Thursday, August 20, 2009

Cash for Clunkers: Going Fast

It was only two weeks ago that the Senate voted to appropriate another $2 billion to keep the Car Allowance Rebate System or CARS (better known as the cash for clunkers program) going. That $2 billion is set to run out Monday night. The New York Times reports that the program has helped finance more than 457,000 purchases since July 24. Car lots have been emptied in the rush, prompting automakers and suppliers to ramp up production lines that had been quiet since last year.
As I wrote two weeks ago, the primary purpose of CARS is to stimulate demand, and nudge the country in the direction of better fuel mileage while we're at it. As of today, the number of vehicle purchases financed by CARS should be enough to drive the seasonally adjusted annualized rate (SAAR) well above the break even point for GM, Chrysler and Ford for the second month running.
Keep in mind that less than six months ago the survival of GM and Chrysler was very much in question. GM's auditors had forced management to insert this troubling sentence in the company's annual report:
"There is substantial doubt about our ability to continue as a going concern."
Buyers are opening up their checkbooks, lots are being emptied, assembly lines are being fired up, workers are being called back, and sales have climbed above Detroit's break even level. The cash for clunkers program looks like it has been a decisive success.

1 Comments:

Anonymous Anonymous said...

Stupid government getting people back to work and nudging up fuel economy. It is fascism I tell ya.

8:47 AM, August 21, 2009  

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