the Obama administration as it pushes for a speedy overhaul of the health care system that would involve a government-run insurance program. They argue that government involvement in any industry is a recipe for disaster.
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“Within a few weeks we will see that this process was abused by speculators and people who took advantage of what is basically a huge government subsidy of corporations that they already own,” Mr. McCain told Fox News last week.
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Speaking on “Fox News Sunday,” William Kristol, the conservative editor of The Weekly Standard, said the rebates were going to middle-class people who would have eventually bought a new car anyhow.

Instead of helping the legions of unemployed, the money is going to a “bunch of upper-middle-class people who have some cars sitting around from 12 years ago,” Mr. Kristol said. “Now they’re just accelerating their purchase to get 4,500 bucks.” http://thecaucus.blogs.nytimes.com/2009/08/02/cash-for-clunkers-become
-a-republican-target/ was in 2009.

It's been hugely successful in some respects, disappointing in others. The average fuel economy of a clunker was 15.8 mpg, compared to 25.4 mpg for the car that replaced it—a 61% improvement.. It's been good for the auto industry, good for those who have turned in cars, stimulative, as above good for fuel efficiency and as a result, good for the environment. But there were actual negatives. Since the "clunkers" had to be destroyed, it created a shortage of used cars for lower-income buyers. It was so popular it ran out of money almost immediately, and another $2 billion had to be added, which also went pretty quickly.

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A September 2010 study by Atif R. Mian and Amir Sufi concluded that the program simply pulled purchases from the future: it produced a short-lived effect (360,000 additional cars sold in 2 months), but that the effect was almost completely reversed in the 7 following months due to fewer cars sold, and found no evidence of effect on employment, house prices, or household default rates in cities with higher exposure.
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Despite Transportation Secretary LaHood claims that the program would benefit scrapyards,[64] auto recyclers and scrapyards have lamented the limited profit potential of the program, including the costs of transporting and removal of toxic waste such as motor oil, coolant, refrigerants, gasoline, unrecoverable plastics, and other items)[65] from the car before processing, which can amount to between $700–$1,200 per car. Some recyclers refuse to participate in the program due to this. Wiki

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There were problems in the interest crashing the cite initially, a paperwork boondoggle for auto makers, and other things. It was discontinued. It only existed from July 1, 2009 to August 25, 2009. There were valid arguments for and against it, and valid arguments whether it was a success or failure.

The new one has differences. First, the program does not incentivize trade-ins, only the purchase of the vehicle. That’s an improvement over the original C4C in at least the sense that it didn’t destroy viable assets. The 2009 program destroyed cars that lower-income people could have purchased; instead, C4C created an artificial shortage in used cars that pushed prices higher and reduced availability. Also, this is not a new subsidy, but a new delivery mechanism for an existing subsidy. Whether it passes (probably not) and whether it would be a success or failure, remains to be seen.


Hippie Operative Nikovich Nikita Nicovna Talibani,
Contracted Agent of Veritas Oilspillus, code name “Nike”,
signing off

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The program was introduced at a very unique time in automotive history. Annual retail sales were in a spiral. Decreases were in the area of 6 million units over a 20-month period with no end in sight for how low it could go.

Toyota, Honda, and Nissan were also reeling, suffering significant losses in market share and, in some cases, product quality. Once thought to be untouchable, their steady rise to the top was now completely up for grabs.
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As if this weren`t enough, the price of gasoline reached record levels. Not only was it a daunting prospect that people could manage to pay for a new vehicle, but it was also equally unlikely that they could afford to drive them after taking ownership. Fuel efficiency was quickly becoming just as important as the purchase price of a new car, truck, SUV, or van. http://autos.yahoo.com/articles/autos_content_landing_pages/1164/Cash-
for-Clunkers-Success-or-Failure- the whole, contrasting the stimulus, gas mileage and environmental effects with the negatives it created, I'd say it was somewhere in the middle; given the time it was done, it saved jobs and created a short-term stimulus. But then hey, I'm a liberal, so I must be grossly partisan about it, right?


Hippie Operative Nikovich Nikita Nicovna Talibani,
Contracted Agent of Veritas Oilspillus, code name “Nike”,
signing off

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Was the cash-for-clunkers program a success?

