Cash for Clunkers

Many funny terms & jargon's emanated after the grand bust of 2008 and amongst them ‘Cash for clunkers’ best reflected the euphemism that Americans invented to deal with the aftermath of the excesses. So here was a state funded dole out that encouraged Americans to let go off their gas-thirsty vehicles off of the roads. But whats that go to do with their economy going belly up you might say. Pure economics was the main consideration though to an undiscerning eye it meant that Americans got new, efficient vehicles on their roads where gas-hogs once existed. And I guess there were plenty of takers for the $4,500 vouchers toward new vehicles, it was said that Auto Dealers everywhere in US ended up seeing more clunkers than they ever thought possible. Its another matter that they will make money out of these by recycling it to some poor 3rd world market.

The economics behind ‘cash for clunkers’ was revealing, it actually busted the American ‘free market’ hyperbole that is ‘Tom Tom’ed around the world. The big 3 US Automakers (GM,Ford & Chrysler), much like the motifs of dead towering presidents on Mount Rushmore were destined to be engraved on Automotive history for posterity . That was ideally what the market forces operating in a free market would have wanted to. But no, the stakes were too high for the Govt to sacrifice, closing the Big three would mean loss of 240,000 very highly-paid jobs, a loss of 980,000 highly-paid jobs at the suppliers and local dealers, plus the loss of 1.7 million additional jobs throughout the economy—a total loss of 3 million jobs. Never mind they churned out large sport utility vehicles (SUVs) and pickup trucks that made customers turn away from the counters. It also dint matter that Darwinian market evolution missed them completely, these US automakers became increasingly uncompetitive suffered from considerably higher labor costs than their non-unionized counterparts from Japan & Europe, including salaries, benefits, healthcare, and pensions. In return for labor peace, management granted concessions to its unions that resulted in uncompetitive cost structures and significant legacy costs. And the damning message came as early as in 2006, Consumer Reports reported that all 10 of the cars that it considered to be the 10 best were built by Japanese companies.So the bust came as a blessing in disguise for the Govt to bail them out, even though only 41% of Americans approved of the actions (as per Washington Post poll finding).

If you missed the humor in all this here it goes; The message from the US bailout was clear ‘If you are poor & loose $100 the Govt would do nothing to you , but if you are rich & loose the $100 billion, the Govt would bail you out’ . Bizzare but true.