In a stark example of how it "should" be done, the recently terminated cash for clunkers subsidy for overleveraged US consumer to purchase Japanese cars, has allowed companies such as Toyota, Honda and Hyundai to push forward a significant amount of their sales, while relying less on the back end of their production curve. Indeed, as Detroit News recently reported, of the five major beneficiaries of Cash for Clunkers, 4 were Japanese cars, with Toyota representing 19.2% of all cars sold under the program. And now that they got their sales out of the door, they are winding down capacity.
Here were the top five models sold into CfC:
- Toyota Corolla
- Honda Civic
- Ford Focus
- Toyota Camry
- Hyundai Elantra
So while Obama's ulterior motive to lever US consumers even more may or may not have worked (these are merely purchases that would have occurred eventually, and instead the US middle class will have more lease payments to look forward to in the interim), the practical reality of CfC has been a nice stimulus package to none other than Japan. This probably explains why they have not been screaming bloody WTO murder.
Hot on the heels of this, Toyota today announced it would be cutting global plant production by 10%. According to MarketWatch:
Toyota plans to cut its global capacity production by 10%, or by 1 million vehicles, as early as this fiscal year, Nikkei reported on its online edition Tuesday in a story dated for Wednesday. Production volume, which peaked at 9.5 million vehicles in 2007, is expected to fall to about 6.7 million vehicles in 2009, according to Nikkei. Toyota currently has a production capacity of 10 million vehicles a year.
In the meantime, bankrupt dinosaurs such as GM are ramping up production, precisely in a time when there will be increasingly less demand (absent another CfC program of course, and a couple extra billion that would have to be tacked on to the next bond sale).
Next up on Ron Bloom's docket: cash for hairdryers and plasma TVs. And guess who benefits? Why, those who make them of course. US consumers merely end up footing the bill. At a 19.99% ARP.