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Cash For Clunkers Debacle (10 Years Old)

Discussion in 'Off Topic & Everything Else' started by Alexander Lau, Mar 25, 2019.

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  1. Ralph Ebersole

    Ralph Ebersole
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    Ralph
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    activEngage
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    From a dealer point of view, it didn't matter whose fault it was. The ship was sinking. If we the tax payer hadn't bailed them out, they may not be here today. I don't remember other government bailouts of the industry with the exception of Chrysler in the early 80's--there may have been some--and Chrysler would have gone down if not for that one. No question.

    I assume nothing and try to deal with facts. Fact is your LinkedIn profile doesn't show involvement with the industry until 2011, but that may be my bad for assuming it is correct.
     
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  3. Alexander Lau

    Alexander Lau
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    Yes, you're spot on. It was conversations with internal GMs (at that point) that spawned my claim.
     
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  4. john.quinn

    john.quinn
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    A.L .-- I can understand the political B.S. -- this stimulus political argument has raged since the New Deal. I don't understand the question from the auto industry point of view.

    It is worth mentioning that the initial impetus/claim for C4C centered around getting older, gas-guzzling models off the road (Clunkers), in favor of newer, fuel-efficient models. So much so that there was an intricate litany of government guidelines that had to be met before a transaction was eligible for government reimbursement. I do remember D.C. claiming "victory" insomuch as whatever charts and graphs they showed at the time purporting how much less fuel would be burned as a result of the program. I put as much stock in those reports as I put in the reports I used to fabricate to show how fabulous was my performance in my self-built Internet Department... :)

    To my knowledge and memory (admittedly both quickly fading...), there were two levels of Dealer discontent during the program:

    1. Smaller dealers without qualifying units. The aforementioned guidelines stipulated only certain units would qualify. As a result, dealers sitting without inventory simply "missed out" and watched as the guy across the street paraded deliveries over the curb... green with envy, to be sure.

    2. Getting reimbursed from D.C. was an absolute nightmare for many, maybe even MOST dealers. As I recall, the program was hastily assembled and funded with something like $1B (I'm sure someone can quickly fact-check the actual numbers... I'm too lazy). The program would run until the money ran dry. But it turned-out that the money ran out in something crazy like 7-10 days or maybe 2 weeks -- it was a runaway success. So congress scrambled and funded something like another 4 billion into the program, extending C4C another month or so.

    It's critical to understand that dealers were delivering cars on the promise that D.C. would reimburse the dealers for the rebates passed along to the customers at delivery -- some up to $4500 (again, memory??). Dealers already short on cash flow struggled. I do remember some dealers refusing to deliver units until the rebate was in-house -- and that took weeks and weeks, and longer if you were not buttoned-up on your paperwork. D.C. was scrambling to hire accountants and administrators as the program continued; no one anticipated the runaway interest in the program.

    So yeah, if GM's fell into one of those two categories, I could understand some sour grapes. But at the end of the program, D.C. funded a few billion dollars in rebates, which was seen as "free money" to anyone still holding on to that '82 Skylark. And it turns out, there were a whooooole lot of 'em. I distinctly remember this one old couple trading-in in their early 80's Eldorado battleship on an Elantra. No joke.

    Those are the facts and the truth of the matter to the best of my recollection.
     
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  5. Tallcool1

    Tallcool1
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    I was the CFO for a small dealer group. I oversaw 3 stores and there were approximately 10 total. We were hurting bad. Treading water at best. This program saved our ass.

    In my opinion, it was absolutely brilliant. It was as close to free as any stimulus. The dealers in our 20 Groups reported record profits. The dealers paid record income taxes, the customers had to pay income tax on the incentive, the consumer paid sales tax and property tax on the purchases they likely would have not made, and all of the employees paid tax on their income that they otherwise would have never earned. I'd honestly estimate a 125% direct return on the total stimulus package.

    Getting paid was a bitch, no question about it. We had a lot of money sitting on the books and I was sick to my stomach for 6 weeks. I actually recall securing an operating loan to cover us until we got paid...but we did get paid.

    I remember dealers that actually refused to participate due to fear of not getting paid. I remember having a long meeting to decide if we were in or out. We went in, some dealers didn't.

    When the fire is burning hot, the idea is to cool it off with no regard for criticism years later. Bottom line is we all lived to fight another day.
     
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