By on March 18, 2009

After Germany’s cash-for-clunkers sales surge, it was only a matter of time, and not much of it, before the US followed suit. The idea failed to make into the federal stimulus package (which is like calling an all-you-can-eat buffet a Weight Watchers’ Special). And so, a bill is born. CNNMoney says aloha, clunker-mania.

The bill, introduced Tuesday by Rep. Betty Sutton, D-Ohio, would provide on- the-spot vouchers between $3,000 to $7,500 to consumers who trade in older vehicles for new, more fuel-efficient cars and trucks. The size of the vouchers would vary, depending on the fuel economy of the car being purchased.

The older vehicles, required to have been built at least eight years ago, would be scrapped and their parts recycled, while the new vehicles would have to meet a certain fuel economy standard – 27 mpg on highways for cars, 24 mpg for light trucks, Sutton said. Consumers could also opt to receive a $3,000 voucher toward mass-transit fares.

Sounds great! How could that possibly go wrong? You know . . . other than all the unintended consequences?

But Sutton’s bill – strongly pushed by Ford Motor Co. (F) and backed by the United Auto Workers – would preclude vouchers from being used on some of the most fuel-efficient cars and trucks, including the Toyota (TM) Prius.

The vouchers would also be limited to cars assembled in North America. “I do not think there should be an expectation of American taxpayers (that) we have to use our tax dollars to incent[ivize] Americans to buy foreign automobiles,” said Rep. Candice Miller, R-Mich., a co-sponsor of the Sutton bill.

More verb[iz]ing? Never mind. Do the domestics really want to open that can of worms? Do they really want the public to scrutinize from whence cometh Chrysler, Ford and GM vehicles? The parts inside? Do they really want to raise the profile of previously invisible non-D2.8 American auto workers whom are getting well and truly stiffed by the Motown bailout buffet?

And what about the obvious question of free trade agreements? WTO? NAFTA? Hello? The head of the US Chamber of Commerce warned against this approach. We’ll keep you posted.

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48 Comments on “Cash-for-Clunkers Bill May Fall Afoul of Pseudo-Patriotism...”


  • avatar
    Robstar

    I have been thinking of trading in my perfectly working 9 year old neon with 168k. It sure ain’t worth 3G’s, let alone 7500. It was originally rated 24/31, but is now rated 22/28 with the revised epa ratings.

    Could I trade it in for say a camaro that gets 29mpg highway ? the mind boggles…

    Anyone know where the yaris, the versa, and the fit are assembled?

  • avatar
    davey49

    Yaris and Fit-Japan
    Versa-Mexico
    I think

  • avatar
    210delray

    Is “incent” a new verb?

    Call me incensed by this bill. I doubt it passes.

    And my ’98 Nissan Frontier is NOT a clunker!

  • avatar
    NulloModo

    Not a bad idea to stimulate the market in general, although I would much rather see it happen as availible to vehicles purchased by US based companies only regardless of where the vehicle is actually manufactured.

  • avatar
    ravenchris

    Protectionism helped turn a recession into the “Great Depression”. Is it possible for Congress to push its head any further up its ass?

  • avatar

    I’m afraid it would be a lose-lose, for me and the planet, if I were to trade my ’99 Accord (32 on the road) for a domestic under this bill.

    As for incenting, well, I guess this particular Sutton doesn’t know how to Sutton for money (allusion to Willy). Sheesh. Who sends these people to Congress?

  • avatar
    CarPerson

    My desire for ANY GM product is rather low.

    Combined with the fact that EVERY GM car sold puts about 5 bucks in Red Ink’s personal wallet, I will not be going to any GM dealer’s lot any time soon.

    Call me when Red Ink has been tossed out on his butt.

  • avatar
    tom

    The German program worked, because it was valid for all cars, no matter where they were made or by which company.

    Protectionism isn’t only poison for the global economy right now, but it also encourages companies to keep on building uncompetitive products and makes them even more vulnerable in the future.

  • avatar
    hwyhobo

    Anybody who wants to give me $3K for my 9-year old Kia can have it.

  • avatar
    golden2husky

    Wow, 7K to replace my ’92 Sable station car? Still, I hate to get rid of something that is in such good condition…

  • avatar
    Steven Lang

    This type of bill should wait until…

    Government becomes a profitable self-sustaining enterprise that can support such well-intentioned programs without using taxpayer funds or the printing press.

    When that happens, count me in.

    Oh, and don’t worry about recycling those cars. I’ll personally buy them all for the Kelly Blue Book Wholesale price and then export them 18 months from now when the dollar has gone down a full third in value.

