By on March 24, 2009

It seems straightforward enough: federal vouchers for old clunkers. Takes old heaps off the road. Stimulates new car sales. Done. Of course, we are talking about a government program here. And that means that H.R. 1550, the “Consumer Assistance to Recycle and Save Act of 2009,” has quickly become a cat fight amongst interested parties (manufacturers, dealers, dismantlers, after-market parts makers, trade protectionists, etc.). If passed, 1550 will surely evoke the law of unintended consequences. At the moment, the bill’s been referred to the House Transportation and Infrastructure committee, so that august body can breathe their magic upon it. Ahead of that joyful event, 1550 contains some HIGHLY contentious sections. How about a stricture for the new car purchase that stipulates different minimum levels of highway fuel economy depending on whether the vehicle was manufactured in the United States or “North America” (i.e., Canada or Mexico)? Yes, way.

The money shot: Section 3 mandates a $4K voucher for “passenger automobile assembled in the United States with a minimum highway label fuel economy of 27 miles per gallon.” The same four grand goes to “passenger automobile assembled in North America with a minimum highway label fuel economy of 30 miles per gallon.” I guess our neighbors to the north and south must. Try. Harder.

If the new “passenger automobile assembled in the United States” achieves that same [higher] 30 miles per gallon highway mpg standard, the US vehicle gets an extra grand: a $5K voucher. Oh, and if that “passenger automobile assembled in the United States” happens to be an electric or plug-in electric vehicle, the voucheree scores $7500. At the moment, the money would go to someone looking at a $100K+ Tesla Roadster or one of those NEV golf cart thingies.

AND if the new “passenger automobile assembled in the United States” only achieves 24 mpg highway, don’t worry too much. The feds would like to present you with a $3K voucher.

The bill also stipulates a lower minimum for trucks, ’cause we don’t want to leave out trucks, a domestic mainstay, do we? “Non-passenger” vehicles must achieve “only” 24 miles per gallon highway to qualify for that $5K voucher. [Look for some tall ass gearing if this passes.]

As for the imports—Saturn Astra, Toyota Prius, Honda Fit, etc.—their buyers are  SOL, voucher-wise. Which, of course, threatens to evoke a trade war. Which could well be the last thing the US economy needs right now [see: Great Depression].

As for the cost to dealers and dismantler of making all these sales, which should generate some kind of profit, 1550 throws in $50 per transaction. Hey, why not? It’s not as if the dismantling industry has a history of title washing or any sort of thing. And while we’re on the subject, who’s in charge of making sure all the clunkers are crushed, the toxic waste removed and the registrations destroyed? Uh . . .

At the moment, the Automotive Aftermarket Industry Association (AAIA) is 1550′s most vociferous opponent. Well they would be, wouldn’t they? Aaron Lowe, the org.’s vice president of government affairs for the AAIA, sent out a press release countering any suggestion that their opposition has anything to do with their members’ profits.

“Proponents of the Cash for Clunkers bill say that it will benefit the environment because it will take older cars off the road, replacing them with new, more fuel efficient vehicles… What will become of all these old cars? The answer you don’t hear from the backers of Cash for Clunkers is that these scrapped vehicles will more than likely be sent to landfills, creating more pollution, not less.”

The AAIA has created a website—fightcashforclunkers.com—to carry their banner forth. While there’s a debate to be had about the relative pollution of old vs. new, let’s file this one under Where’s MY NSFW Bailout?

The Cash for Clunkers program would earmark federal funds for car owners to trade-in their sport utility vehicles in exchange for vouchers to be used to obtain newer, more fuel efficient vehicles. On the surface the program may sound reasonable, but its consequences will increase the nation’s carbon footprint, create issues for those not fortunate enough to afford the cost of a new vehicle and be a waste of taxpayer dollars.

The Fight Cash for Clunkers organization… instead favoring tax credits to help upgrade, repair or maintain older vehicles, as well as tax deductions for interest on car loans and state sales tax.

Death would be too good for this bill. And the idea that the feds should do something, ANYTHING, to stimulate the US new car market is sadly, badly mistaken. The best thing our government could do for the UScar industry is to let Chrysler and GM go C11 and/or C7.  The resulting flood of new, highly discounted product will drive down prices and, perhaps, encourage buyers to trade-in their old cars for new.

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25 Comments on “Editorial: Cash for Clunkers Bill Heading for Trouble. One Hopes....”


  • avatar
    210delray

    Well, I think this bill is so “clunky” that it will never see the light of day — at least I hope so.

  • avatar
    grog

    Um, what electric or plug-in electric is currently assembled here in the ole USofA? Not counting Tesla.

    Sounds like a subsidy for all those potential Volt buyers.

  • avatar
    toxicroach

    How many people are going to go from a clunker to a 40k car?

  • avatar
    Happy_Endings

    Can they a make commercial like the one for Victory Auto Wreckers?

  • avatar
    Robstar

    I’d benefit from this & still don’t like it.

