Tuesday, September 1, 2009

It's Confirmed: Cash 4 Clunkers Was Another Government Failure

Auto sales for August were released today.  Overall, the SAAR (Seasonally Adjusted Annual Rate of sales) was boosted for the month of August, although it fell well below expectations.  Goldman Sachs had been forecasting SAAR for August would be 15.5% - it came in at 13.7 million (this is the annualized rate of sales based on actual sales for the month).   Worse yet, the numbers for the domestic producers, Ford, GM and Chrysler, fell way below expectations.   Ford's sales rose 17% in August vs. 2008, but a 38% rise was anticipated.  GM's sales dropped 20% from a year ago and Chrysler's fell 15%. 

How did this happen?  Here's the top-10 cars sold by brand, according to Edmunds.com:   1) Toyota Corolla  2) Honda Civic 3) Ford Focus 4) Toyota Camry 5) Toyota Prius 6) Hyundai Elantra 7) Ford Escape 8) Honda Fit 9) Nissan Versa 10) Honda CR-V

You can see the problem here.  U.S. taxpayers largely subsidized the new car sales of Toyota, Honda, Hyundai and Nissan.  And not only did the sales goals of C4C fall well short of expectations, but like every other heavily subsidized sales program, C4C has "pulled" future sales into a few short weeks. The question going forward is not whether or not the sales rate will drop off, but by how much.  Several auto companies announced ramped up production based on August sales.  But to whom will they be selling that production?   I anticipate another cliff-dive in the economy this fall.

One more issue I'd like to address.  I would like to see the credit scores of those who actually purchased a vehicle using the C4C program.  In all likelihood, the average person who could have benefitted from turning in a late-model gas-guzzler most likely did not qualify for financing, even with the $4500 credit.  And I suspect that a large portion of the buyers who participated would have been able to buy a new car and qualify for financing even without the $4500 kicked in by the taxpayer.  Seems a bit ironic that Obama's program to subsidize automobile purchases and stimulate sales at Ford, GM and Chrysler, benefitted higher income Americans and foreign car manufacturers - all at a multi-billion dollar cost to the taxpayers.

1 comment:

  1. Last post I chimed in:
    "I am watching Gold $980 and Silver $15 as breakout zones." which happened today. I will have a write up on this later, but I think a breakout may not be at hand at this time.