Saturday, August 22, 2009

Cash for Clunkers Ends

In thinking about what will finally come out about Cash for Clunkers once the chapter is completed on this miserable idea, here is a list of the possible things that will come to light:
  • Originally budgeted for $1B with a $2B added at the beginning of August to take the program through November, I suspect the program active only through 8/24 will end up costing more than $3B

  • The $3B was supposed to be all payout money to stimulate the sale and reclamation of automobiles. I suspect we will find out that some large portion of that money or of additional funds will have been used for the administration of the program. What that final figure is will be shockingly high for the return.

  • Sales of automobiles under this program will not be all that stellar and will not justify the expenditure. See July auto sales.

  • We will find that customers either held purchases in the 90 days before or expedited purchases from what would have been the period after the promotion thereby making those periods a time of weak sales.
  • Automobile dealers and manufacturers will end up in the red for advertising creation, production and distribution of promotional material for the program which ended early and was rife with problems.
  • Automobile dealers and manufacturers will end up in the red due to late or missed payments from the government for vehicles sold. The government is already missing payments to these parties which means that working capital is sitting on the sidelines. In addition, these parties may also be paying interest on short-term loans they may not have taken if not for the gap between sale and payment.
  • There will be fraud on the dealer side as well - applications to the government will be made for transactions that never took place. This will happen for a couple of reasons - 1) corruption always happens especially when dealing with the inefficiencies of government bureaucracy and 2) the system appears to be so broken that thieves will rush in sensing an advantage.
  • There will also be fraud in the handling of "junked" cars - some number of the cars that were destroyed will make it back on the road. Some will work the system when they sense that the government cannot enforce and when the prospect of $5,000 or more to resell "junked" cars looms out there.

No comments:

Post a Comment