bitkahuna

iTrader: (20)

Heard this and thought it was a good idea.

Instead of big loans to the auto companies, how about just give the PUBLIC a tax credit or straight discount on any GM/Ford/Chrysler vehicle they buy, say, $5K! Might be cheaper than the 'loans' which we all know will never be repaid and are just the BEGINNING.

J.P.

They made it sound like they need working capital NOW, so I am not sure that would fix the short term issue.

Long term, it may be a good idea to do something like that to help the battle for market share.

spwolf

how does that work? Toyota/Honda/Nissan/Hyundai/MB/BMW/KIA produce locally in USA as well...

besides, USA has been driving force behind WTO, that made many closed markets open the doors to US goods, if they taxed american products higher, US economy would end up being at much worse position than now

tex2670

They pass legislation that specifically identifies the make and models that it applies to. They won't say you must buy an "American car" for your cited reason, and the inverse--all the Big 3 autos produced and assembled in Mexico and Canada.

Maybe they can reduce the amount of the loan, and make the plan some kind of combo.

PhantomZX

I don't know how well this would work - people just aren't in a spending mood right now because of uncertainty over their jobs, etc...

For me personally, I'd still be concerned at the quality as well as treatment by the dealerships sales and service departments.

mmarshall

Yes, I think it's basically a good idea too, but I'm not sure it would necessarily help a lot of American auto workers. A number "American"-badged vehicles are produced abroad, with foreign labor. The Chevy Aveo, for instance, is built in Korea by Daewoo. Many other Chevies and Pontiacs are built in Canada. The upcoming Ford Festiva, soon to be introduced here, will be built in Europe. The Ford Focus is built in Mexico. Some Dodge/Chrysler products are also built in Canada. There are, of course, many other examples....so, to an extent, the tax credit would end up pumping up the economies of other countries as much as our own.

jwong77

I think this is a terrible idea, its just another crutch for them to lean on. "Hey lets not advance our car designs any because the government is just gonna help us sell our cars anyways!" Let the free market decide if they should stay in business. If they do indeed fail it would have been of they're own doing.

litesoarer

Have you at all given any thought to the fact that if the big three fail, The imports we buy now may see a significant price bump since they do not have to compete with the big 3 in price anymore? Is this acceptable to you?

I8ABMR

You will lose more money in the long run even if a small tax credit. I have two people on my staff who drive 07 and 06 Tahoes. Both had to have the motors replaced under warranty this past month. When one of the ladies asked the dealership for the corporate number to complain the service rep told her go ahead, its not like they care. They are agoing under. NICE

I8ABMR

They are not going to disappear. They will be bought by larger companies like renault and nissan in the 90's. Still here but with new management. The japanese car makers will still need to compete with each other. We will be fine. I really really hope they do go bankrupt so they do a total overhaul top to bottom. Since the current CEO of GM took over almost a decade ago the cars stock has fallen miserably. I cant believe that piece of crap even still has a job.

Threxx

It sounds good until you consider the nature of the economy...

Give people $5k in credits toward any domestic vehicle and you'll first see people buying left and right but quickly see dealers start adjusting their prices higher to compensate for the increase in demand until it's as high as they can charge without reducing demand.

I guess you could force dealers not to adjust but then how do you realistically come up with a 'frozen' price in a sales environment where every single deal involves a ton of negotiate, given and take?

FKL

No, nobody actually "knows" this with any sort of certainty.

They need capital to shore up their debt and balance sheets, not some sort of loosely devised structual tax incentive (which would carry many more problems than it solves, including price manipulation be dealers on increasing demand).

Lexmex

I think getting a car is the last thing on people's mind right now. Without a good economy, people are going to opt to keep up and maintain their current vehicles, even chopping off the price via tax credit or whatever won't produce buyers, and that goes for a lot of other items other than cars, people simply don't have the cash or even credit available.

bob2200

I agree with those who mentioned WTO (World Trade Organization) agreements. We're into those agreements, like it or not. I wouldn't be surprised if our bailing out the auto companies violates some of these agreements. I seem to recall they are very broad in their wording.

RON430

As far as I know, the auto makers have still been forcing dealers to take cars. GFC record those as sales. The tax rebate would help dealers as they are the ones who own the inventory. It would end up helping the mfrs but indirectly. While I haven't seen the actual plans, I don't think that auto makers would be interested in this. They won't be against it. They just know it isn't their problem.

Last I looked GM had something like $44B in debt. In the commercial world, loans come with covenants. In other words the loans can keep revolving with interest payments if the covenants are met. The covenants can be value of assets, inventory value, etc. Or it can be in relation to cash on hand. I would guess that GM and ChryCo will be in violation of their covenants in January. That doesn't just mean their lines won't revolve, they will be immediately callable. So they need the cash, by Jan. 1, to insure that during Jan they don't violate the convenants. The covenants could also do some other things like automatically increase interest rates, force asset sales, etc. They could be anything. We just don't know what is really going on.

While the tax rebate might be the best way to help the dealers, I doubt the auto makers place it as a top priority. And then you have to get through this whole credit thing. You get the sense that anyone who is credit worthy that wants a car is getting a great deal. And if you are subprime, you can't get a loan. With or without a tax credit. From that perspective I suspect the question on the tax credit isn't "instead" of the bailout but in addition to.