I know, huh? Anyone who spent five minutes thinking about Motown’s $42.4 billion (and counting) feast at the federal bailout buffet would figure out that the beneficiaries are using tax money to discount their products—to support an unsustainable small market share. OK, that last bit’s a bit technical. But the bailout = discount = unfairness media meme is just gaining traction in the MSM. And it’s no small point. As I’ve pointed out here before, those federally-sponsored new car discounts effectively punish automakers who didn’t run their companies into the ground and threaten their products, profits and jobs. The Detroit News wakes-up to the story this morning. Chrysler, you are the weakest link.
You can get a $31,405 Dodge Ram pickup for $17,975 in Denver, much to the delight of Chrysler dealers who are using some significant incentives to get people into showrooms. Chrysler LLC is spending big — to the tune of more than $5,600 on average per vehicle in incentives — to reverse its fortunes after months of dramatic sales drops. But the sales strategy is raising some eyebrows as the Auburn Hills automaker has received $4 billion in federal aid and is presenting a case for more help leading up to the March 31 deadline to show its operations are sustainable and its loans can be repaid.
To her credit, DetN scribe Alisa Priddle lays out—though doesn’t highlight—GM’s participation in this Madoff-like scam.
In February, Chrysler spent an average of $5,608 per vehicle on incentives, according to Edmunds.com. That compares with $3,681 from General Motors Corp.; $3,384 at Ford Motor Co.; $2,572 at Nissan Motor Co.; $1,682 at Toyota Motor Corp.; and $1,249 from Honda Motor Co.
Chrysler’s defense: the discounts were planned a long time ago, and it’s different money. But hey, if that is horseshit, who cares?
Using federal money to stimulate demand is a “way of priming the pump,” said Sheldon Sandler, chief executive officer of Bel Air Partners in Skillman, N.J., which provides financial services to dealers. “It may be unfair, but I’d rather see them use cash to support incentives and make cars affordable than use the cash to support legacy costs that won’t stimulate demand.”
“It’s better to sell cars and lose a little money than have them sit on the lot and not make any,” Sandler said. That’s because it is inventory that the dealer has already paid for.
Welcome to Bailout Nation, where automakers use your tax money to sell a car people wouldn’t otherwise buy at a discount—after taking their cut.
The answer is simple. Bailouts for everyone else to make things fair.
The only question now is how the feds wire transfer billions to the Korean automakers. We might need to have the Swiss help us with the logistics.
You might as well buy a Chrysler now. At least then your getting something for your tax dollars.
Its so amazing how the “language” we use takes on a life of its own.
The Big 3 didn’t come looking for Bailouts…they came looking for BRIDGE LOANS. Loans that must be repaid – and force these companies accepting them to accept the government’s terms on them. Why are we still calling them bailouts?
Why are people so suprised when the company returns and asks for more money? THAT’S WHAT A BRIDGE LOAN IS !!!
#2 other countries, such as Japan, have given large, unreported sums of money to their car companies to support them – why can’t (shouldn’t) America do the same?
Just as the government is trying to buy toxic assets (Legacy Assets) from under AIG, we should be working to unentangle comapnies like GM and Chrysler from the world market so the shock of one going under won’t be so devastating – because I forsee Chrysler not lasting another decade.
Ford and GM will survive.
Maybe the taxpayer is being financially raped due to the manner in which we are dressed.
A source of the frustration is the core role of government. I believe that most would agree that a proper government has a mission to make things fair.
Laws, courts, allocation of resources should all work towards justice and fairness for all. Favoring one person or group is generally inappropriate. Either government stays out of the issue or jumps in completely. Earmarks for nobody or earmakrs for everybody…
You can call this flow of money to GM and Chryco whatever you want, but at the end of the day it isn’t fair to everyone who isn’t getting them.
Consider all the Ford dealers that wouldn’t be closing if the GM dealer next door was shut down when last September.
People generally don’t take kindly to their hard earned dollars being used in unfair ways.
Loans that must be repaid – and force these companies accepting them to accept the government’s terms on them. Why are we still calling them bailouts?