The short answer is yes. The program accomplished what it was set out to do, which was to get consumers back into the showrooms and to jump-start new-vehicle sales.

With some creative marketing and wheeling and dealing, dealers were also evidently able to convert many nonqualifying shoppers into the buyers of other new or used cars, a trend that created a sizable positive impact on sales as an indirect consequence of the program.

On the other hand, the clunker program was overly complicated, a nightmare to manage for dealers and difficult to understand for consumers. I would give the pure sales impact of the program an A and the administration of the program a D.

In the end, how many cars were sold through the program?

The official total sales that were directly because of the program will be right around 700,000 units. The average incentive — based on the most recent data available — was around $4,200. If we simply divide $3 billion by $4,200, we get about 714,000 units. The original forecast for 250,000 units was based on the initial $1 billion budget for the program.

Who benefited from the program?

From the manufacturers' perspective, everybody except for the luxury carmakers. Hyundai, Kia, Toyota, Honda, Nissan, as well as Ford and GM's small-car lineups all experienced sizable sales increases. The perfect vehicle for the program was the sub-$20K midsize compact car. You will have a tough time finding any inventory that fits that description in most dealer lots today.

More importantly, the program was a lifeline thrown at severely cash-strapped dealers. Sales were up. So were the profits. Consumers tend to drop their guards when there are big incentives, assuming that they will get great deals no matter what. As the clunker sales reached a fevered pitch, I think it's fair to say that the deals got much stingier. Many shoppers could have gotten better deals if they had done their homework before going to the dealership.

How far will the economic stimulus from the program spread?

The economic impact of the program is significant but short-lived. If we assume an average selling price of $25,000 for the program, and total unit sales of 700,000, the cash-for-clunkers program generated at least $17.5 billion of economic activity, not including incremental sales of additional products, such as extended warranties, alarm systems and financing revenue for the dealerships — as well as roughly $875 million in sales-tax revenue for state governments. When we add in the fiscal multiplier effect, the net impact of the program was easily north of $25 billion — if not much higher. However, the impact also has a short life expectancy. Once the program is over, the impact is pretty much over as well. It will be the next challenge for manufacturers as well as dealers to try to figure out a way to ride the program's coattails.
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Some dealers thought credit [worthiness] could be an issue, but customers cashing in on the program seemed to have no trouble finding financing. What happened?

For one thing, the CFC incentive was used as all or part of the consumers' down payment, automatically increasing loan-approval rates — the bigger the down payment, the higher the approval rates for car loans, everything else being equal. The $4,500 incentive sometimes was doubled by manufacturer incentives. Even if you have less-than-perfect credit, if you put $9,000 down on a $25,000 vehicle, you have a good chance of getting approved. We also saw the captive finance companies becoming more flexible during the promotion in their approvals. http://www.time.com/time/business/article/0,8599,1918692,00.html the way, there are facts and figures that show a good number of people who went in to take advantage of the program found their vehicles ineligible, but bought cars anyway.

Also, More than 680,000 vehicles were sold, creating or retaining 42,000 jobs in the second half of 2009, annual gasoline consumption was reduced by 189 million gallons, thus reducing annual C02 emissions volume by 1.7 million metric tons, and consumers saved $568 million in annual fuel expenditures, while increasing average fuel economy by 9.1 mpg.


Hippie Operative Nikovich Nikita Nicovna Talibani,
Contracted Agent of Veritas Oilspillus, code name “Nike”,
signing off

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1. Much is said about poor management in the Big Three, but less is said about the short-term focus on quarterly profits that characterized their corporate culture. Maybe we should examine whether the short-term focus on quarterly profits that was certainly part of the Big Three's demise is itself bankrupt. Maybe this corporate philosophy is leading American industry to the junkheap because it creates all the wrong incentives and disincentives: an obsession with profits rather than quality, a dearth of long-term planning, a pressure to pay out bonuses and dividends rather than pay down debt and all the rest.

Maybe the collapse of the Big Three is not just an indictment of the Big Three but of Corporate America in general. The endless propaganda spewed by the financial press never tires of glorifying Corporate America with stories about "the top 100 companies," the top 50 innovators, the best companies to work for, etc. etc. etc.