    Do we have fiscal conservatives left in either party? Jeez!

  • avatar
    NulloModo

    Protectionism in the sense of putting tariffs on imported steel, raising the prices of manufactured goods all the while not forcing a change on outdated American steel mills is bad.

    Protectionism in the sense of encouraging people to buy a more efficient car and funneling all of the money back into the US economy instead of letting it go overseas is good, it hurts no one other than foreign interests.

    It’s time for the US to stop holding back and flex its muscles as the most important economy and market in the world. If we are going to come out of this economic downturn quickly and before China has a chance to gain any more ground, we need to rewrite the rulebook.

  • avatar

    NulloModo

    I seriously recommend a little Google action along the lines of “great depression protectionism.”

  • avatar

    Aww, and just when I was warming up again to my clunker. But at 250000+ miles, the old beast still gets better than the required 27 on the open road. And there is not much out of Detroit I have a hankering for. Damn protectionists.

  • avatar

    Macroeconomically, I’m not sure I agree with the bill, HOWEVER from a personal standpoint, I gotta 8-year-old Lumina and a 9-year-old Jeep that are getting a little long in the tooth, & with the Fiesta coming to the US next year, which I think will be built in NA (Mexico), I’m interested to see where it goes. Just think, a 2011 Fiesta and a 2010 Fusion, sittin’ pretty in the driveway…

  • avatar
    FloorIt

    Isn’t a “trade-in” a cash for clunkers program ?
    Though my recent 2005 Suzuki Aerio trade-in getting 24mpg city 29 hwy and my purchase 2009 Ford Fusion V6 getting 16.2 mpg city (according to the onboard computer) doesn’t qualify for upgrading mpg. Oh well, the better performance and ride quality make up for the less mpg.

  • avatar
    smarts

    This cash-for-clunkers bill is illegal under WTO rules of national treatment, and it is very likely that either the EU or Japan will file suit against the US. However, the US would be able to maintain this law for the duration of the legal-proceedings, which can last years. Further, even if the US loses, other countries cannot collect damages through retaliatory trade actions. This is why the pre-2004 election steel tariffs were costless for Bush, even if costly for those in the US that use steel. So, the law could certainly help in the short term, at least domestic automakers.

    But this is not a purely domestic phenomenon.

    http://www.cbc.ca/consumer/story/2008/04/02/toyota-prius.html

    Believe who you want, but there is a reason that Toyota does not account for R&D expenditures when calculating the profitability of the Prius.

    All governments support their domestic autos. While it might be stupid in terms of efficiency, from a strategic perspective not doing so is a dumb idea.

    As for domestic content, it’s not easy to measure. Here is one attempt:

    http://www.usatoday.com/money/autos/2007-03-21-car-content-chart_N.htm

    But I’m not sure this accounts for white-collar employment and research value-added which is arguably the most important for newer products.

  • avatar
    McDoughnut

    I’m headed strait to the junk yard first thing tomorrow to buy trashed out cars that still have titles – who’s coming with me?

    We can carpool!

    $3K – $7K for a trade in?! Talk about a license to print money.

    Do any of you guys own a tow truck or a flatbed?

  • avatar
    Ingvar

    It is very simple: If this program is supposed to help the american industrial infrastructure, then it should be billed as such. But, if it is supposed to help people exchange older cars to modern fuel efficient cars, then cars like the Prius should be included, obviously. Something else would be a lie.

  • avatar
    NulloModo

    Robert – I see an important distinction between raising tariffs on foreign goods and lowering prices on domestic goods. Creating incentive for domestic consumption is far more passive than creating obstacles against foreign consumption.

    Also, the US economy is quite a bit different now than in the 1930s. If push ever came to shove the loss of access to US based technology and information resources could cripple the majority of foreign economies. Losing access to processors from Intel and AMD, software from Microsoft, internet resources like Google, and all of the satellites/internet backbones that the US owns and operates would send the rest of the global economy into a tailspin.

    Basically, at this point in history, all of the investments the US has made into global information age infrastructure have led to a state where no other single nation or even group such as the EU could pick up the slack if we were to cut off the pipe.

    As opposed to watch the economy continue to tumble, I think it is time to capitalize on the investments that have been made and get back to a good bit of ‘we are going to do what works for us and if you don’t like it, tough cookies’ attitude, the likes of which we haven’t seen for decades.

  • avatar
    Ingvar

    Nullomodo:

    Yeah, and the thousands and thousands of billions of dollars that foreigners have invested in the U.S., could easily be taken out and invested elsewhere. Try to pop out all those cheap loans without foreign money banking it up. The U.S. economy would suffer inflation never heard of since Germany 1923.

