$25 Billion to Automakers -- Better Idea

[RH77]

Instead of giving $25 Billion to the "Big-3", I have an idea. Why not benefit both the average citizen and the automakers by offering to buy-out the difference on discounts.

Economy cars could benefit the most. For that kind of money, you could knock $10,000 of the price of a vehicle, get people in newer, more efficient vehicles, and kick-start the industry.

Say a new, base-model Ford Focus is $15,000. With the "Harrell Stimulus/Rebate Program", that car could be sold for $5000, and the automakers get the difference to continue operations. Think of how many people could afford reasonable financing on that.

Agree? Disagree?

-Rick Harrell (RH77)

[Matt Herring]

RH77-

I usually agree with most of your posts...but have to disagree on this one.

I love the idea of getting to buy cheap cars but the only problem is the Big 3's operating budget includes the sale of their cars at near-current pricing. To liquidate their stock just to build cash revenue leaves them drastically short on income (which would ultimately trickle down to layoffs...something the government will not let happen on a large scale). While they might sell alot of cars quickly they would probably be making less money in the long run because they have to sell 3 cars to make what they used to on one car.

When the Big Three builds a single car and settles on a standard price for that car they also build that income/revenue into their operating budget. Selling cars at manufacturer cost does little to nothing to settle the increasing debt and losses they have incurred. Unless you're talking about being able to liquidate their entire stock for upwards of billions on dollars it just doesn't benefit them. And, you're assuming that Americans currently have money to buy a car...even at a drastically discounted rate.

[trebuchet03]

Can you explain your maths a little more?

Here's my two seconds of calculation...

25b divided by, 170m registered voters... Is slightly less than $150 per person.

Voters, because if you're not going to participate and therefore help the system - the system shouldn't help you. Plus, you have to be 18, which filters out all the 3 year olds

For the 10K figure... My math says that would be for 2.5 million cars... Or ~1.5% of voters.


That aside, it will likely destroy the resale market.

[Matt Herring]

GM lost almost $40 billion last year...it takes alot of $5000 cars to make that up!

http://www.bizjournals.com/columbus/...1/daily14.html

edited to add the near $40 billion source

[trebuchet03]

Originally Posted by Matt Herring

GM lost almost $40 billion last year...it takes alot of $5000 cars to make that up!

GM: More buyouts after record $38.7B loss - Business First of Columbus:

edited to add the near $40 billion source

But they'd still be getting $15K per car.... From the OP:

that car could be sold for $5000, and the automakers get the difference to continue operations.

[Matt Herring]

The $10,000 rebate has to come from somewhere. If it comes from the government...it comes from the taxpayers. If you're one of the people buying a $5000 car you're happy to pay an extra $150 in taxes a year. If you're not...you're not a happy camper.

We're already tagged with $700 billion of debt with the recent bailout. The United States just became the worst credit card abuser in the country. You know...you finally get the credit card paid off and swear to never use it again. Then, one small $100 purchase and the next thing you know it's back at a $5000 balance.

I knew as soon as the government started giving handouts...it would open the floodgates.

[NeilBlanchard]

Hi,

If money is going from the government to the auto makers, it out to be based on results: they should be able to build models that get a minimum combined fuel mileage of 25mpg (better aero and other virtually "free" efficiencies!), and this should increase by 1 mpg per year. Any models that get less than this must be priced to include a 10% penalty that the government gets to collect to pay back the taxpayers.

If they can build the efficient cars and sell them, then they get R&D money from the government and maybe some tax credits.

The USA should adopt the same diesel standards as Europe; and also the best models sold in Europe and Japan, etc., should be immediately sold in the USA.

All car companies should immediately improve their existing models, to get the efficiencies as soon as possible. If the whole country -- the whole world is going into a slowdown, then the car companies must take their lumps along with the rest of us.

[Silveredwings]

I thought it was supposed to be a loan. Before you say, "good luck with getting that back," I agree: I'm as cynical about the management of the big 3 as anyone. On the other hand, I recall that Chrysler did pay back their bailouts back in Lee Iacocco's days.

[Matt Herring]

The recent $700 billion bailout is not completely a loan...unlike anything we've seen before. The recent bailout financial institutions received includes a government stake in the company and while partial loans were floated to banks to reverse the poor credit market those companies that were essentially (or in some cases declared) bankrupt were revitalized with government buy-ins. Some of the money was earmarked to be used to extend credit to consumers while some was destined to simply reverse debt and cover FDIC insurance for lack of funds to cover it.

Neil...I think we're moving in the direction of minimum mpg standards for vehicles. After rejecting GM's recent request for $10 billion to assist with the Chrysler merger the government countered with the speeding up of a $25 billion package for the development of fuel efficient vehicles. That $25 billion is a straight loan. Story below...

U.S. rejects GM's call for help in a merger - International Herald Tribune

[trebuchet03]

Originally Posted by Matt Herring

The $10,000 rebate has to come from somewhere. If it comes from the government...it comes from the taxpayers. If you're one of the people buying a $5000 car you're happy to pay an extra $150 in taxes a year. If you're not...you're not a happy camper.

That's what I'm saying.... there's not enough money in the 25b to give out. That $150 figure was how much each voter would have to pay to reach 25b (therefore, that 25b would take $150 off the price of the car, not $10K), not how much that would need to be paid to reach $10,000.... Which is why I wanted to hear more from RH77