Retired Auto Execs: Distort New Car Market or Bailout Bucks Are a Bridge to Nowhere
Unless you must have a car now, if you’re considering a domestic car or even a U.S.-built car, wait. Many of the proposed legislative measures to “save” the domestic auto industry will cut car prices by thousands of dollars. If you buy a car now, you could pay thousands more than you will later. Automotive News [sub] reports on the most ambitious federal consumer bailout proposal yet. “Retired Chrysler President Hal Sperlich has written a position paper with Don Runkle, former vice chairman of Delphi Corp., calling for a $3,000 government cash incentive on the purchase of a Detroit 3 vehicle.” Chrysler and Delphi execs? You’re kidding, right? Nope. An incentive like this would be unfair in so many ways that it boggles the mind. And yet it’s such a bone-headed proposal that it– or something like it– could happen anyway. And the guys make an excellent point: for GM and Ford to survive (I wrote off Chrysler when Cerberus bought them), auto sales cannot continue at their current level. “In an interview today, Sperlich and Runkle said that without consumer incentives, the Detroit 3 will merely burn through any government loans they receive within a few months. ‘It will be a bridge loan to nowhere unless there are incentives to spur demand,’ Runkle said.” To boost auto sales in the current economy, actual purchase prices are going to have to come down. A lot. And if even one manufacturer cuts prices, the others will have to follow. So, if you don’t want to pay too much for a new car, wait.
Michael Karesh lives in West Bloomfield, Michigan, with his wife and three children. In 2003 he received a Ph.D. from the University of Chicago. While in Chicago he worked at the National Opinion Research Center, a leader in the field of survey research. For his doctoral thesis, he spent a year-and-a-half inside an automaker studying how and how well it understood consumers when developing new products. While pursuing the degree he taught consumer behavior and product development at Oakland University. Since 1999, he has contributed auto reviews to Epinions, where he is currently one of two people in charge of the autos section. Since earning the degree he has continued to care for his children (school, gymnastics, tae-kwan-do...) and write reviews for Epinions and, more recently, The Truth About Cars while developing TrueDelta, a vehicle reliability and price comparison site.
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@ psarhjinian; yeah, the damage to the used markets will be real as well. And that hurts leasing too, rather than outright purchases. However, fixing the demand side is more important than giving cash to Detroit. There is not a good way to do this, and any way we choose is going to have a lot of negative externalities.
So this guy thinks that the government should kickstart deflation? One of the surest ways to make sure this recession is deep, long, and hurts like hell. Good call.
The truth of the matter is that American car companies are hindered in selling small cars they produce in Asia & Europe AND bringing them back home to sell. Rules & regulations enacted by Congress will not allow GM/Ford to sell their own cars here in the U.S. This needs to be changed. If this were to happen, a bail-out would nat have had to happen. These same cars actually sell in Asia & Europe and would sell here also.