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GM Problem Solved

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Don't give them the money! That was the comment from a long time employee to me over the weekend. There is a better way to solve the problem.

He believes as many others do that giving GM $25 billion would be just the down payment on a future bailout. He estimates GM would need another $25 billion six months from now if not sooner. There is a better way to bail out the car companies. Reportedly people inside Chrysler want the government to sponsor car buying rather than inject cash directly into the automakers themselves.

Instead of giving GM $25 billion he suggested giving that money to the consumer instead. The government could do that by giving consumers a $5,000 rebate on any U.S. made car they buy. The consumer gets a much better deal, the car companies get to sell off all their bloated inventories and everybody is happy. The supply chain would recover once cars began to sell and everybody profits from the bailout from the parts supplies through the manufacturer and straight through to the consumer.

$25 billion may be a drop in the proverbial bucket for GM but at $5,000 per car that would cover 5 million cars. That would bring auto sales back up to nearly where it was two years ago before the drought began.

With a $5000 rebate going towards the down payment the banks would not have any trouble writing the loans. For a $20,000 car that would equate to a 25% down payment and the banks can't complain about that. Obviously smaller, cheaper cars would fare better and for large gas guzzling SUVs that $5K would not be a big incentive for a SUV purchase. Going this route the government would also get the added advantage of a trend towards more economical cars.

I believe this could really work. It makes complete sense and that is probably why lawmakers won't go for it. Why should GM get a handout when all they really need to do is sell more cars?

Jim Brown

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