After taking plenty o’ heat for “helping” Chrysler and GM shit-can nearly 2000 car dealers, the Obama administration has arranged a little sugar for the remaining stores—and then some. They’ve created a federal loan guarantee program for dealer inventory financing that’s worth, you guessed it, billions. Automotive News [AN, sub] reveals that the Small Business Administration’s “pilot” program for car dealers (women and domestics first?) will run from July 1 to September 30, 2010. And what, pray tell, do the lucky, politically-connected car dealers get for our money?
The agency will guarantee no less than 75 percent of the dealer’s floorplanning (i.e., inventory) loans, from $500 thousand to $2 million, with a maximum repayment term of five years. “The SBA estimates it will be able to offer guarantees on 4,500 loans in the first three months of the pilot. In the following 12 months, if past patterns hold, it will be able to do about 7,500.”
That ought to do it! “This is a lifeline thrown out for thousands of dealers throughout the country,” said Bob Cockerham, owner of Car World Kia in Santa Fe, N.M. “This could end up igniting the runaway inflation that some economic analysts believe will result from uncontrolled, unsustainable federal deficit spending.”
No, he didn’t say that. He said “saving thousands of dealerships.” Cry the beloved franchisee, eh? Anyway, how much is THIS boondoggle going to cost me? NADA? AN? Bueller?
Dear God, where is all this money going to come from? Is anyone going to try to keep the Obama adminstration from driving the USA into total insolvency? He’s a freaking community organizer, NOT A BUSINESSMAN, and he’s inflicting massive damage that we’ll never recover from. Did he promise change…or chains?
Just how much money has been given out so far?
I sure agree with Bearadise. Being Canadian I feel somewhat removed thankfully from this spending madness but our feds are doing a fine job of giving it away too. It’s scary to think about ten or twenty years down the road. I shudder for my grandchildren trying to live in that economy.
I am just plain numb now.
This is peanuts compared to the Trillion dollars we have spent on the Iraq “war”.
I’d love to hear from the Obama supporters on this. If they’re anything like the above comment from capdeblu, the deflection and avoidance of addressing the CURRENT issue says it all.
@capdeblu:
What an extraordinary leap of logic! So blowing a trillion on a stupid, needless, pointless war justifies blowing billions more on a stupid, pointless, needless bailout? By your reasoning, one colossally stupid mistake justifies another.
Are you sure you aren’t a Republican?
GBooth,
Team Obama doesn’t think bailing out failed businesses is needless. How much have we, the taxpayer, already burned through on this boondoggle, $75B? We’ll easily see $150B if indeed Gov’t Motors is kept as a gov’t entity for 6-18 months as they themselves project.
Good thing Obama keeps blithering on (Bush style, I’d add) about how he inherited this mess. His math skills must be a bit rusty as the mess he inherited was 1/3 of the size it is now directly because he’s throwing $100 bills around like they’re nickels.
But hey, Change!
The Obama administration is making a bad situation worse: Dealers are customers of the factory. Eliminating customers of the factory makes NO SENSE. Dealers are NOT overhead to the factory Mr. President. I don’t mind Chrysler pruning its marginal dealers in the BK process, but Chrysler is cutting some excellent dealers for reasons unrelated to good business. I know this for a fact.
Forcing out good dealers will unnecessarily burden the US taxpayer. There must be a limit to how fast the printing press runs here.
I think Mr. Obama is being poorly advised.
Cheney: “Reagan proved that deficits don’t matter”
If you believed it back then, then you shouldn’t start complaining now
Another massive disadvantage for the one poor bastard who didn’t jump on the guvmint teat (Ford). I bet the buggy whip industry is kicking themselves (with their zombie feet) for not thinking of having the government bail them out a hundred years ago. If there had been an “environmental” movement at the time I bet they would have argued that horseshit and methane were greener than cars.
I’m with Detroit-Iron.
