In a recent article in the New York Times, reps from GM and Toyota both told the newspaper that they are optimistic about the automotive market in the near future. They felt this way especially in light of the declining interest rates (checked your savings account's variable rate lately?) and the $600 stimulus checks that the Federal government is sending out … some time or the other. Without getting into an economics debate here, let's just say that $600 isn't a whole lot of money, the last year's worth of Fed actions cutting interest rates hasn't helped, Americans are in over their heads with debt, and GM has been offering 0% financing on cars for years. Ford is pleasantly candid in the article, saying "I'd like to be able to tell you the worst is behind us, but I really can't give you that assurance." In fact, Jim Farley at Ford (remember when he ran Lexus?) thinks that next quarter is going to be even worse. The article is just a gold mine of reality checks though, like Chrysler VP Steven Landry saying "I don't know if I can take another March like this one" and Toyota's US chief Bob Carter insightfully opined "We're not immune to economic cycles and downturns in the automotive industry."
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Yeah, that $600 is going to go a long way in helping the automotive industry. I, for one, can’t wait for the check. As soon as I get the check, I’ll running out the door to get new…hub caps, from Autozone. Either that or I’ll be paying cash for a new Aveo. That’s about what they’re running for nowadays after rebates, isn’t it?
Car sales have been vastly inflated in recent years by 0% financing, cheap leases, HELOC’s and America’s never-ending appetite for debt.
The sheer number of nearly new cars I see everywhere is amazing. 10 years ago half of the cars in my neighborhood or at my office would’ve been beaters, or at least sensible used cars. Now even my $14/hr receptionist has a shiny BMW lease.
Marginal buyers like her are going to be crushed during the recession, and the companies which benefited during the boom are going to feel the pain.
Im in the business and have no car payment and am
a fan of the beater,If I need to take a trip its fly or rent a car.If and when I get a $600.00 check Im going to blow it on a major keg party
“… this year’s rebate checks are technically an advance against a (new) tax credit for the 2008 tax year, based on 2008 income. To put the money in taxpayers’ hands as soon as possible, the IRS will use our 2007 income figures (to calculate rebates).”
http://www.chicagotribune.com/business/yourmoney/chi-ym-cruz-0330mar30,0,2781499.story
My concern is that the legislation behind the new tax credit for 2008 hasn’t actually been passed yet.
Frankly Toyota can be optimistic. Sales are down but they are still gaining market share (=positive image with public) and they are profitable. Their optimism makes sense.
GM? Hallucinagenic.
Burning market share (=bad consumer image), bleeding cash. This is dream land time.
The media is going into a tizzy, but most folks can relax. Recessions are normal and endurable, as we’d remember if they came along as frequently as in the past. The automobile business is a cyclical industry; always has been, and always will.
This is not to say that getting laid off from GM, Ford or Chrysler won’t be painful, for many people. I hope it won’t happen. But as we saw when Willys, Packard or AMC (or the Pennsy RR, Bethlehem Steel or TWA) disappeared, for the most part the American economy will keep rolling along.
Said it before and I’ll say it again.
Once the blood is running in the streets come fall ’08, it’s time for me to start looking for that gently used 2-3 yr old Mustang GT.