NCPA - National Center for Policy Analysis

SIMPLE WAYS TO FIX DETROIT

April 6, 2009

There's a small list of things that might actually help the car business, says Jerry Flint, a former Forbes Senior Editor.

Finance dealers:

  • Dealers buy cars from the factory on credit, but credit is tough to come by now, which means dealers don't have enough stock to entice buyers.
  • The Small Business Administration created a loan plan, but it doesn't work because it requires car dealers to have high credit ratings, which few do.

Subsidize buyers:

  • We've got a tax credit on home purchases. Why not one on cars?
  • Buy a new car, made by anyone, here or imported, and you get a 10 percent tax credit, regardless of income.
  • The state sales tax should be allowed as an income tax deduction, again with no phase-out tied to income.

Back off from electric cars:

  • We're talking about very large extra costs, $6,000 to $10,000 for a hybrid, and much more for an electric car, which will probably have serious operational and maintenance problems and be so difficult to fuel as to be impractical.
  • People won't buy them, so the government should stop hounding Detroit to make battery-driven cars.

Be realistic about novel engines:

  • R&D on ways to replace the gasoline engine is okay.
  • Decreeing that the problem has been solved is not okay.

Halt step-ups in safety regulations for a few years:

  • Cars are not unsafe now.
  • All resources left should be devoted to making attractive, high-quality cars.

Halt step-ups in fuel-efficiency mandates:

  • All carmakers are pushing to improve fuel economy, but tougher regulations will only divert money and talent.
  • The market is taking care of buyers' needs for high-mileage cars. Computer controls, direct injection, turbocharging and other engineering changes are working.

Find some way to dampen speculation in petroleum:

  • That doesn't mean gasoline prices can't go up.
  • It means they can't yo-yo between $4 a gallon and $1.60, because the industry can't survive this volatility.

Source: Jerry Flint, "Simple Ways to Fix Detroit," Forbes, April 13, 2009.

For text:

http://www.forbes.com/forbes/2009/0413/034-auto-industry-backseat-driver.html

 

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