Yet another kick in the nads for Ford. This thing is going to get political with Ford soon, since they are being forced into a corner as it appears from here. I hope they scream and shout right away and that the people actually respond by buying their cars & trucks.
With 4500 dealers at an avg of say $1.5million, lets call it $6,750,000,000 outstanding.
What’s next? Are they going to subsidize the shine shops that prep the new cars for these dealers?? How about the vehicle transporters?
Bob Cockerham, owner of Car World Kia in Santa Fe, N.M. “This could end up igniting the runaway inflation that some economic analysts believe will result from uncontrolled, unsustainable federal deficit spending.”
I think I’ll pass on economic advice from “some analyst” as interpreted by owner of Car World Kia.
They will do anything to prop up the price of their product. No one is able or willing to afford the product becaue the value is not there.
So instead of doing the natural order of things by reducing the price, the manufacturer gets propped up- can’t make money from selling your product? No problem, here is free money to keep your company afloat.
Now the stores can’t make money from selling your product, and the business community consequently finds you too risky to loan you money? No problem- here is free money, charge whatever you want for the vehicle. You don’t have to worry about selling it, just build your inventory and we’ll pay you to do it.
That’s why we go to work everyday for long hours and make sacrifices, after all. It’s the least we can do.
@boosterseat
This Floorplanning Loan program is available to all dealers (yes ..that includes Ford dealers). You will notice that these are actual loans, not free money. Interest will be payed, the money will have collateral. By the way your sacred Ford is letting it’s dealers die a slow death. They are removing points by attrition. just went to Indy for the race up Hwy 41 in Indiana. Just on that small trip I counted four Ford store closures (fresh ones too). One in Terre Haute, which was a pretty good size store.
All the floorplan money in the world won’t matter when 600K potential customers lose their jobs month after month.
@dpeppers
These are not even loans. They are “loan guarantees”. It doesn’t seem like a single commenter paid attention to the article. The government in only on the hook for defaults. By guaranteeing the loans, the government allows the dealers to get better terms.
motron wrote:
“These are not even loans. They are “loan guarantees”. It doesn’t seem like a single commenter paid attention to the article. The government in only on the hook for defaults. By guaranteeing the loans, the government allows the dealers to get better terms.”
By your logic the gov’t should just guarantee all the loans outstanding in the US then, correct? That would solve all our problems, now wouldn’t it? Maybe you are on to something, though, because that seems to be what they are doing anyway: FNM, FRE, commercial real estate, auto companies, dealers, suppliers, soon to be credit cards, municipal bonds, local governments, etc., etc…. Ah yes, that is what this country was built on.
I agree with capdeblu… at least this money stays in the USA. I prefer it stay in my pocket of course, but it beats wrecking a tiny country in the middle of the desert just because we had some “bad intelligence”. Well unless those hidden WMDs were actually under the hood of Sebrings all this time ;)
Gimme Gimme Gimme Gimme Gimme Gimme Gimme Gimme Gimme Gimme Gimme Gimme Gimme Gimme Gimme Gimme Gimme Gimme Gimme Gimme Gimme….
Taxtakers should not be allowed to live in civil society…They are no different than muggers…Just more cowardly…They vote for scum like Obama to steal for them.
JMII, capdeblu, GBooth, and other assorted lefties… you forget or just mindlessly ignore the situation in Iraq that existed before the invasion and liberation of 25 million-some souls. Saddam was a butcher of his own people and a direct threat to our interests in the region and had executed acts of war against us and our allies in the area that President BJ should have addressed. Remember that freedom is never free and is, in fact, priceless.
But that isn’t about cars so… I fear for Ford too and how they are going to make it with all the Gov. hand outs to their domestic competitors. Gov. Motors and Chrysler/Fiat will NEVER get any of the few dollars that Obama, the Dems and the Chicago Thugs let me keep. On our summer trip I’m renting a Ford or Toyohondasan to drive, F’ the rest of them.
Martin Schwoerer@
“Cheney: “Reagan proved that deficits don’t matter.”
