Sunday, July 5, 2009

More potential hypocrisy from the schizophrenic Harper government


Today we learn that “Ottawa eyes $3,500 'cash-for-clunkers' program”, in which Canadians will receive $3,500 to trade in their old cars to buy new ones, in an attempt by the copy cat Harper government to artificially inflate demand for new car sales, as the US and other countries are doing.. This incentive program is a flagrant abuse of tax payer money that (by definition) could be used for a plethora of more worthwhile programs, like helping people save for their children’s education etc etc, but now that the Harper government has a vested interest in the ongoing and immediate viability of GM and Chrysler, we have them contemplating measures that are completely counter to the measures they took a short two years ago, namely their much maligned Green Levy program

Two years ago I found myself looking to upgrade my 2001 GMC Yukon with the purchase of a factory ordered 2007 Chevrolet Suburban with the new fuel efficient E85 engine. I had negotiated the purchase of this vehicle from an out of town dealer with a signed agreement, but had yet to get my trade-in appraised, when all of a sudden I learned that Jim Flaherty had announced his Green Levy program that would have seen the purchase price of this vehicle increase by $2,000. I immediately called the dealer and informed him that my order should be considered null and void, if there was any possibility that I would pay any part of this new tax, especially given that Flaherty had exempted all the GM cars produced in his riding of Whitby-Oshawa on the premise that they incorporated this new E85 engine and exempted all pick up trucks produced in his riding as well, on which the Suburban is based and which are no more fuel efficient. And yet I was expected to cough up $2000 more for this vehicle, in order to subsidize someone else’s purchase of a Honda Fit or a Toyota Prius? Good for Honda and Toyota, bad for me and GM.

Why did the Harper government see value in standing in the way of my purchase of a new fuel efficient vehicle two years ago that would have cost me $2,000 for nothing, and now they want to throw $3,500 of taxpayer's money at me to do the very thing that they previously stood in the way of? Are these people schizophrenic, or what? Do they have a clue about what they are doing? Where is their guiding philosophy for these random acts of policy, apart from making it up as they go along?

This Green Levy was implemented (like the income trust tax) with ZERO consultation with stakeholders (since that would require the capacity on the part of Flaherty to both listen and understand) and was decried (like the income trust tax) by the domestic car manufactures as discriminatory to their business interests.

Fast forward two years and we have the very same government now contemplating a reverse policy to the Green Levy (the Green Bevy?) that would see taxpayers-at-large subsidize the car purchasers of others, to the tune of $3,500 per vehicle.

Taken alone, this might have been a defensible policy to have implemented, but on the backs of all the other measures using taxpayer monies to revive a moribund industry, this is reaching far beyond the point of absurdity, as Canadian taxpayers will now be fully engaged in the following automotive resuscitation efforts:

- Billions in “loans’ to GM and Chrysler that both Harper and Flaherty have publicly acknowledged will likely never get repaid.

- Billions to purchase the equity of GM and Chrysler that both Harper and Flaherty acknowledge will be a long time before we see any return on, if ever.

- The Government of Canada assuming the new car warranty obligations and liabilities of GM and Chrysler.

- Taxpayers picking up the complete tab for the under funded pensions of GM, with no change whatsoever to the pension scheme offered to GM workers on a going forward basis that got GM into this mess in the first place.

- And now the Harper government wants to use taxpayer money to artificially inflate the sales of new cars? Doing so would be an absurdity, and completely counter to any vestiges that are left to Harper’s claim that he is a free market Conservative. The Green Levy of two years will have done a complete 180.

Taken collectively, these measure already implemented by the Harper government to resuscitate the automotive industry, can be considered as “cash for clunkers”, namely billions upon billions for GM and Chrysler. Enough is enough. We don’t need another program that actually goes by that name.



Ottawa eyes $3,500 'cash-for-clunkers' program


Auto industry, U. S. incentives put pressure on Canada to offer trade-in money

By Renata D'Aliesio, Canwest News Service July 5, 2009 2:05 AM



Environment Minister Jim Prentice said Saturday he's reviewing whether Canada should follow the United States and several European countries in offering consumers a substantial financial incentive to scrap their clunkers and buy new vehicles.

Prentice said he's met with a number of auto manufacturers over the past few months to discuss the prospect of giving Canadians $3,500 to trade in their older, polluting vehicles.

