It's official, the stimulus plan has been signed and the era of the Obama economic plan starts today. The only part of the plan affecting the automotive industry is the $1.7 billion portion allowing consumers to deduct sales taxes paid on new vehicles off their income taxes. It is predicted to generate 94,000 additional units in 2009 with an average rebate of $330.
The "cash for Clunkers" program was dropped from the final version, this would have given tax breaks to those that traded in less fuel efficient older vehicles and agreeing to have them scrapped. A similar program is in effect in Western European countries giving consumers $3,200 if they scrap their old car, it is anticipated to generate 200,000 additional units in 2009.
Now on to GM and Chrysler's problems, as of this writing no "plan" has been submitted to congress even though Nancy Polaski and Barney Frank sent a letter Friday indicating "we trust you are going to submit a plan that identifies specific steps you will be taking while you are using our money". GM is set to get an additional $4 billion and Chrysler another $3 billion. In fairness, the final plan is not due until the end of March.
Both companies have stated they have had issues with the UAW in accepting concessions to stay out of bankruptcy. The UAW applauds the newly appointed "Task Force" to oversee the restructuring plans. The "Task Force" replaces the original idea of a single "Car Czar" (here's a good WSJ article on the topic). The committee is made up of senior administration officials, with Treasury Secretary Timothy Geithner and National Economic Council Director Lawrence Summers as the leads. Other members have not been appointed as of this writing.
On a good note, they have hired Ron Bloom, a consultant who comes from the United Steeworkers of America, Ron will be overseeing most of the financial analysis.
In my opinion, there are too many hands in the fire at this stage. The "Task Force" is not even completed—and now we have added all these extra levels of involvement? Once Washington's group dynamics come into play, you can bet the whole process will slow down. Doesn't Tim have enough to worry about? Appointing a single "Czar" would have been a better decision to get this plan moving, give direct leadership to GM and Chrysler, and single accountability to the success. So here goes another $7 billion without a plan, I wish someone would give me just $1 billion; I could create some nice jobs and boost this economy with that!