If you believed it back then, then you shouldn’t start complaining now”
Um, Martin…Reagan also instituted a myriad of tax cuts which stimulated the economy, something Obama’s massive – MASSIVE – spending has not done. And, despite the bald-face lie that taxes would not increase for 95% of working families, every one of the Messiah’s proposals are going to cost working families more. and more. and more. Of course, since he is putting people out of work faster than we can count, pretty soon there won’t be that many working families to worry about.
By CBO estimates this is not peanuts compared to the trillion wasted in Iraq. In fact, Iraq is peanuts compared to the 10 trillion additional debt Obama and the loons in Congress have hooked us on to in just the past 4 months.
And what did Obama say yesterday “You ain’t seen nothing yet” …?
Tell you what Barry – I’ve seen far too much already. You aren’t impressive at all.
In the immortal words of Colonel Nicholson at the end of “The Bridge on the River Kwai”, I am sure Obama voters who realise the “madness, madness!” of what is happening are saying “What have I done?”.
Here’s a few graph for you:
http://zfacts.com/p/318.html
That one highlights debt as a percentage of GDP (which is a truly relevant statistic and one of the drivers behind our possibly-pending loss of triple AAA bond rating as a country).
http://blog.heritage.org/2009/03/24/bush-deficit-vs-obama-deficit-in-pictures/
I couldn’t find this graph anywhere more neutral, so please don’t complain to me about the source. The graph is compiled from actual past deficits and projected deficits from both the white house and CBO.
I understand minor (1-3%) debt spending, though I don’t think it wise when our entitlements have been out of whack for quite some time. Our debt remains static and is recorded in dollars, while inflation decreases the actual cost of the debt.
This article reflects bizarre decision-making.
Dealerships for chrysler and GM have a high likelihood of needing to go out of business, or diversify into a new franchise. Why are these businesses being rewarded by government backed loan guarantees? Why not all businesses fitting a certain model, including dealerships?
For those that say this is just a $30 billion commitment and not actual spending by the government: Please remember that the government just “forgave” a $15 billion “loan” that it provided to GM a few months ago.
I like 1 through 26. (distracted)
A billion here, a billion there, pretty soon you’re talking about real money.
Wake me up when it’s over.
Wildbill is bad at math. The U.S. government killed more Iraqi citizens during the last decade than Saddam.
Tommy – Care to present that link?
I thought not. The only thing close to what you are claiming is the Lancet article which has helped make the Lancet a laughingstock.
Dealerships for chrysler and GM have a high likelihood of needing to go out of business, or diversify into a new franchise. Why are these businesses being rewarded by government backed loan guarantees? Why not all businesses fitting a certain model, including dealerships?
You could argue the same for the banking industry, and you would be a laughingstock.
—
The only thing close to what you are claiming is the Lancet article which has helped make the Lancet a laughingstock.
Really, so the real serious scientists must believe in compiling totals from newspaper obits.
I understand minor (1-3%) debt spending, though I don’t think it wise when our entitlements have been out of whack for quite some time.
What you don’t understand is that these number should be cyclic with the business cycle. You run surpluses during the good times and deficits during bad. These are really bad times, and I don’t see the surpluses when it seems the wealthy were rolling in the dough.
on the plus side, when my current luxo-SUV lease is up, I can replace it for far, far less with a lightly used SUV/car.
Based on comments here and elsewhere I’m not alone, and even if the price of the used car is driven up, the guy selling the new SUV is still screwed.
“I understand minor (1-3%) debt spending, though I don’t think it wise when our entitlements have been out of whack for quite some time.
” – Me
“What you don’t understand is that these number should be cyclic with the business cycle. You run surpluses during the good times and deficits during bad. These are really bad times, and I don’t see the surpluses when it seems the wealthy were rolling in the dough.” – Agenthex
I completely agree with that statement, except that ideally a government should be able to reduce discretionary spending in a bad time sufficiently to prevent a deficit (i.e. if government income drops by 10%, they would ideally be able to decrease discretionary spending by 10%).