    Can I trade my 200 neon that gets (revised) 22/28 for a truck that gets highway 24. What sense does that make?

  • avatar
    RetardedSparks

    “…instead favoring tax credits to help upgrade, repair or maintain older vehicles.”

    I LOVE IT! I get a tax break for fixing up my track car!

    Finally, here’s MY bailout!

  • avatar

    This bill is political BS. There is no intent to help the environment or the economy. At best, it’s a(nother) subsidy for auto companies that have plants in the US. It may artificially inflate car sales, but artificially high car sales are one factor behind the current problems. And with the current credit crunch/crisis, do we really want to encourage MORE consumer debt?

    And this negative opinion is coming from somebody who would benefit from the bill. I have a 15 y/o truck that we want to replace and most of the cars we are looking at would qualify.

  • avatar
    OldandSlow

    “Finally, here’s MY bailout!” – That’s what I said when I first read this, since I’m still driving a 40 year old vehicle that’s a rust bucket.

    Unfortunately, it all looks too good to be true.

    I’m looking at trucks with manual transmissions and that 24 mpg highway requirement may be a deal breaker. So, I guess I’ll replace my current clunker with another clunker.

  • avatar
    findude

    We really need to stop treating trucks differently. The additional cost of trucks will naturally be passed on to the consumers of the products and services that the truck enables.

    If a cash for clunkers program is adopted over the long term (and for more reasonable amounts), it would increase both the churn (turnover) of the national fleet and make it younger. Making it younger is a good thing if doing so actually increases fuel consumption.

    Still, I think this method for encouraging the purchase of fuel efficient cars is weak. The best way is simply to tax oil where it comes out of the ground or into the country. Nothing will make Americans move to more efficient cars faster or more completely than expensive fuel.

  • avatar
    nmcheese

    $4k off a new VW Jetta Diesel (final assembly point in Mexico, gets upwards of 40MPG) might produce a sale here.

    Or I’ll just continue driving the w124 merc – still gets mid 20′s mpg after 14 years / 150k miles.

  • avatar
    T2

    When TTAC ran the “Magna Closes” topic last week posters were commenting thus :
    ______________________
    Eventually, with NAFTA in place, I believe the “American” auto manufacturers will shift virtually all of their auto production, including parts, to low wage Mexico.

    In which case : -
    America will not function with being only a service based economy. The middle class is evaporating and this should be sending warning bells off in your head.

    A job/position must justify itself economically or it ceases to exist…
    …unless you work for the government, that is!

    Well the Government is the largest service industry
    ___________________

    Ok, the point I make is that government has to have make work projects to justify the fiction which is our day to day lives. The fact is most of us have enough stuff. Heck, there is even a whole industry supplying storage for our stuff. Now we can get paperless billing and existing media can be scanned and recorded etc and retrieved via computerised equipment there is less need to have all that stuff around. It could be stored outside the home on a so-called sky-dish. This means the infrastructure, the cabinets, the containers, shelves and drawers for storing those magazines, albums, receipts etc could also be going away with them.
    OTOH, it is quite possible that the car you changeout every five years, or fewer, probably contains more manufactured parts than is in your whole home. Case in point, my home stero is more than 30 years old yet I have turfed two cars with much more advanced audio electronics. And while most start looking for a new vehicle – must have a Prius and what’s that Genesis all about? – at the same time the fridge and stove may be barely ten years old but are still considered “brand new”.
    On that theme there may even be those who consider having curtains in their pickup more important than having drapes in their home. Not anyone here at TTAC I hope.

    So when Americans stop buying cars this major “replacement” industry, AKA the auto business, will need to evaporate significantly. Need them or not the government will continue to sponsor the labor for their manufacture with however much money it takes.

    The blowback could be if owners notice the devaluation this impacts on their current vehicles they may just throw in the towel on any new purchases and decide to keep what they have around longer to ensure they extract value from the investment. Bottom line they stop buying even if they could.

    If the carrot of the cash inducement fails to work prepare to start seeing govt use the stick of stringent mandatory inspections on a yearly basis, like they have in Germany and the UK, to cull the herd.
    T2

  • avatar
    jerseydevil

    yeah it does sound good on paper. And it falls apart in execution. What ia an american car? No one knows. SO what perecnt of the car is american? Is a 5speed transmission that originates in mexico of 50% asian and 50% european content, built into a new chrysler, american content? The mind boggles. I have a VW that was built in Mexico. The mind boggles again.

    My mexican built VW gets an official 29 mpg hwy. If i need to buy a “domestic” car with better mileage, there are pity few choices, it comes down to the Focus (gag). All of the others are ford hybrids (gag). ALl my choices are imported. The GTI, for example is built where? who knows? But it does get 31 mpg.

    AND, i will STILL need to buy a NEW car, which is not a gonna happen for my budget. I could do a three year old Honda fit or Golf, but NOOOOOOOOO. Also, making a large payback for plug in electrics? what plug in electrics? There might as well be a 50,000 payback for dodo dung engines. There are none of them either.

