By on February 3, 2009

For most in the German auto business, the Cash-for-Clunkers scheme (€2.5K if you scrap your old and buy a new one) is the savior that rescues Deutschland from eternal CO2-related damnation. Not to mention the fact that dealers are reporting long lines in showrooms. The hottest topic: the money to fund the Abwrackprämie (“wrecking award”) will be gone soon. Germany’s elected representatives only allocated €1.5b for the program—enough for 600K cars or one fifth or Germany’s yearly run rate. If that money gets exhausted anytime soon, turning water into wine will be relegated to cheap stunt status. The media ignores this eventuality, and beats the public into a frenzy. Act fast! Im Windhundverfahren (“greyhound method” a.k.a. first-come-first-serve principle)!

The Windhund Award goes to the German dealer rag Das Autohaus which brazenly reports that the money may not last into March. The Hamburger Abendblatt reports that more than 300K forms have been downloaded so far. Turning to the back of the paper, next to the obits, it is revealed that only 2000 completed applications were received by the Bundesamt für Wirtschaft und Ausfuhrkontrolle (BAFA) the agency that administering the greendoggle. For the rest, the subsidy is, in fact, a bail-out initiative for organized crime.

Old hands remember when the Altautoverordnung (old car directive) came into effect. Manufacturers were forced to take their old cars back and pay to have them shredded (in an ecologically-friendly way, of course). A car that previously had brought a few hundred Euros cost the manufacturer a few hundred Euros for the wrecking yard’s trouble. More often than not, the money was collected, but the cars were not crushed. They were sold to Central Europe or Africa.

Now imagine what happens when €2.5K is at stake.

The Abwrackprämie is only a week old. There’s already a huge black market for bogus car culling. Monitor, the German version of “60 Minutes,” ran a segment where a TV team succeeded in selling a supposedly shredded car to Poland. Then they sold it to a Lebanese trader who exported it to Africa. As a final accomplishment, they registered the supposedly culled car again . . . in Berlin, right around the corner from where the law was passed. Nobody was checking in a country that usually checks everything.

[Ed: Vehicle safety wasn’t mentioned. But then, why would it be?]

The program cited Jürgen Resch, head of the environmental organization Deutsche Umwelthilfe, who said: “We assume that hundreds of thousands of cars and hundreds of millions of Euros will end up in the hands of organized crime.” As always, the road to hell is paved with good intentions.

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17 Comments on “Germany’s Clunker Culling Cash: A Subsidy For Organized Crime?...”


  • avatar
    slateslate

    LOL, from my short vacation experience in Germany is that there are no clunkers in Germany. There are a lot of old cars, but they seem very well maintained and since it’s very expensive to own, operate a car and get a driver’s license, so people with enough money for a car in Germany don’t drive clunkers.

  • avatar
    Steven Lang

    Reminds me of this commercial…

  • avatar
    John Horner

    Since the real point is to stimulate new car sales, why does it matter if the old cars really get shredded or not? The new cars are still getting sold.

  • avatar
    Casual Observer

    The government would pay 2500 euros over and over to get the same clunker off the street, without ever getting it off the street.

    That would mean government money going directly to criminal organizations who could lend a clunker to a car buyer for a fee (1000 euros possibly) and recoup the vehicle from the shredder after the transaction (for a fee). Then repeat; or sell the car to a Lebanese trader.

    Social engineering schemes never work, and often make problems even worse.

  • avatar
    no_slushbox

    John Horner:

    Damn good point. Sure, people are double dipping if they collect the government money and still sell the car, but that doesn’t hurt the government. It only hurts the dubious claim that the intent of the law is to get older, higher emissions cars off the road.

    It’s exactly why an environmental group exposed the circumvention of the law, and not a manufacturing or union group.

    Getting highly maintained cars that cannot even be registered unless they meet stringent inspection standards clunkers off the road is just greenwashing.

    The real question is, after years of unrealistic sales driven by unrealistic interest rates and sloppy underwriting, how much government intervention is sales levels should there be.

    Unfortunately the recession is making it very difficult to determine what is a long term shift in consumption patterns and what is cyclical (and very easy for the cheerleaders to claim it is all cyclical).

  • avatar
    no_slushbox

    This is just one more symptom of the elephant in the room that no one is willing to face.

    There is no future in high wage simple assembly jobs.

    And those has nothing to do with China or any other low wage BRIC country.

    Those countries are just a distraction from the real truth – technological progress destroys jobs.

    If there were no low wage countries there would still no future in simple assembly jobs, and other simple jobs. Those jobs would be replaced by robots and other technology. Every year technological progress gives automation the ability to replace additionally complex human jobs.

    That’s what completely disgusts me about the jobs bank. It wasn’t originally created to keep jobs out of China; if it was honestly I wouldn’t have a problem with it. It was created to stop the automation of jobs.

    In other words, the UAW created to jobs bank to limit technological progress in the United States.

