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.
- 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.
- 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.
Browse more articles on Economic Issues