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"wildly popular" economic boost.

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August 03, 2009 – Comments (7) | RELATED TICKERS: LAD , F , KMX

Auto sales about to Surge in 3rd & 4th qtrs while Alstry is still screaming old news about the past US auto sales that crashed. Look at what stocks like LAD , F or KMX are doing today on projected 3rd & 4th qtr  car sales.

 http://news.yahoo.com/s/ap/us_cash_for_clunkers

Administration: 'Clunkers' improving gas mileage

AP – A 2000 GMC Jimmy that was traded in as part of the federal government's 'Cash for Clunkers' program is … By KEN THOMAS, Associated Press Writer Ken Thomas, Associated Press Writer – 29 mins ago

WASHINGTON – The Obama administration appealed to the Senate on Monday to bail out the cash for clunkers rebate program, arguing it has already made striking gains in fuel efficiency and is a "wildly popular" economic boost.

Transportation Secretary Ray LaHood ducked when asked if the program will be suspended if the Senate does not vote to replenish coffers before lawmakers go on vacation later this week. Instead, he said "I believe the Senate will pass it this week."

The administration said the average fuel economy of new vehicles purchased through the program is nearly 10 miles per gallon higher than for the vehicles traded in for scrap. LaHood said some 80 percent of the traded-in vehicles are pickups or SUVs, meaning many gas-guzzlers are being taken off the road, and the Ford Focus is a leading replacement vehicle.

"The program is working the way Congress intended it to work," he asserted on MSNBC. But it was not intended to run out of money nearly so quickly, nor create such confusion at dealerships.

The administration pressed hard for an additional $2 billion after serving notice over the weekend that the program could expire as early as this week unless the Senate acts, as the House did in voting overwhelmingly for the money Friday.

Senate Republicans appeared to be in no rush Monday. "We were told this program would last for several months," GOP leader Mitch McConnell of Kentucky said in remarks prepared for a Senate floor speech. "It ran out of money in a week, prompting the House to rush a $2 billion extension before anybody even had time to figure out what happened to the first billion."

McConnell said "it's not a bad idea to look for a second opinion. All the more so if they say they're in a hurry."

The administration collected information on 80,500 vehicle transactions logged into the government's operating system through Saturday afternoon. An official said the fuel efficiency improvements would save a typical customer $700 to $1,000 a year in fuel costs. The new vehicles were getting 25.4 miles per gallon on average, a 61 percent increase over the models traded in, said the official, speaking on condition on anonymity because the figures had not been released.

The data was aimed at appeasing lawmakers such as Sens. Dianne Feinstein, D-Calif., and Susan Collins, R-Maine, who have questioned whether the program's environmental benefits go far enough.

"We're encouraging senators to listen to their car dealers and the people they represent," LaHood said. "If they do that, it will pass the Senate."

The administration has been coy about just how long dealers would be reimbursed for rebates of up to $4,500 per vehicle, after saying Sunday that the program would have to be suspended if the Senate failed to act.

Fierce lobbying for the program came from other quarters: The National Automobile Dealers Association and the American International Automobile Dealers contacted thousands of dealerships, telling them to bombard the Senate with phone calls and e-mails.

"This is the one true stimulus that seems to be working out of all the things that have been tried in the last few months," said Cody Lusk, president of the international group.

LaHood had said earlier that if the $2 billion isn't approved, "we would have to suspend the program." At the same time, LaHood told C-SPAN's "Newsmakers" show Sunday that the administration would "continue the program until we see what the Senate does and I believe the Senate will pass this."

"Any deal that is made (Monday) or the next day and that is in the pipeline ... the dealer will be reimbursed and the car buyer will be reimbursed," the secretary declared.

The program provides consumers with $3,500 or $4,500 in incentives for trading in gas guzzlers for more fuel efficient vehicles. Automakers were reporting July's auto sales on Monday and analysts expected the car program to provide a boost in overall sales.

Only the Senate can help at this point; the House voted Friday for the money to be put into the popular program, and the House members have left on their summer recess. The Senate is scheduled to start its vacation by week's end.

Obama officials scrambled last week to add money to the Car Allowance Rebate System, which is designed to get old, polluting vehicles off the road and scrapped while helping car dealers emerge from the recession. The $1 billion has led to the sale of some 250,000 new vehicles.

The program helped lift Ford Motor Co. to its first monthly sales increase in two years, the company's top sales analyst said Sunday.

July sales results mark the first year-over-year gain for Ford since November 2007 and apparently the first uptick by any of the six biggest carmakers in a year, George Pipas said.

"We were having a good month — and Ford's been having some good months lately — but the program really put us over the top for sure," Pipas said.

The Senate narrowly approved the initial money in June. But some lawmakers who voted for the plan, including Feinstein and Collins, have said the additional dollars should push consumers to buy more fuel-efficient vehicles and allow people to buy fuel-efficient used vehicles. Sen. Jeff Bingaman, D-N.M., has said he was concerned with the way the House paid for the extension, shifting $2 billion from a renewable energy loan program.

 

7 Comments – Post Your Own

#1) On August 03, 2009 at 3:51 PM, davejh23 (< 20) wrote:

"The administration collected information on 80,500 vehicle transactions logged into the government's operating system through Saturday afternoon."

When it was first mentioned that they might need to suspend the program, less than 30,000 sales had been logged.  Where are the other 170,000 sales?

