Car subsidies: What works, what fails
- Source: Gasgoo.com
- [14:45 August 26 2009]
- Comments
If one country should have reason to continue its stimulus program, then it is America. Despite the cash-for-clunker success, US July sales were still down by 12.2 percent in July 2009, compared with July 2008. With the program ended, August sales will most likely still be robust, while September sales are expected to be a disaster.
While the US government is stingy when it comes to stimulating flagging sales, it surely is generous in propping up car companies that suffer from sagging sales.
According to theWashington Times, GM has so far received $68.7 billion in government funds. Moribund Chrysler is said to have been given $17 billion by the government, in an attempt to make it pretty enough so that Fiat would take the company as a gift.
Both companies were taken bankrupt, which cut a wide swath of destruction through suppliers, bondholders and other creditors at a cost of many billions more. Experts put the total cost at more than $100 billion.
The three programs in Germany, China, and the US all worked, sometimes beyond the wildest expectations. The US program became a victim of its own success. It was underfunded and was stopped before it could make a real impact.
If the US would have taken the more than $100 billion the GM and Chrysler disaster has cost so far, and would have given it to consumers as a stimulus, that money could have generated sales of more than 20 million cars, more than the US ever sold in a year.
