Americans Bought the Right Cars, Just Made By the Wrong Country. Oops.(Image Credits: www.theweeklydriver.com)
What could have been better news to come across my iGoogle after returning from my late Summer holidays than that the US Government has ended the Cash For Clunkers scheme after one month. I wrote a lengthy diatribe in my last entry about what a circus-ugly plan CFC was, and it seems that Uncle Sam and the American auto industry agrees with me. What better way to bolster your homegrown automakers than to scythe out even more market share from underneath them while they restructure to offer the sorts of fuel efficient cars they should have been selling anyway and shuffle more customers over to their competitors' better constructed products? Government intervention was necessary. However, it seems that the government bought into its own hyperbole and false urgency. A sensible plan would have been to get together with the product planners from the Big Three, find out how quickly they can get their four-cylinder cars to market, and then launch CFC at the same time amid a surge of Labor Day 'yay for the USA' feeling. This Economist article highlights how CFC was a 'devil's bargain,' of sorts. CFC was necessary to avoid a Keynesian liquidity trap (when the public saves money when they should be spending). The article also highlights that Americans now are considering the costs of ownership, rather than just the costs of purchase. But by encouraging spending, the Government unwittingly pushed consumers over to foreign competitors. Combined, the 'Big Three' netted only 39% of the money offered under CFC. Meanwhile, the Toyota Corolla came out on top; the nearest American competitor was the American Focus in a dismal fourth. Hence the economy was saved at the expense of the industry the Government was trying to protect. One certainly hopes that any plans the Government has for the health care system will be more well-thought than CFC, but I'm not holding my breath.
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