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Propping up the banks, insurers and financial service industries that employ far less people, and produce nothing of real value at a cost of several times what the Auto Makers were hoping for makes little sense on the surface either. Unless you are inclined to suspect it’s the organized theft of the treasury as I do by the powers that be.
Though it makes bad economic sense, surveys conclude most Americans would choose going to the dentist for a root canal than a car dealership to buy a new car. The average citizen would hardly bemoan the government’s refusal on that basis alone.
Unlike Bankers car dealers really spread their wealth around. It’s a self serving thought and action of course, the expectation is if your son’s little league team had their jerseys paid for by the local car dealer you will at least browse their inventory before perhaps making a choice to purchase elsewhere.
Car Dealers and Realtors happen to be independent News Papers bread and butter. These two industries typically make upwards to 80% of most of the advertising local news papers take in. Circulation and sales of news papers does not make them profitable. Advertising makes them profitable. Car Dealers and Realtors make them profitable.
Could it be that the or one of the main reasons for allowing the impending bankruptcy of the Auto Makers is to force the sale or closure of the nation’s last few remaining respected and independent sources of news? I wonder, what are your thoughts on this?
The Big Boys knew you can’t run a business that way. So they cut the Dealer’s Cost in half. Car magazines now had to post the new dealer cost figures. But in the fine print, was DEALER HOLD BACK of DEALER INCENTIVES as it was variously called.
The Dealer Hold Back is 2.5% and is line itemed on the invoice as a Wholesale Finance Credit. Memo is 5%. A manufacture's employee can buy a car out of a dealer's inventory at line 310 invoice cost, minus the 2.5% wholesale finance credit minus the 5% memo money. That is dead cost. Each dealer is given a production quota on a monthly basis that if they hit or exceede could earn them an overide incentive of anywhere from 500.00 per unit to 5% per unit depending on the production incentive set for the dealer. So a volume dealership can in theory make money on a car even selling it at dead cost.
Thank you so much Professor, I always so appreciate it when you can share your insights, vast knowledge and observations in the ever so polite and cordial way you do with friend and respected foe alike.
Then you have never worked around a hardcore union my friend. These abuses are not the employees choice all the time, because many are actually union rules. For example, yes playing cards half the day is a personal choice, but flagging equipment INOP because it was handled by someone non-union is a union rule. It does not matter to them what it costs to company, the union rules come first to them not the company. Then you add the other abuses that they can get away with on top of that, and you have a perfect storm of waste.
Excellent post! At first i was skeptical at bailing out the auto industry, cnn said that the industry has around 2 million employees, but they do give or take a few 100,000, but then realized the effects of them going out. It would have a mass ripple effect, many businesses rely upon the manufacturing and sale of cars.
Thank you also for your kind words. I appreciate it very much.
Thanks for bringing me up to speed! (I have not dealt in cars since 1990). I don't see how the Government under anyone could possibly let the American auto industry slide down the drink without a real effort to save it.
We need to cut the debt level of the US consumer. I don't care that it isn't fair, bailing out the banks isn't fair either, but without consumers spending mor ejobs will be lost and we willjust continue to circle the bowl. You could try to do it with rising wages, etc, but that is unlikely in these times, if anything the genral consensus is that the people losing their jobs were making too much to satrt with (I disagree). Ultimately much of the debt that consumers owe was originally borrowed from the Federal Reseve by the banks thenselves. The Federal Reserve created the money with bookkeeping entries or out of thin air. I say we wipe out our dedt with the Fedral Reserve and turn it into a nationally owned central bank.