Bailout Watch 568: Cash For Clunkers Hurt Bailout Exit Strategy

Edward Niedermeyer
by Edward Niedermeyer

More new information from today’s GAO post:

Moreover, whether enough time has passed for the impact of the structural changes to be seen is unlikely, especially given that the automakers have not completed restructuring, the economy is still recovering, and new vehicle purchases remain at low levels. For instance, although the federal Car Allowance Rebate System program resulted in a sales spike in August,16 September sales returned to historically low levels. These and other challenges are likely to delay the companies’ recovery beyond what it would be under more favorable economic circumstances.

As TTAC noted last Friday, “finding a real, sustainable bottom of the market from which to grow is not made easier by erratic bursts of stimulus frenzy.”

Edward Niedermeyer
Edward Niedermeyer

More by Edward Niedermeyer

Join the conversation
4 of 8 comments
  • Charly Charly on Nov 02, 2009

    Why IPO next year. That only makes financial sense if you expect GM to go under fast as there is just not enough time to make GM perform well. ps. After selling Opel i think it is obvious that GM will go down fast

  • Cars4Charities Cars4Charities on Nov 03, 2009

    Cash for clunkers was a complete disaster. By destroying almost 700,000 RUNNING cars, it caused used car prices to soar and revenue from car repairs and car donation to nose dive. This is just what charities that operate car donation programs told the polititicans would happen if the c4c cars were scrapped instead on sold or given to the poor.

  • VanillaDude VanillaDude on Nov 03, 2009

    Everytime this administration flops, we end up getting a re-education on basic economics and why ignoring it only further stagnates our economy. This is what happened with C4C and the auto bailouts. We really are more open minded and more intelligent than Washington gives us credit. After all, we have a huge percentage of college educated Americans, so why should they be surprised when we question the status quo? Not everyone believes the crap their professors tried to shove down their throats for a passing grade, a lot of folks like me faked it so they can get their post graduate degrees. Consequentially, when the politicians propose spending even more of our money in losing sweetheart deals between them and lobbyists, a large portion of the electorate balk. When they meddle into auto policies and prop up GM and Chrysler, educated Americans reading TTAC and Edmunds point out the pol's blatant stupidity. Our news media were bought out, but their former readers and subscribers obviously weren't, and they come here to speak freely. This administration doesn't know what it is doing, and while that is OK in a way, it isn't when they waste our money learning old economic truths. These self-righteous idiot leaders need to feel our heat, and be told boldly, "NO MORE!" We gave them a fair chance. We gave them a TRILLION dollars to try. They failed. Now they have to start listening to us, right?

  • Hreardon Hreardon on Nov 03, 2009

    The point of the article is easy to understand: by distorting the market through C4C, it will merely take longer to get a good gauge on the true performance of these companies. Look at manufacturing data for the months of Aug-Sept: up, but mainly to refill depleted inventories. There's little sign of sustainable growth...yet. We're likely to see very choppy manufacturing data for months as retailers keep inventories low and only order what is necessary to keep minimums in stock. The flip side of this is that we may see a supply constraint in several markets and resultant price increases. As .gov continues to interfere in various markets (C4C, 1st time homebuyer credits, Cash for Fridges) it will become increasingly difficult to determine how, when and where monetary policy should adjust accordingly and where the real demand is. Look at the homebuyer credit - likely to be extended because everyone knows that if it ends this month there will be a plunge worse than we saw after C4C. This does nothing but prolong the pain of the housing deflation and further distort the market by trying to reinflate a bubble that needs to drop another 20 - 30% to return to norms.