Makers and sellers of cars have been aggressively lobbying Ottawa to adopt the measure, contending it will significantly boost sales in the sagging auto sector while reducing greenhouse gas emissions.

Pressure has mounted since U. S. President Barack Obama signed a "cash-for-clunkers" program worth up to$4,500 US into law last month.

However, Prentice said before making a decision on whether the federal government would adopt a similar incentive, he wants to evaluate the effectiveness of an existing program, which offers modest rewards that vary across the country.

In Alberta, drivers who scrap vehicles made in 1995 or earlier can get up to $490 for a bicycle, up to a year's worth of monthly transit passes, or $300 cash.

"We have a limited program that's in place now that was frankly put in place before the recession began. It was directed at getting clunkers off the road. It wasn't really designed as an economic-stimulus package," said Prentice, who was in Calgary for the annual Calgary Stampede festival.

Prentice suggested a decision on whether to offer clunker-driving Canadians more lucrative rewards to buy new cars will be made within 60 days.

He said the cost of upping Ottawa's enticement will play a significant factor.

The Harper Conservative government is forecasting a$50-billion deficit in its 2009-10 budget, which is rich with spending on infrastructure in a bid to stem job losses during the recession.

The U. S. government has authorized $1 billion US for its cash-for-clunkers program, which ends this Nov. 1, while Germany has budgeted five billion euros, or $8.1 billion Cdn, and recently extended its deadline to Dec. 31.

"It's an enormous public subsidy for the purchase of new cars," Prentice said. "That's been one of the issues is the extent of public dollars that we would want to put into incenting people to buy private automobiles."

Liberal Leader Michael Ignatieff expressed support Saturday for the program, as long as it was offered at the right price. He wasn't specific as to what he believes that price should be.

"Getting clunkers off the road might stimulate the auto market, but it has to be sensible," Ignatieff said in Calgary. "You've got to get the price right. You got to have an incentive to actually get the clunkers off the road, but you can't pour too much public money into it or other taxpayers have problems."

Some taxpayers have already taken issue with Ottawa's decision to give two faltering automakers billions of dollars.

Along with financial aid from Washington, General Motors Corp. is receiving $10.6 billion from Ottawa and Chrysler is getting $3.8 billion.

Sales of new vehicles in Canada through the end of May came in at 582,000 units, a 19.5-per-cent decline from the previous year.
© Copyright (c) The Edmonton Journal

6 comments:

Anonymous said...

Dealer Profit Margin
The difference between MSRP sticker price (retail price) and invoice price (wholesale price) is a dealer's potential profit margin, assuming vehicles sell at sticker price — ignoring other costs, charges, or rebates he might receive.

This dollar margin, as a percentage of sticker price, is not the same on all vehicles. Some vehicles have a very high profit margin percentage, others have a low margin percentage. For example, Lexus vehicles have very high 13% margin, while Suzuki vehicles have only 4% margin. Average profit margins fall in the 7%-8% range.
http://www.leaseguide.com/Articles/carprices.htm
 
So a $30,000 vehicle has an average $2,400 profit margin and a $20,000 Suzuki has an $800 profit margin.  And we are going to give away $3,500 for a clunker for a net loss on the new car sale of between $1,100 and $2,700 which is naturally picked up by the taxpayer.  How much money to we have to keep paying to save a few thousand jobs? Stop the insanity!

Les

CAITI said...

Les:

This cash for clunkers insanity is a bailout of the dealers. Make no mistake about that.

Brent

Anonymous said...

So now we own a percentage of GM and we will use tax money to prop up the failing sales of the business we just bought a part of. Is there not a conflict of interest here? Why is so much taxpayers cash been thrown to save GM ...Flahery's riding? (that was a retorical question). And it is curious that Prentice, not Flaherty, is making this announcement. It's not an environmental solution being proposed, it's just another bail out for GM.

Seems with Iggy Harper has no opposition.

Polyian

Big Winnie said...

Could we use the $3,500 to get rid of our "clunker" government?

Just a thought

Anonymous said...

If the government seriously wants to get people out of their older cars and into new (newer) ones, the put in place the exhaust emission standards that Ontario has country wide. I moved from Ont to MB and I can't believe the number of beaters running on what appears to be half and half-- half oil and half gas. Then, you'd be helping the environment at least.
Of course, it really has nothing to do with getting older cars off the road, does it....

Anonymous said...

Yeah, total b.s. program designed to keep Canadians in debt on the pretense that getting rid of an old car, will actually help the environment.