Because they haven’t accepted the government’s terms on any of them. In every case, the government’s given them the money first, and said, “Oh, you’ll have do this by X date.” And then by the time X date rolls around, the new Administration decides to ignore the previous terms, give them more money, and then says, “OK, now you have to abide by certain terms, and we really mean it this time.”
Since they haven’t actually had to accept any terms, and since they’re not going to be able to repay the money, it’s a bailout.
#2 other countries, such as Japan, have given large, unreported sums of money to their car companies to support them – why can’t (shouldn’t) America do the same?
First off, if everybody does it, then we’ll just have to give even more money to GM and Chrysler. Everyone else subsidizing actually makes it even stupider to subsidize them, not the other way around. Secondly, GM and Chrysler were already the global weakest link in the automobile industry, losing tons of money even when the global car market was much larger. It’s ridiculous to claim that a company like GM that was losing money, burning through cash, and selling subsidiaries to stay afloat for the last four years (and has had a Death Watch at TTAC for the same reasons) is that same as companies that were profitable every year until now and are only affected by the depressed global market for cars.
Every car company is being hurt, yes. But some car companies, like GM and Chrysler, were already on the path to bankruptcy.
Just as the government is trying to buy toxic assets (Legacy Assets) from under AIG, we should be working to unentangle comapnies like GM and Chrysler from the world market so the shock of one going under won’t be so devastating
This makes no sense. “Unentangle from the world market?” Really? What does that mean? It’s in the world market that GM is actually profitable (or was), at least if you mean sales in Latin America, China, etc. I don’t understand your analogy to the financial companies at all, and I don’t see how it fits. If you’re talking about divesting stakes in other companies, GM’s been doing that for the last four or five years, long before any of this started, but that’s been a sign of weakness.
Considering the cars that Chrysler is building, it would be a better use of taxpayer money to pay Chrysler workers to quit designing and building cars. At a minimum we should quit subsidizing building crappy Mitsubishi GS platform cars and absolve Chrysler of CAFE responsibility as it winds down. Someone will buy Jeep out of the inevitable liquidation. Bailouts only delay parting out the company.
# Flashpoint :
Ford and GM will survive.
Studebaker
Hudson
Packard
American Motors
Wlllys………..
Tell me, what makes GM and Chrysler different? Could it be totally bankrupt companies on life support from the Feds? What happens when the Feds run out of money?
I purchase 10+ vehicles a year for my company. I’m so mad over this whole affair I would not have a GM or Chrysler product if it was offered for free. This from a company owner that’s purchased over 200 GM vehicles.
I don’t mind the companies earning my money. I vehemently object to the companies stealing my money by slopping at the taxpayer’s pig trough.
I suspect there’s many more that feel this way. This is an obscene joke on the taxpayer. Of course our Socialist government has no problem taking from one to give to another.
Studebaker
Hudson
Packard
American Motors
Wlllys………..
Tell me, what makes GM and Chrysler different?
I agree with what you said, however, GM, even now, is much bigger than any of those companies were. But that shouldnt be an excuse.
Bill Wade…
I completely agree with you.
If being loans makes them not bailouts, how are the payments on those loans back to the lender- the people of America- going? How much has been paid back so far?
If all the carmakers needed was loans, why didn’t they just go to commercial lenders like businesses do all the time? Oh right, because the carmakers had zero creditworthiness, and no prospect of success, and not a chance of ever paying the loan back. So lenders that must answer to shareholders will not touch the carmakers.
So their only chance at survival are involuntary ‘loans’ forced on the American public. Forced, because even in the rust belt over 88% of Americans are against it. Forced, because nowhere in the constitution is the government considered a commercial lender charged with favoring one business or industry over all others. Forced because no one else on earth would give a penny to those whiney self-important deadbeats.
If that is not a bailout, I am at a loss.
The key is that GM is getting smaller every day. Day in and day out.. They have been for decades. Only a matter of time before they aren’t relevant.
At this point the bailout money is just enough for them to shrivel in a controlled manner.
To save GM it would probably take hundreds of billions of $, a roaring economy and some amazing ideas for new cars.
Welcome to the controlled shrivel.
Doesn’t this violate America’s trade agreements? Not necessarily NAFTA, but international ones?
