Got a Clunker? Want Some Cash?
June 12, 2009
The U.S. House of Representatives passed the alliteratively, but aptly titled "Cash for Clunkers" legislation this week. Today, according to the Detroit News' online site, detnews.com, senators and representatives are hammering out a compromise on the $1 billion measure meant to jumpstart skittish consumer demand for new cars in the U.S. and thus aid the struggling auto industry.
The one-year plan would offer car owners vouchers up to $4,500 to turn in their gas-guzzling vehicles for more fuel-efficient models made in the U.S. Taken off the nation's highways, turned-in vehicles would be scrapped. The legislation's goal is to sell 1 million vehicles. According to the Detroit news outlet, the Senate and House are expected to pass a compromise plan next week.
Worked for Germany
It's a plan that has worked in Europe, most notably in Germany, as Bill Ford, executive director of Ford Motor Company, pointed out in a recent opinion piece in Fortune magazine's Fortune 500 issue. In January, Ford noted, the German government offered its citizens $3,200 to scrap cars, nine-plus years old, and purchase new, eco-advanced vehicles. By March, auto sales in Germany rose 40 percent over the same month in 2008.
The plan would work here in the U.S., Ford said, reporting a Goldman Sachs estimate a clunker turn-in program could boost demand by 500,000 to 1.5 million vehicles a year. "A boost of that magnitude would help preserve jobs across the country, from workers making cars and parts to those in local dealerships," in addition to environment benefits, said Ford.
He went on to cite Energy Department figures that a family could save $780 a year by switching to a vehicle that propelled fuel saving to 30 mpg from one with 18 mpg.
Admittedly, Bill Ford's perspective on this massive vehicle turnover is colored by the prospect of his company's business future.
But is It Good for the U.S.?
Others, including some environmentalists who decry the idea of 1 million vehicles ending up in landfills across the nation and those who view the increasing national debt with horror, are definitely not on the bandwagon for this program.
Our own fleet industry champion, Ed Bobit, correctly pointed out in his June 2009 Automotive Fleet back-page editorial such legislation would have very little, if any, direct impact on commercial fleets. One objection he voiced to the clunker plan was the potential promotion of smaller vehicles, such as "the so-called 'minicars'-Yaris, Fit, Smart," that had just failed industry safety standards.
Offering an avenue to register opposition to the legislation (www.fightcashforclunkers.org), AF's chairman further opined the vehicle turn-in program "may or may not help Detroit because the people who possess clunkers are generally those who can't afford to buy new ones, even with an incentive."
Now, hesitant as I am to disagree with my boss - whose office is just down the hall- I must offer a dissenting view on that last point: folks targeted by the Cash for Clunkers plan couldn't afford to take advantage of its incentives. I dissent because my household, and at least a few others I know, are watching the legislation's progress with a more than a little self-interest.
We have a 1996 Toyota 4-Runner, bought used several years ago when family needs and activities required greater cargo and people capacity. Today, we drive the SUV as little as possible - mpg is ghastly, not to mention what's spewing into the air from its tailpipe (although it has passed its most recent California emissions test). Like many other U.S. consumers, however, we're reluctant to take on a new car payment just now, even though we've been blessed with ongoing employment.
Would we turn our clunker in for cash to help buy a new, environmentally-responsible and gas-sipping car? Just show me the dotted line.
As the Butterfly Wings Flap
I strongly suspect we are not alone in this demographic. And as, one by one, new cars are purchased with the program's help, the auto industry will get a boost. Eventually, that boost, in turn, can help lift the economic recovery, improving U.S. corporate outlooks, corporations that operate fleets.
The flapping of a butterfly's wing, mathematicians tell us, can stir up the air over Africa enough to set off an exponentially growing chain of global weather changes that causes a hurricane the next month in Miami.
With that cause-and-effect paradigm in mind, where do I turn in my 1996 4-Runner?