Maybe it's as simple as: those companies with long-term planning and an abhorrence of debt will prosper and all those which focus on short-term profits and acquiring debt will wither.

2. Most of the profits generated by the Big Three in North America came not from manufacturing vehicles but from financing the sale of those vehicles. In other words, the auto industry securitized its way to "prosperity" just like the investment banking and housing industries.

3. The durability of Big Three-manufactured cars was simply not competitive. The Big Three chose to tout the J.D. Powers reports on the number of defects found per new vehicle as the proper metric for their improved quality; as a low-income marginalized consumer my metric was more demanding: can this car run for 12+ years with almost no maintenance or repair bills?

This lack of durability of the Big Three vehicles receives almost no visibility. The fact that a car made by American workers with largely American-made parts in Tennesee lasts a decade or more with virtually no repairs or maintenance required while the 10-year old Big Three vehicle is either junked or a problem-riddled "beater" is the 800-pound gorilla in the room few have cared to discuss.

There are three basic explanations for this decline in durability. One is that the Big Three relentlessly squeezed their parts suppliers to lower costs, and since that's all that mattered then the quality of those parts declined--you get what you pay for.

Meanwhile, the Japanese management philosophy is quite different; they seek to establish a consortium of parts suppliers which they will work with for years if not decades. Yes, price matters but quality matters above all else. The suppliers eventually learn they can make a profit by supplying high-quality parts in quantity to Honda, Toyota, et al.

Poor parts lead to parts failures and durability vanishes.

The second possibility is that the Big three consciously pursued Planned Obsolescence as a guiding strategy, based on the 1950s-60s-era habit of prosperous U.S. housholds buying a new car every three years.

Detroit pumped out exciting new models every year, fueling the desire for the "new hot look." The release of new models was a national event.

Now, most cars look blandly alike: yet another gorilla in the room few mention as a proximate cause for Detroit's decline. The best Big Three vehicle I've driven in the past 10 years was a PT Cruiser; it had good visibility, a clean interior and a decent ride. And it didn't look like a 1993 econobox dressed up with a rounded rear end like most other cars.

Unfortunately for Detroit, real (inflation-adjusted) U.S. household income began slipping in 1970 and has continued sliding ever since. As interest rates climbed in the 70s and the quality of Detroit's vehicles visibly slipped, people turned to the Japanese cars partly because they could no longer afford to buy an American car every three years or maintain one that fell apart in a few years.

And lastly, Raptor's single obsessive point:

4. The UAW continued to act as if the Big Three still held the same quasi-monopoly they'd enjoyed in the 1950s and 60s. Exhibit One is the Ford-UAW agreement pictured below.

Is this the agreement of a union fearing the dissolution of the industry and companies which support it? Is this the agreement of a union obsessed with lowering costs to enable the companies it depends on to survive and prosper against intense global competition? Clearly it is not.

In the context of a quasi-monopoly, perhaps it made sense to demand shorter work weeks and ever-higher pay, benefits and bonuses. But it seems likely that the UAW failed to consider the long-term consequences of Detroit's decline in quality when compared to its global competitors, the consequences of American household's decline in real wages and the consequences of skyrocketing healthcare costs to its three employers.

I'm not trying to bash the union or its members here; all I'm saying is that the union is also an enterprise, and as such it has to adapt to changing realities if it is to survive. More at http://www.oftwominds.com/blogmay09/bigthree05-09.html other words, rather than thinking about the issue and looking at it from a complete perspective, our righties would rather let propaganda do their thinking for them: "It's all the unions' fault!" Works for them.

Of course, neither he nor the others will bother to READ what I'm quoting, or if they bother to read (and I don't think they'd get past the first paragraph, to be honest...reading takes SO much more time than spouting) would just dismiss everything but the last point, but for the elucidation of everyone else, here are some possibilities offerd for your consideration.


Hippie Operative Nikovich Nikita Nicovna Talibani,
Contracted Agent of Veritas Oilspillus, code name “Nike”,
signing off

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Mike:

I'm curious as to why Rappy thinks TARP was a good idea

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