    Either you accept that this is a global economy, and a global crisis, and that we are all in it together. Or you can mind your own business and solve your own crisis without the help of others. But then, don’t think for a minute that all that crap the americans has shoved in peoples throats with the last fifty years about free trade won’t come back and hit you in the face. In for a penny, in for a pound… The americans have started several wars to defend that idea…

  • avatar
    Demetri

    So I guess I’ll be hitting up craigslist to buy a $100 junker before I buy my next car. Too bad there isn’t anything built in the US that I would want. Actually, depending on how sweet the rebate is, I could go for a Honda Civic Si. I think the Impreza/WRX might be built here too, but the fuel economy doesn’t meet the requirements.

  • avatar
    EngineeringTheAtom

    This is where I decide my next vehicle should be a non-domestic just to spite the union.

    Or maybe I’ll grab a $500 beater off of craigslist and go ahead and get more of my tax money back.

  • avatar
    Ingvar

    “Or maybe I’ll grab a $500 beater off of craigslist and go ahead and get more of my tax money back.”

    All those $500 beaters will be $5000 before the end of the week…

  • avatar
    Ingvar

    Speaking of which, that car on the picture looks like a C4 Corvette with a Camaro front end. Is that true?

  • avatar
    br549

    “Yeah, and the thousands and thousands of billions of dollars that foreigners have invested in the U.S., could easily be taken out and invested elsewhere.”

    Actually, it can’t. If it could then the Chinese–the biggest purchacers of U.S. treasury bills–would have done so when the value of the dollar was plummeting a while back. The nearest competitor to the dollar is the Euro which is in the process of falling.

    Foreign entities don’t invest here because they like our ways necessarily or think we’re cool. They do so because it’s the most financially prudent thing to do. A program such as this will not change their minds. Last time I checked, the Chinese didn’t have that much to fear from our purchasing domestic autos.

  • avatar
    Ingvar

    Perhaps so, but my government in Sweden chipped in several billion dollars worth of aid, just to be nice, to help Your government bail out all Your banks. The american citizens should thank people around the world for all that help. It would be a prudent thing to do. And don’t you forget it…

  • avatar
    Jeff in NH

    Actually, depending on how sweet the rebate is, I could go for a Honda Civic Si.

    Sorry, Demetri, all Civic Si coupes and sedans are assembled in Canada.

  • avatar
    jimmy2x

    Ingvar :
    Perhaps so, but my government in Sweden chipped in several billion dollars worth of aid, just to be nice, to help Your government bail out all Your banks. The american citizens should thank people around the world for all that help. It would be a prudent thing to do. And don’t you forget it…

    OK – so maybe I am internet deficient, but I cannot find any reference to the several billions that Sweden gave to the US. Do you have any citations for this statement?

  • avatar
    tom

    Well, obviously China won’t throw all its Dollar reserves on the market at the same time, that would pretty much destroy their value. However, if China simply stops buying US bonds, the consequences will also be a disaster, and it’s already starting. The latest billion Dollar injection by the FED came solely by printing new money, because there just isn’t a market for more bonds anymore.

    You have to be aware of the fact, that the Dollar is just another bubble, only backed by the trust that everything will turn out just fine. If one major player starts losing trust in the Dollar and floods the market, it’ll start an avalanche with disastrous consequences for the entire global economy…

    So China already has the US by the balls, and they’ve given out the rules to the US:
    1) Be nice to us
    2) We’ll support you, if it’s sustainable

    And it’s not only China…Japan has almost the same amount of Dollar reserves, and there are tons of other players who have large enough reserves to bring the whole thing down.

    Now the good news is, that nobody wants the Dollar to plummet, because they need the US market, so they accept losses on the currency front as long as they can make money exporting goods. However, if you start with protectionist measures, the incentives to keep Dollar reserves are a lot smaller…well, you can imagine what that means…

  • avatar
    John Horner

    If this program would run afoul of world trade rules, can someone explain to me how China gets away with being the most protectionist large economy in the world?

    Want to sell cars in China? No problem, build a factory there, give majority ownership of the factory to a local (and normally at least partly government owned) company, transfer in technology and know how … and you are good to go. BTW, don’t try to take your share of the profits back home as cash.

    China didn’t grow a massively positive balance of trade by simple luck and hard work. The pickle China finds itself in is: What to do with all those excess US dollars?

  • avatar
    smarts

    China gets away with it since they already conceded a huge amount to gain entry into the WTO. We can debate all day long about whether it was enough – especially related to autos – but the facts are that China’s entry into the formal world trading system required, by far, the largest concessions in history. They did not get in for free.

