This assumption is somewhat dubious. The Cash For Clunkers is the government program that allows consumers to trade in a used car bad fuel efficiency for a new car with better miles-per-gallon and receive a rebate up to $4,500.
It is certainly true that this program has resulted in a binge of new car buying, but it is also reasonable to expect that the program should affect all auto companies in a similar way. It hasn't. While Ford posted a sales increase of 2.3%, rivals GM and Chrysler experienced decreases in sales of 19% and 9.4%, respectively. Even Honda, otherwise considered a healthy company, had its sales drop by 17% during the month in question. Here is a summary of July sales results:
- Ford +2.3% (the ONLY one with an increase!)
- Chrysler -9.4%
- Toyota -11%
- Honda -17%
- GM -19%
- Nissan -25%
So why is Ford benefiting so much, while the others aren't? At first blush, there are four possible explanations:
- American consumers are rewarding Ford for refusing to take bailout money. By taking the high road, Ford has established itself as the last truly American car company, a family business that relies on its customers for its success, not handouts from taxpayers.
- New car buyers just randomly picked Fords last month, signifying nothing.
- New car buyers avoided GM and Chrysler because of the "stink of death" surrounding their bankruptcies. If this is the case, then we should see their sales improve as their survival grows more and more likely. Of course, this explanation is contradicted by Honda's poor performance.
- Some other unobserved factor.
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Ford asked for bailout money from the government along with the other automakers, and then turned it down once all the stipulations came into light; I wouldn't be so quick to praise them for patriotically refusing to take government aid.
ReplyDeletePoint well taken. We can't tell for sure what was in their minds. I'm aware that they attended the "bailout meeting." I think that if I were an auto executive, I would have attended that meeting as well, just to see what the deal actually was.
ReplyDeleteBut having said that, I still praise them for not taking government aid, even if one of the reasons for doing so were all the strings attached to that aid.
Also, from a marketing point of view, what's important here is that they are now widely perceived as the "ruggedly independent" American car company. That's a PR victory if I ever saw one.
Thanks for your excellent comment.