    On one hand it was self preservation, on the other it was self preservation at the expense of the country, a bit like draft dodging.

    Everyone interested in the current automotive political situation should read The End of Work.

    I do not agree with all of the author’s solutions. But the author is dead on accurate about where we are now, and the two possible directions that we are headed in.

    To quote a review:

    Rifkin (Biosphere Politics, LJ 5/15/91) argues that the Information Age is the third great Industrial Revolution. A consequence of these technological advances is the rapid decline in employment and purchasing power that could lead to a worldwide economic collapse. Rifkin foresees two possible outcomes: a near workerless world in which people are free, for the first time in history, to pursue a utopian life of leisure; or a world in which unemployment leads to an even further polarization of the economic classes and a decline in living conditions for millions of people.

    I am rather disgusted that, at this turning point, liberal politicians are wasting their political capital keeping a small special interest group busy doing busywork (automotive assemblers) at the expense of lesser paid people, education, technological progress, and much more important long term political challenges.

    And for people that want to whine about China and India taking jobs, don’t. Because they aren’t. Efficient production dictates that capital (automation) and labor be mixed based on the equalization of the ratios of their marginal productivity and marginal cost.

    It is very hard for capital (automation) to compete against $1 a day, but very easy for capital (automation) to compete against $70 per hour with legacy costs. If a someone in (insert developing country here) didn’t take your job a robot would.

    Instead of that low wage working at relatively high wages in (insert developing country here), and funding the progression of knowledge, rights and education in (insert developing country here) that person would be busy learning how if the world is destroyed he gets 72 virgins.

  • avatar

    Bertel,

    Does windhund specifically mean greyhound? The family of breeds which includes greyhounds, afghan hounds, borzois, and Irish wolfhounds are known in English as “sight hounds” since they hunt by vision, not by smell. The name “windhund”, though is very poetic, though at the 45mph most racing greyhounds can reach that would be quite a breeze.

    My ex just had to put down our greyhound due to rapidly spreading bone cancer. They are magnificent animals and make very sweet pets.

  • avatar

    @ no_slushbox: And what would that have to do with organized crime and clunker culling?

  • avatar

    @ Ronnie: It does. Windhund = Greyhound. Windhundrennen = Greyhound Race. There is no Windhund Bus ….

  • avatar
    cwp

    Ronnie — my wife lost her greyhound for the same reason a few years before we were married, and was utterly heartbroken. Your ex has my sympathy.

  • avatar
    no_slushbox

    Bertel Schmitt:

    Clunker culling is just another artificial way to keep the assembly jobs going.

    The big lie is that it is about the environment, and not about preserving outdated jobs. Since Germany has, as far as I’m aware, always had high gas taxes I doubt there are many old gas guzzlers. And the law was written so that every new car would qualify.

    Organized crime has simply seen through the greenwashing and found a way to keep perfectly good cars on the road.

  • avatar
    john.fritz

    Removed due to inept usage of Google translation with NSFW content. Please don’t repeat. Please only use English to comment.

  • avatar
    no_slushbox

    Removed due to inept translation. Please don’t repeat. Please only use English to comment.

  • avatar
    HEATHROI

    Do Germans have anything other than organized crime?

  • avatar
    skor

    @HEATHROI

    Most of the members of organized crime in Germany are not Germans. Albanians, Turks, Russians(Jews really), and other people from Third World countries make up the gang element in Germany, as well as in other Western European countries.

  • avatar
    ihatetrees

    no_slushbox:
    There is no future in high wage simple assembly jobs.

    +1. I’ve seen the simpler manufacturing jobs slowly crowded out by fewer higher end maintenance jobs and better machines.

    Hell, the inability of even higher paid workers to sit still, concentrate and inspect/measure consistently is moving their jobs from the production floor to robotic digital cameras and wikkid visual measuring software.

    I’ve wondered how far out the cashier / RFID chip tipping point is – retail cashier positions at large supermarkets and dept stores are replaced by an RFID chip on each item in the store.

    There’s the shrinkage and shoplifting issue. But that’ll do nothing more than concentrate such RFID stores in effectively policed suburbs.

  • avatar
    joeaverage

    So what will the uneducated class do in the future? Not a comment on those people’s potential – just a comment on the fact that they chose a career where they bolted stuff together.

    By the way I recommend taking the “Monitor” segment and running it through Babelfish or some other free translation service. Interesting segment.

    One customer was recycling a 62,000 km VW Lupo (Fox). That’s a 40K mile vehicle that they were crushing. HOW does it help the environment to crush mostly new vehicles? I understand the 400K mile vehicles somewhat but there is manufacturing pollution to consider. New cars aren’t grown on tomato plants from mulched soil. They generate waste just being built.

    I’m keeping my two daily drivers alive as long as possible and economical. 10 and 12 yrs old, nearing 200K miles.

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