And, to you point, if you are running surpluses during the good times it is far easier to cut spending and avoid running a deficit. My point was simply that I understand the concept behind deficit spending, not that it works well in reality.
“The only thing close to what you are claiming is the Lancet article which has helped make the Lancet a laughingstock.” – me
“Really, so the real serious scientists must believe in compiling totals from newspaper obits.
” – Agenthex
Do you know the methodology they used? It was obscene. Here’s some keys for you:
– They used 47 “cluster” interviews….which is just ridiculously low for statistical accuracy when expanded to an entire country.
– They interviewed main street households (i.e. off a main street in the city, a flaw itself) and asked about “deaths” in the household pre-invasion and post-invasion leading up to July 2006.
– The difference in “deaths” was determined to be caused by the U.S. invasion and deemed “excess deaths”.
Note: Consider here for a moment the implications that all deaths after the invasion were attributed to the U.S.
– The Lancet report said there were 82 deaths pre-invasion and 547 post-invasion, then multiplied up in relation to the Iraqi population of 27,139,584, and came up with an estimated 654,956 “excess” deaths, 2.5 % of the population.
– 601,027 were attributed to the violence (mainly from gunfire and mainly among men aged 15-59), the rest coming largely from increased illness and disease.
(Note that the gross figure of ~650k was inflated by 50k with illness and disease, again being attributed to the U.S. invasion in the ultimate report)
– If it is assumed that there were 601,000 violent “excess” deaths between March 2003 and July 2006 (about 40 months), that should produce an average of about 500 violent deaths per day.
My point behind this is not to CREDIT other numbers, but to discredit this report.
It was not a study, per se, but an exercise in statistical manipulation.
Scientists manipulate information nearly as often as politicians unfortunately. And to your point, the real scientists try to conduct relevant studies to bring useful information to light.
Joe
I completely agree with that statement, except that ideally a government should be able to reduce discretionary spending in a bad time sufficiently to prevent a deficit (i.e. if government income drops by 10%, they would ideally be able to decrease discretionary spending by 10%).
Perhaps they can, but it’s not necessary a good idea. We’re talking fiscal policy, which has a lesser contribution than monetary during normal cycles. The point is that during REALLY BAD times, monetary interest cut even to 0 cannot inject enough capital to prevent deflation, which is why gov spending is necessary to maintain employment and break the spiral.
On the normal fiscal side, gov “waste” is not nearly as bad as advertised. Every few mil is argued endlessly on the senate floor or whereever, and it’s a reasonably transparent process. The discretionary budget is not that large, and it’s mostly military related anyway.
–
It was not a study, per se, but an exercise in statistical manipulation.
You realize this is how epidemiological studies are usually done, right?
–
Scientists manipulate information nearly as often as politicians unfortunately.
No they don’t, which is why they tend to be generally unerring relative to any other field.
WildBill: Take a chill pill. Yes, Saddam was a bad guy, but at one time we supported him. We have supported alot of bad guys until they were no longer useful. THe Iraq war WAS A HUGE WASTE OF TAXPAYER DOLLARS!!! What did we get for that?
Lots of dead American soldiers who put their lives on the line for the most dishonest and crooked President and Vice President in the history of the United States. THe same Administration that delivered the worst economy since the Great Depression. The same ones who started the auto bailouts. So you know what? Stop whining about how terrible Obama and the Democrats are. There not perfect, but they are ten thousand times better than the jerks and crooks who ran us into the ground for the last eight years. Bush and Cheney are still lying through their teeth about what happened with “WMDs”. THey should just shut the hell up and go away. Nobody misses them. Not even all the Republican-donating car dealers and executives.
amadorgmowner@”Bush and Cheney are still lying through their teeth about what happened with “WMDs”. THey should just shut the hell up and go away. Nobody misses them.”
I do.