    That said, there are a ton of rules and other safeguards regarding labor and environmental standards which could be used by the Obama administration to correct for some trade imbalances (at least in some industrial sectors). The problem is that you cannot apply rules to China alone – you have to apply rules consistently to all WTO members. Politically, this is very difficult.

    Legal mumbo-jumbo aside, the differential treatment of auto parts and finished vehicles is faaking stupid. The strong yuan partially offsets this, and with future Chinese growth, I suspect that exports of finished vehicles to China will improve. After all, they do drive on the right side of road….

  • avatar
    ZoomZoom

    Ingvar :

    Perhaps so, but my government in Sweden chipped in several billion dollars worth of aid, just to be nice, to help Your government bail out all Your banks.

    You’re absolutely right, that 20% that we pay to support the United Nations isn’t nearly enough. We should pay more. I’ll get my checkbook.

    The american citizens should thank people around the world for all that help.

    Again, you’re absolutely right. Thank you world for helping during so many natural disasters. Tsunamis, earthquakes, famine, disease, you’re always there helping out your human kind. Your assistance is greatly appreciated.

    It would be a prudent thing to do. And don’t you forget it…

    I most certainly will not forget it. Thank you.

  • avatar
    vanderaj

    @ davey49 – My new Honda Jazz (=Honda Fit) is assembled in Thailand. I am pretty sure they are not assembled anywhere else.

    Whether you give folks a check for a domestic good for $100 or add $100 to all non-domestic goods, that is a trade barrier, and against WTO rules. Eventually, that $100 incentive will cost $200+ once fines and ill will by foreign investors are factored in.

    The US auto industry already has “safety” related trade barriers. There’s no reason why these shouldn’t be eliminated. If they were harmonized with EU rules, the D2.8 could have exported their cars (something you DO want) to many more countries, and obviously when the SUVs stunk to high heaven with $4 gas, imported cars they’ve already made and ipaid for, like the Fiesta, Mondeo, and many others could be imported and SOLD in the USA with minimal regulatory cost. Those cars are safe and frugal.

    Trade barriers are without doubt the most stupid reaction, and hurt those you are trying to “protect”. During the great depression, trade barriers prolonged the depression until the start of WW2 and made it far, far worse.

    You can’t trade amongst yourselves, otherwise hyperinflation would work (just declare the value of the dollar to be a new value or print new money) – you have to trade with others, and with substance. And not just import, but MAKE stuff and EXPORT it. You can’t do that with trade barriers.

    thanks,
    Andrew

  • avatar
    eggsalad

    So I can trade in my “old clunker” that gets 35city/40hwy for a “new, fuel-efficient” domestic that gets 24/27?

    What a bargain!

    About the only domestically-made car I’d consider is a Pontiac Vibe. Which, as we all know, is a Toyota.

    And certainly doesn’t get 35/40mpg.

  • avatar
    Dynamic88

    I’m going to trade in my ’63 Rambler (Car of the Year) and take the $3K mass transit voucher.

    Sure I am.

  • avatar
    rpol35

    I believe the German program was modified so that a car owner had to prove that he/she had owned the trade-in for at least one year. The purpose of the amendment was to cut off all of the dumpster divers who are looking to do what many here are suggesting. Don’t know if there is a similar provision in the proposed U.S. legislation.

  • avatar
    montgomery burns

    The real outrage here is that someone butchered a C4 corvette with what appears to be a 70 Camaro front clip.

    Oh the humanity.

  • avatar
    NN

    Quality comments here. My two cents…if they limit it to US or NA produced vehicles only, it may ignite a trade war. Those saying “so what” to that idea have really no idea what the consequences of such an issue would be…disastrous, for both the US and the rest of the world. As much as you’d like to think so, we are not a self-sustaining economy.

    So maybe they pass this bill and allow all cars to be bought, like the Germans do (Dacia is one of the greatest benefactors of their program). Most people will go buy new Honda’s and Toyota’s. Then you’ll see populist explosions from politicians and unions.

    If the bill makes it through all of this, in one form or another…then the government will print money to buy all these clunkers and scrap them. Let’s say these clunkers number 60m. $5k each = 300bn dollars. The dollar will devalue, taxing us all. The Germans, being an export led economy with a much smaller population and a fiscal surplus, can afford this. We cannot.

    Not to mention the facts of artificially stimulating demand, supporting companies that can’t function on their own and destroying natural demand further down the road. The hangover will be worse and we’ll be bailing them out again, for more.

