Posted on 02/08/2009 6:45:17 AM PST by Diana in Wisconsin
As auto sales nationwide continue to dwindle, a Wisconsin auto dealer has offered a solution to boost demand and revive the flailing U.S. auto industry: $5,000 government discounts.
John Bergstrom, CEO of Bergstrom Automotive based in Neenah, Wis., wrote a letter to President Barack Obama late last week suggesting that everyone who purchased a new vehicle in America, no matter where it was built, be given a government voucher for $5,000 during a 90-day period from Feb. 15 to May 15.
The manufacturer would match that with another $5,000 voucher, meaning buyers would get a $10,000 discount under Bergstrom's proposal.
"If the government, the manufacturers, the financial institutions, and the dealers all work together, we could give our economy a huge positive jolt," Bergstrom wrote. "Together we could get this industry rolling again in a hurry."
Bergstrom's plan also assumes dealers would agree to sell the vehicle at invoice pricing, and financial institutions would finance credit-worthy buyers with 72-month loan at a 5 percent interest rate.
The plan could eliminate the stranglehold inventories of new vehicles piled up across the country, and generate new vehicle orders that would bring people in manufacturing and parts plants back to work almost immediately, Bergstrom wrote.
While Bergstrom Automotive has also seen its sales volume decline last year, Bergstrom said his proposal was not self-serving.
"I'm very concerned about workers out of work," said Bergstrom in a recent interview. "It's very important to get them back to work. There's no reason to dwell on getting manufacturers' costs down."
According to Reg-Trak, a Waterloo automotive research firm that tracks state auto sales, new car and truck sales declined by 13 percent last year in south-central Wisconsin. Truck sales, including sport utility vehicles, declined 15.4 percent while car sales declined 10.2 percent.
In Dane County, car and truck sales in 2008 declined by 11.5 percent from 2007.
However, Wisconsin and Dane County fared better than the nation as a whole in 2008 -- total U.S. car and light truck sales were down 18 percent, the worst performance since 1992.
Bergstrom said the White House acknowledged receiving his letter, but as of Friday they had not provided any further response.
Bergstrom's proposal has generated some support among his peers in the auto retail industry. Allen Foster, general manager of Smart Motors in Madison, said he favored anything that would help stimulate the economy.
"The more we can give consumers, the better," Foster said. "We need to restore consumer confidence."
In a bid to boost auto sales, the Senate voted Tuesday to add an $11 billion provision to the economic stimulus package that will allow most Americans to claim a tax deduction for the sales tax and any loan interest on the purchase of a new car from Nov. 12, 2008, to the end of 2009.
Mr. Bergstrom's proposal takes this to the next level, Foster said.
Smart Motors actually bucked the national trend of declining sales, as 2008 was a record year for the company. Still, Foster felt more should be done to stimulate the economy.
"I'm in favor of anything that helps people get their confidence back," Foster said. "It will be better for all of us in the long run."
The customer thinks this is a “giveaway” to benefit them.
But this is the dealer talking, and HE thinks this is a giveaway to benefit HIM.
The dealer thinks that, given the voucher, he can raise prices, or avoid giving a discount. So the customer will pay the SAME NET PRICE for the car.
I don’t understand why people don’t get this.
Another scary thing to contemplate: Bambi’s bailout contains how much — $billions? — of “health care subsidies”.
As sure as night follows day, INCREASED HEALTH COSTS will follow these subsidies.
>> 11% doesn’t seem like the end of the world.
Leverage works both ways.
i would love a new bmw. just a new 3-series, nothing extravagant!
This guy’s a genius at spending other people’s money!
I'm pretty sure this won't happen. If they know that the person buying the car has $10,000 of someone else's money then that $10,000 car becomes $11,000 or $15000. It's like the vouchers for the cable box for the digital switch. In the free market they would be sold for $10 or $15.00 bucks. Government vouchers forced the price up to $45 or $50 bucks.
Only a demrat would think that giving someone $5000 of tax payer money to puchase anything is somehow gonna help the economy. Only a demrat ignores the fact that tax dollar coffers are broke at every government leval.
It’s right up there with so-called “free” cradle to grave government-run health care. This model has failed everywhere it’s been tried, but by the Marxist god the left is determined take us down this road again and again. The result is as predicatable as a sunrise—trillions of tax payer dollars wasted.
The thing is that nobody wants to buy ANY car right now. Those who were buying at $30K are not now buying at $20K. Car dealers are good at pulling numbers out of thin air, and this is just another example of that.
Unfortunately, it's going to be the other way around.
Oh they're thinking about it, they're going to to do it, they just haven't figured out all the details:
They looked into the possibility of sending debit cards to all 150 million American households, but decided it was not yet logistically feasible.
Didn’t the auto makers do this with the rebate a few years ago? Their sales went through the roof. But, of course, the auto makes probably don’t have cash to spare anymore.
You’ve got to give this guy the prize for the most self enriching special interest proposal yet.
Ya a Mustang!
I’m actually looking at buying a car right now. Now way I’m buying a car from a company that took bailout money
Looks cool, hows it run in snow? LOL!
No ponies for YOU! ;)
You can actually get free horses. It’s the transportation, boarding, feed, and supplies that cost money
What the heck is that? Batman’s golf cart? LOL!
Not a Pinto, that's for sure.
Has anyone up there considered the effect this will have on the value of used cars? Will used car dealers now go out of business because the value of their inventory drops through the floor, but their working capital loans stay at the same value? Are we going to bail out used car dealers?
Then . . . when used cars have such little value and you bring your used card in as a trade-in on the new card — you know, the one for which you have a voucher — won’t that play out in the bottom line of the entire economic transaction?
I didn’t major in economics, but I did take in in college, and I do have an MBA, and I did take it in law school . . . and something’s just not right here.
I’m a new car dealer and I’m taking your used car in trade. It now it worth less than it was in the pre-voucher days because the net cost of new cars has decreased . . . why would I give you as much in trade today as I did before vouchers existed?
And . . . if you can’t make payments on your car loan because you lost your job . . . your used car is now worth less when the bank repossesses it and sells it. You’re further upside down. The bank now comes after you for more money after the post-repossession sale. Are we going to bail out those who default on car loans who now will owe more because the repossessed used cars are worth less?
Am I crazy and missing something here, or doesn’t this skew the entire market? Isn’t is dropping a boulder in a lake and nobody in Washington or in the media is willing or intelligent enough to focus on the residual waves caused by this?
You certainly have low expectations - I'm expecting to get my unicorn that $hi+s Skittles any day now. :=)
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