Now lets see: If Chrysler sells a $30k truck for $20k, they need $20k less bailout money. Just how bailout money is financing the $10k difference is not clear in my mind. The truck will not sell at $30k and is a total loss for Chrysler if it does not sell. This makes it less likely that the government loans will be paid back. I suspect the $10k difference does not exist. It is imaginary funny money.
It seems to me that Chrysler is doing the responsible thing by marking down its trucks. If they did not, it would be worse for Chrysler and the government since they both would be out $20k.
It does not hurt GM since it can do the same thing if it wants. And Ford says it doesn’t need the money, but we know it can get government loans too if it just says yes.
So who is being hurt here? Toyota and Nissan? But Japan does its own government subsidy thing.
It seems to me we are now playing the game as it is played around the world. About time.
My wife and I just got a new 2009 Sonata (manufactured in Montgomery, Alabama) for about 40% off the MSRP.
Deals like that are going to evaporate into the ether once/if the industry ‘settles out’ (i.e. the weaker links are finally allowed to die as they should have been, naturally; without delaying the inevitable). Thus, we were made the offer by Hyundai and the local dealer, and since we had a lease-turn in, we plumped for it.
Propping up GM (including Saab and Opel, if indeed they are propped up) and Chrysler, are analagous to keeping a dead person with gangrene of all limbs, on life support long after the brain-waves have ceased.
Expecting the patient to get better, heal up, get up, go back to work and pay off the hospital bill (skyrocketing by the day) is not only imbecilic, but – needless to say – totally unrealistic and not founded on anything resembling common sense OR reality.
@ lw: I think Chrysler should include your wisdom in their next ad campaign…
“Do you want to get your money back from our taxpayer funded bailout? Buy one of our trucks at 50% off MSRP!”
Awesome.
Now lets see: If Chrysler sells a $30k truck for $20k, they need $20k less bailout money. Just how bailout money is financing the $10k difference is not clear in my mind. The truck will not sell at $30k and is a total loss for Chrysler if it does not sell.
The difference is they’re not just selling off old inventory manufactured pre-bailout/bridge loan. They’re keeping the factory going and selling all vehicles at a loss.
In other words, your tax dollars are paying for the loss inherent in each newly made vehicle.
That’s no way to run an airline.
3 things.
1. Ask yourself where money comes from. Hint: not from the treasury.
2. If a bridge loan falls in the forest and is not repaid what does it become? Hint: rhymes with tail out.
3. What about those poor bastards who bought a new pickup for 20 or 25 K last year and thought 5 – 10K off sticker was a good deal? Hint again: They just lost a lot of what we normally call equity.
I purchase 10+ vehicles a year for my company. I’m so mad over this whole affair I would not have a GM or Chrysler product if it was offered for free. This from a company owner that’s purchased over 200 GM vehicles.
I don’t mind the companies earning my money. I vehemently object to the companies stealing my money by slopping at the taxpayer’s pig trough.
This is called Acting on principle.
It is the right thing to do. Kudos for you.
Nowadays, to deal with GM is like to deal with Castro´s Cuba: To deal with stolen goods.
If every American ceases to have economic relations with bailouted companies, bailouts would cease. People decent enough to be sick of public bailouts could and ought stop dealing with bailouted companies. Forever.
@ GS650G
2. If a bridge loan falls in the forest and is not repaid what does it become? Hint: rhymes with tail out.
If the company fails it is not a bailout it is a loss. The only way to get the loan back is for the company to succeed. If GM and Chrysler fail and take Ford down with them do you really think that Honda, Toyota and Hyundai are going to move all their manufacturing to the U.S. and give us jobs? With no domestic competition they won’t need the PR. They will build the manufacturing plants somewhere with cheaper labor.
3. What about those poor bastards who bought a new pickup for 20 or 25 K last year and thought 5 – 10K off sticker was a good deal? Hint again: They just lost a lot of what we normally call equity.
Too many people think that an automobile is an asset with equity. Actually it is a transportation expense. The resale value does not reflect the actual value of the vehicle but how much someone is willing to pay for it.
Mark45 : GM and Chrysler (especially Chrysler) will never succeed, in the normal business sense of the term (make a profit), at least without a bankruptcy of some sort-and probably not even after one.
And how much somebody is willing to pay for something IS the actual value of an item.