At a gathering I attended recently, the answer was both, depending on whom you asked. All the people I spoke with were apparently unaware that Ford, the biggest player in Detroit, still hasn’t asked for any money, hasn’t given any dealers a three-week ultimatum to close or else, and still has to work within many of the “old” rules that GM and Chrysler have now gotten out from under.
A product-liability lawyer might express the opinion that anyone involved in litigation with GM or Chrysler may well have lost the chance of remedy when the bankruptcy court separated “good GM” from “bad GM” and “old Chrysler” from Fiat-owned Chrysler. Apparently things like lawsuits tend to stay with the old companies, the ones that were out of money months ago.Likewise, some former union workers appear less than pleased about what has become of the promises made to them in the past for what could be described at the time as genuinely miserable work (see the Product Spotlight in “Max Payload”). While attorneys and production-line workers are rarely grouped together, if these guys pay federal income taxes, they are all paying for GM and Chrysler’s bankruptcies, just like you and me.
According to the IRS, more than 32 percent of federal tax filers in 2005 avoided paying any federal income tax; per a 2009 Tax Policy Center report, that number is now up above 43 percent. For the sake of argument, let’s say a bit more than half of the USA’s 300 million people pay federal income tax; it’s not the only income source for the Treasury, but it’s significant.
The sour-economy-triggered Chrysler and GM debacles cost estimates are $100 billion dollars at this writing. Payouts have gone to GM, Chrysler, related financial institutions, and suppliers, but there are other costs. Include $3 billion for the CARS “cash for clunkers” program, a 136-page clunker of a bill (I read it, I dare you to do the same without contemplating some form of “…cide”) that so smacks of socialism I’m surprised we aren’t going to be stuck driving Trabants and Ladas. With its myriad requirements and loopholes, I could buy a new truck that gets a whopping 2 mpg more than my old one and still get thousands. This won’t do anything for lowering the country’s fuel use; it’s just another way to help sell some cars. And Detroit was not happy when the bill didn’t require the new car to be domestic.
Right now, dealers that GM and Chrysler dropped are lobbying Congress to get some money for themselves and their businesses, and I think their efforts may be for naught. To representatives, GM and Chrysler (good or bad, new or old) are massive, impersonal corporations, but dealers are constituents, friends, and often financial contributors and fundraisers—all magic words to a politician. Senators are a tougher sell, and there’s every possibility President Obama would veto such legislation. Whether dealers deserve it is another question, as those who don’t practice PR for a living will tell you that most closure-targeted dealers were not genuinely surprised when they got “the letter.”
Well before the economic plunge began, Chrysler was working on Project Genesis to get Chrysler, Dodge, and Jeep brands under one roof. Some of those closed dealers are the ones who didn’t want to sell their franchise even with incentives. Others bought extra vehicles at the request of Chrysler and then Chrysler dropped them, so yes, some people got screwed and the “new” companies should be required to honor the dealer agreements, contracts, and various state franchise laws.
Simultaneously, some dealers are happily reporting sales increases to 40 percent driven by cash-for-clunkers, the accompanying automotive advertising blitz, and rebates and incentives that may equal the clunker credit. In a market that might sell 10 million units this year, the 250,000 vehicles accounted for in the CARS bill’s $1 billion budget (and the additional approved $2 billion) marks an increase of 2.5 percent. Wow. I guess anything not preceded by a minus is a plus.
Now back to those taxpayer numbers: $100 billion and 175 million people works out to $571 per taxpayer. If half the Fed’s revenue comes from personal income tax rather than corporate, that’s still nearly $300 the average taxpayer has given to making new companies, not saving old ones. Washington wants to tell me that my $300 investment and CARS will result in fuel savings and cleaner air. Bull.
Adding insult to injury are the tax credits for “clean” or “high-mileage” cars and trucks. If you buy, for example, a diesel SUV or hybrid pickup and meet all the qualifications for a tax credit, you get money back. Even if you pay no federal income tax you still get a check if you buy what the government wants you to.
Since no one person can vote for the majority in Congress or pay anywhere near what lobbyists do, you didn’t really get to decide if, how, or when that money was spent. Personally I’d have voted for not supplying any cash until bankruptcy, thinking (perhaps stupidly) that it might have caused a quicker, firmer grasp of the situation. I’d have skipped CARS and just given every taxpayer a break to use it on whatever they want; the $45,000 limit means a few diesel-powered “category 3” heavy-duty pickups won’t qualify.
I pointed out at the beginning that the Detroit bashers had failed to separate Ford, a company that will have to work as hard or harder than (the new) GM and Chrysler to keep going. So far this year, they’ve done that the old-fashioned way, with products people want to buy and marketing that relays that sentiment.
And that’s how it should be in the car business.