    This is a really stupid idea, that i really wish was a really good idea. It winds up being of no use to those middle and lower income wage earners who most need it.

    Having said that, 4g’s back on a 14g focus brings it to 10g, i suppose i could live with that. (gag). I hate being poor.

  • avatar
    wsn

    Trade protectionism is bad already. And use it in the name of the environment is ridiculous.

    And no, it’s not saving the environment, it’s hurting the environment.

    It’s very reasonable to expect a Camry to last 12 years, clean and efficient. 1997 Camries are still common today.

    And they are encouraging people to throw 8 year old cars into the dump?

    That will increase the total amount of resources used to produce cars by 50%! What a waste.

    Yeah, I know there are cars better be scrapped by 8 years. But again, the companies that produced them will have already been in C7, if not for the bailout.

    So, the right way for saving the environment is: stop the bailout, let them die. Then everything on the road will run clean for more than 12 years.

  • avatar
    bill301972

    As a car salesman for a Ford dealer in the Southwest, I would greatly benefit from such a program. However, even I recognize that such benefits would be temporary. We would be pulling sales out of future years and we would face another slow down once the program was over.

    The same thing happened with the 0% deals and the easy credit. To have a sustainable (important) car sales business model with the right number of dealers and production, we need to allow the correction of the credit markets, buyer habits, manufacturer practices, and dealer size and quantities to work themselves out. If we don’t we will be just putting off the inevitable.

    After the disastrous sales year of 2008, I am already seeing some changes that would allow for a long term sustainable business model. Customers are now saving up down payments (0 down was never good for most customers). The financing that is available is encouraging shorter term financing which puts customers back in equity sooner. Customers are being more careful about buying vehicles that fit their budget. The dealer pool is shrinking (I don’t want to see anyone fail, but the number of dealers in the market was based on an artificially inflated market).

    In my area, we are beginning to see a greater level of professionalism in the surviving dealers as they begin to realize that they need to provide real value and service to their customers and they realize how important repeat business will be to them in the future. I have also seen some very shady and dishonest dealers go under that were a drag on the whole business.

    I would love to see some incentives to assist in reducing pollution and decreasing our nations energy dependence, but let’s not perpetuate a failing business model. I intend to be in the business for at least another 15 years and I am thinking long term. If our government insists on a cash for clunkers program, then I will just make my temporary extra commissions and save them for the next slow down.

  • avatar
    Ingvar

    So, let me get this straight: In order to lower fuel consumtion, you can get a voucher to buy a truck, but not a Prius?

  • avatar
    GS650G

    Now people will get to realize where their cars are really built. US made Hondas would be more American than most of Ford’s cars and the Chrysler mini vans.

    This government running the car business thing is not going so well. Let’s put 2 of the three out to pasture and leave it at that.

  • avatar
    Gunit

    With the baby boomers past their peak house, car etc. purchasing years, sales of many things will deflate. It’s a natural occurrence and business needs to adjust rather than have government programs spur spending to previous levels.

    All these bail out plans are short sited anyway, what happens after the incentive is discontinued? What happens when our children finally have to pay through taxes for our selfish consumption?

    With booms come busts, adjust.

  • avatar
    bill301972

    True that, Gunit

  • avatar
    brentalan

    “At the moment, the money would go to someone looking at a $100K+ Tesla Roadster or one of those NEV golf cart thingies.”

    I think there is a $35K upper limit on this bill.

  • avatar
    Jerome10

    Every law has unintended consequences. thats why I wish there weren’t so many of them.

    “market forces” should have an asterisk by it. If we’re not careful there will no longer be market forces, it will be whatever market the government chooses to support at the expense of those it doesn’t.

  • avatar
    golden2husky

    Clunker bills are a failure, if the yardstick for success is improving air quality. If that is really the goal, make annual emission inspections for all cars after 5 years on mandatory in all states. These bills have nothing to do with air quality. This is a shameless attempt to move more cars at the unsustainable rate of the past. Lame.

  • avatar
    ravenchris

    Every purchase is a vote…

  • avatar
    joeaverage

    http://www.phoenixmotorcars.com/vehicles/phoenix-sut.php

    There is an American assembled full EV for ya…

    Wait – no that is a Korean chassis with the EV package installed in the USA.

    Wait – that thing is no more American than a Chevy or Ford made in Mexico with Chinese parts…

    VBG!

    Still would be a happy driver in a PMC.

    There are the Miles EVs. I think they are modified Kias.

  • avatar
    joeaverage

    Fisker EV?

  • avatar
    sarah_marie08

    ‘The same four grand goes to “passenger automobile assembled in North America with a minimum highway label fuel economy of 30 miles per gallon.”

    ‘As for the imports—Saturn Astra, Toyota Prius, Honda Fit, etc.—their buyers are SOL, voucher-wise. Which, of course, threatens to evoke a trade war.’

    A pretty good percentage of Toyotas are assembled in America. And this bill isn’t going to pass anyway.


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