Thursday, August 13, 2009

Cash for Clunkers Trickle Down Effect

Much has been discussed in the past few weeks on the unexpected success of the government's Cash for Clunkers program and the recent $2 billion extension.

No doubt automotive manufacturers, dealers and all the working class people on the assembly line in middle America got a major boost financially from this program. President Obama's administration had conjectured that this program would in turn stimulate all those people to increase consumption that will help lift us out of this recession.

But there are some interesting, unexpected beneficiaries of this program as well.

Sodium silicate providers. Who? What? For car dealers to receive government reimbursement for "clunker" trade-ins, they must agree to "kill" the old cars using a method the government recommends: Drain the engine of oil and replace it with two quarts of a sodium-silicate solution.

Scrapyards. Once "killed," guess where those cars went? The first installment of the program funded the demolition of about 250,000 cars. Good times for Sanford and Son!

Satellite radio. Even folks at Sirius XM who reported a $157 million quarterly loss last week are looking to benefit from the program. How? They had cut deals with many of the automotive OEMs before the downturn to pre-install new vehicles with the satellite radios.

Who may not be too happy about the success of the program? Auto repair shops who won't get to service those "clunkers." But, hey, they had a good run for the past 2 years as penny-pinching consumers deferred new car purchases to keep their current ones a little longer.


No comments:

Post a Comment