18 December, 2009

Japan got it less wrong.

As you are no doubt aware, this summer, in a misguided attempt to kick-start the economy and bolster auto sales, congress gave a bunch of your money to people looking to buy a new car.

That’s all well and good, but when more than half of the new cars purchased were foreign name plates. That doesn’t do much to buoy the big three in Detroit.

Before anyone started talking about the whole ‘Cash for Clunkers’ program, I said if you want to give a Federally funded boost to GM, Ford and Chrysler, don’t give them a bail-out, give Americans a rebate for buying a new car. I am opposed to corporate welfare, which, cards on the table, that is what a bailout is.. but if you are going to give one out, a rebate for the purchase of a new American made car would be the way to go.

Instead, they did both, and failed miserably.

A large percentage of new vehicles purchased were at or below the mileage of the one being turned in, and more than half of them went overseas.

Now, before you say that most Toyotas, Hondas, Kias and Hyundais sold in the US are manufactured in the US, and many GM, Ford and Chrysler vehicles are manufactured elsewhere, that is a flawed argument, or at least not a complete one.
You have to follow the $$. Where does the money go when you buy a Honda? Sure, some money goes to the local dealer, some goes to the domestic plant, but the lion’s share of the profit goes to Tokyo. And the same goes for the Big 3, except 2 of the 3 stay in the US (dealer, and HQ)

Well, as they say, when the US economy is down, the world economy is down. And Japan, in an attempt to bolster its economy, has put together a ‘Cash for Clunkers’ clone. With one crucial caveat. In order to qualify for the credit, they must purchase a new domestic car.

In other words, GM, Ford, Chrysler, Kia, etc.. are out of luck. But what interest does the Japanese government in stimulating foreign companies, at the expense of domestic ones?