    As much as I’d like someone to give me $5k for my old beater, I’d rather it remain worthless and none of the above consequences come to fruition. The bottom line is that there is massive over capacity and some automakers must die. Chrysler should go first.

  • avatar
    RetardedSparks

    A few details of the proposed plan that I’ve found (no idea what the final plan, if any will be like:

    – You must prove that the clunker was owned by the person buying the new vehicle (same name) for at least two years. Sorry, no junkyard raiding.

    – The rebate will be scaled to the delta between trade-in and new car EPA mileage rating. If it’s negative, you may have to PAY the government to trade (just joking on that last part, I think!)

    – Max incentives are available for US built vehicles, slightly lower cap for CAN or MEX built vehicles. (I’ve read $5k for cars from the US, and anywhere between $2500 and $4000 for CAN/MEX) Reports have been vague about whether or not transplants qualify. Some have said US jobs are US jobs, others have said no cash for foreign-owned companies (I wonder if Chrysler would qualify after they give 35% to Fiat? Hmmm, bet nobody in DC thought about THAT!)

  • avatar
    psarhjinian

    If this program would run afoul of world trade rules, can someone explain to me how China gets away with being the most protectionist large economy in the world?

    The same reason the US boycotts Cuba but not China: money. The potential profits involved are too significant to ignore, which puts China in a dominant position when it comes to trade regulation. No politician outside of the most strident human-rights activists is going to risk the corporate backlash, and no country is going to risk harming their domestic industries who want to do business in China.

    Oh, sure, you can demand concessions and so forth, but let’s face it: if China was to be held to the same economic, humanitarian and environmental standards as smaller fish are, we’d have been talking “embargo” a long time ago.

  • avatar
    pirkko

    Ultimately, allowing the incentives to be used on vehicles such as the Fit and Prius will encourage their respective makers to move forward with their current plans (on hiatus due to the economy) to build American plants to produce these vehicles.

    This is exactly what the bill should be doing, encouraging all business to invest in America, whether the ownership is foreign or domestic.

    Punishing those makers because their headquarters is in Japan will, at best, only serves to further delay their investment in America. This slows the recovery of those communities which would otherwise benefit from that investment.

    At worst, an international backlash could cause similar “Protectionist” actions in other markets. Since the international marketplace is the one place the major American manufacturer’s are (or have recently been) profitable, the consequences could mean a temporary uptick in domestic sales but a slide in international sales. The latter of these could cause irreparable harm to not only the domestic automakers, which could not survive without those markets, but the backlash could spread into other American exports (causing yet greater damage to the American, and global economies).

  • avatar
    Mike66Chryslers

    Speaking of which, that car on the picture looks like a C4 Corvette with a Camaro front end. Is that true?

    That’s what it looks like to me. I was going to ask the same question.

  • avatar
    Dragophire

    I have a question for everyone because I honesty just dont know the answer. Does Japan place a tariff on American cars sold there or do they have a limit or something. The reason I am asking
    1 I dont know the answer
    2 I am kinda tired of hearing that we dont need any form of protectionism when other countries do it to us in some form or another.
    I have be pleasure of going to Japan once about ten years ago and I didnt see on American labeled car. I know why but I would like to hear other views on why?

  • avatar
    smarts

    Tariffs are zero on all vehicle imports (except for tanks):

    http://www.customs.go.jp/english/tariff/2009/data/87.htm

    However, this doesn’t mean that trade is free. The distribution networks are essentially closed. No point in importing anything if there is no place to sell it.

  • avatar
    Demetri

    “You must prove that the clunker was owned by the person buying the new vehicle (same name) for at least two years. Sorry, no junkyard raiding.”

    So I get punished for “supporting the economy” and frequently buying new vehicles? Where’s my incentive?

  • avatar
    wsn

    This is designed to reward crappy car companies and punish the good ones.

    I mean, after 8 years, a Toyota Corolla can typically fetch $3000~5000. But a Chrysler Neon/Caliber can fetch about $500~3000.

    By imposing an 8 year limit, the policy basically made sure crappy cars have the same resale as the good ones.

    Plus, it actually hurts the environment. If most cars can last 12 years (typical), but we offer the incentives to scrap them at 8 years, then we will produce and buy 50% more cars than needed. That’s a huge waste of resource that could go toward education or health care. Not to mention all that extra environmental footprint; think about all the electricity used to produce 50% more cars and the coal pollution caused by generators.

  • avatar
    RedStapler

    The minimum age is 8 years, what is the maximum age?

    I suspect a lot of crappy beaters will come back from the grave only to be “culled” for the subsidy if this passes. I also suspect that many of the scrapped cars will wind up overseas distorting other used markets.

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