In Cuba, theyre
still driving cars from the 50s. Not to antique car shows
on nice Sunday afternoons, but every day.
cant afford new cars.
Americans wont be able to afford new cars, either.
manufactured, smoke-and-mirrors growth the economy has
supposedly undergone since the last collapse, back in 08,
has just been undone, son. Were back to where we were
only were worse off this time. Because the jig is up. It is
no longer insider baseball that the U.S. economy is in its late
probably terminal Ed McMahon stage: Old, tired and
broke. You can only spray so much ether into the carburetor
and people are cluing in. Not just the elites in DC and New York
who run the show. Us. You and me and thee.
on to the con.
In the space
of about four days (since last Friday) the Shyster Market has lost
4-10 percent of its value value that may have been entirely
paper value but nonetheless, the effect on the paper sent
to millions of Americans (their next 401k statements) is going to
be less-than-stimulating. Correction. It will stimulate them. But
in an entirely different direction than the cheerleaders of recovery
intend, hope and pray. It will make the sensible (yes, such still
exist) batten down the hatches, where previously they perhaps had
them open juuust a crack, suspicious but cautiously hopeful. No
mas. Only an idiot (or someone who no longer cares about tomorrow)
would continue to spend more than absolutely necessary for everyday
life in this pre-Weimarian nightmare that is early 21st century
life is going to get much harder for the not-sensible; the people
who live on credit, in the moment and well beyond their means
(just like Uncle). It is a safe bet that interest rates are going
to skyrocket while the value of a dollar plummets and the price
of commodities goes through the proverbial roof. This triple tag
team will make loans unthinkable and new car purchases all-but-impossible
for anyone who cant lay a stack of bills on the table, a la
Is it even
necessary to ask how this will affect the car industry? Buying a
new car when not absolutely necessary amounts to a
vote of confidence in the future. It reflects the buyers belief
that he will be able to pay for it; that his job will be there tomorrow
next year and that he has the luxury of disposable
income to spend on something extra. How optimistic is
America feeling right now? Imagine how optimistic most Americans
will feel when they discover theyve been cheated (again) out
of (for most 401k holders) thousands of dollars they thought they
had last week.
The big question
(well, one of the big questions) is whether the industry can survive
another street beating in the space of less than four years. Ford
is doing ok but GM (and much more so) Chrysler-Fiat are still pretty
rickety. None of them can probably withstand a protracted downturn.
the Great Seer in the White House with his usual impeccable
timing and mastery of all things economic has just imposed
another billion-dollar-mandate on the car companies; a near-doubling
of federally-required fleet average fuel economy requirements
known inside the Beltway as CAFE. The Car Czar has decreed
that new vehicles shall be x more fuel efficient
without also telling the rubes that they will as a result
also be much more expensive.
That, of course,
doesnt even factor in the great likelihood that the cost of
a new car in two or three years is likely to be 5-10-20 percent
more than it is today even without the add-on costs of CAFE as a
result of QE3? (more Fed funny money stimulating
the dying economy) and all the rest of it, including possible double-digit
interest rates to compensate lenders for the effects of the former.
result of all this will probably end up looking something like an
American version of Fidel Castros Cuba. We already have the
bleak, dead-looking cities; listless people shuffling around with
little more to look forward to than their next slice of government
cheese (for as long as that lasts). All that differentiates
the United States is the still-extant appearance of prosperity.The
shiny new cars we see all around us, in particular.
But it is a
If you were
to put a big red dot on every car currently on the road thats
still being paid for, it would amount to more than half the cars
on the road. Of these, a large percentage around 20 percent
are under water (the owners owe more than the
car is worth) just like the suburban McMansions many of these same
people live in. For now.
driving paid-for cars are going to hold onto them and forget
about buying a new car. The people driving cars with outstanding
notes arent going to be buying anything, anytime soon. And
the rest the Payday Lender frequent flyers and equity-spending
consumers? Well, the music has stopped and all the chairs
are occupied. Sorry.
And where does
that leave the car industry?
with permission from EricPetersAutos.com.
[send him mail] is an automotive
columnist and author of Automotive
Atrocities and Road Hogs (2011). Visit his
© 2011 Eric Peters
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