The ‘cash for clunkers’ program is creating a problem familiar with Detroit: Soon, there will be too many cars for the number of car buyers.
In order to meet current demand for the ‘cash for clunkers’ program, GM and other automakers are increasing production substantially.
However, the ramping of production will create an old, new problem: Too many cars on the lot come Labor Day (When Cash for Clunkers program officially ends, and the artificial demand cedes).
Historically, when dealers flood the market, despite forecasts of diminished demand, they bleed billions.
It’s the reason why Detroit needed a government bailout in the first place. Unfortunately, they are not learning from past mistakes. Hopefully they will not call upon Washington, again, for another bailout as this problem emerges.
BLOOMBERG TV EXPLAINS, Watch:
“It’s déjà vu all over again.”
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