"Obama officials scrambled last week to add money to the Car Allowance Rebate System, which is designed to get old, polluting vehicles off the road and scrapped while helping car dealers emerge from the recession. The $1 billion has led to the sale of some 250,000 new vehicles."

Says who?  The Obama administration?  The dealers?  Why aren't these sales being logged?  Why are they pushing for extra money when we haven't "officially" spent 1/3 of the first billion?

It's too bad Ford is becoming the leading American auto company.  I currently drive a Ford and will never buy another. 

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#2) On August 03, 2009 at 4:34 PM, Wharrgarbl (50.62) wrote:

I love these misleading headlines.  They make it sound like the "Wildly Popular" clunkers program is responsible  for 250,000 car sales last week.  And now we desperately need to provide more money to keep the ball rolling...

Car sales for 2009 were estimated to be around 10 million.  Thats roughly 192,000 sales per week, not seasonally adjusting for the summer sales.

So yea, there has been a bit of an uptick in car sales, but this is just burning up a small portion of the large inventory sitting around.  I just can't see a car company ramping up production because of this.

What's supposed to drive 3rd and 4th qtr sales?

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#3) On August 03, 2009 at 4:40 PM, DownEscalator (22.63) wrote:

Wharrgarbl:

What's drivin Q3 and Q4 sales?  CASH FOR CLUNKERS, PART DEUX!

Expect the government to again subsidize car sales for some other claimed purpose, "because the first one worked so well."  If you give the government owernship in two car companies and have the Congress in bed with 3 or 4 more, don't be surprised when the Congress starts passing incentives for car sales.  They're obviously setting this up so that Cash for Clunkers isn't just a one-time thing.

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#4) On August 03, 2009 at 4:56 PM, toopersent (74.46) wrote:

The nice thing about C.A.R.S. is that inventory is moving quicker, which means companies like Ford and ramping up production, which means more jobs for people and more hours for current employees.  Yeah, these people would be buying new cars anyway, but they would be buying them in the next couple of years; we want them to buy now!

I'm also convinced the environmental aspect of this program was just used as selling point to convince the neigh sayers.  I'm sure that the people swaping in their SUV's for a Ford Focus were going to buy a more fuel efficient vehicle anyway, now they are doing it earlier.  

 

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#5) On August 03, 2009 at 5:18 PM, alexxlea (58.24) wrote:

As you increase the efficiency of using a resource you end up using more of that resource. It's strange but true.

Not everyone can benefit from this program.

It adds more debt to households heading into the worst employment scenario we're going to ever see in our lifetimes (If you think the past two years were bad wait for this decade to unfold).

A car sold today means a car not sold tomorrow.

Building cars adds nothing of long term value to our economy.

Free money isn't free.

The program inflates new and used car prices.

The handling of the program itself is spawning yet more beaurocracy to deal with the submissions.

There's a lot of things wrong with this. Getting people to go out and buy something today as opposed to tomorrow does not do anything for us. 

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#6) On August 03, 2009 at 5:29 PM, toopersent (74.46) wrote:

It creates jobs and re opens factories.  Its $1-3 billion better spent (and at just a fraction) of the TARP. 

 It does add to consumer debt, but we both agree that these people would be buying cars anyway.  What does it matter if the consumer pulls down the debt today, or a year from now? 

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#7) On August 03, 2009 at 6:50 PM, RLAprof (< 20) wrote:

I own a 2003 Taurus, and it has over 100,000 miles on it. It qualifies for the $4500 credit because it was listed at 18mpg at the time it was sold. In actuality, I have always averaged about 26mpg.

Instead of taking advantage of the Clunker program, I could sell the car privately for about $3500 and provide an affordable, good-mileage, well-maintained auto to a family who cannot afford a new one and cannot afford to pay the premium price at a dealer. I could also trade it in (for about $1950) and allow the dealer to make a profit on the new auto that I buy, as well as a profit selling my good-mileage, well-maintained auto to a family who can’t afford a new one.

Now, the family who would like to buy my car is currently driving a car that is too old to qualify for Clunker (making it an oxymoron), and it gets 12mpg. The only autos left at the dealer get far worse mileage than mine, or they are older, because the newer ones qualified for Clunker and were destroyed upon trade-in. Any newer ones that were taken in before Clunker,\ have become too expensive for that family to be able to finance, because banks have clamped down on loan requirements, and one of the parents has been laid off, and the other had her hours cut.

So here are the outcomes of our scenario:

I buy a new hybrid, one that has a huge battery full of high-pollution metals, but we don’t have to look at the effects from mining and smelting those metals, so that doesn’t count. My perfectly good car is destroyed and the parts that don’t go into a landfill are melted down to make new cars, or something. My new car gets better mileage, but I only put 3000 miles on my car last year (I walk to work), meaning that IF gas hits $4 per gallon again I will save about $230 per year in gas. The family I mentioned is still driving their too-old Clunker, costing them over $2000 per year in maintenance costs and more than double what they should be paying for gas. It won’t pass pollution standards set by the state, but as long as they provide proof of a major tune-up, they can get it licensed. Toyota got to sell a car, and that is supposed to kick-start our economy. At best, it will help dealers (the ones that are left) to liquidate their inventories to make room for the new ones coming in next month. They used to do that with “rebates”, but at least they paid those out of their own pockets. The used-car market is in disarray, because there is an entire class of cars being destroyed for no reason, leaving a hole in the used car market.

Let’s pump a couple more billion into this lemon that only benefits those who can already qualify for a loan and those who have mismanaged their companies at the expense of taxpayers. Whatever happened to the free market?

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