One single word can surely summarize the cause of the current financial crisis – greed. Any additional explanation merely dissects or excuses the mechanisms that enabled people and institutions to get as much of the pie as they could, at the moment, and the future (or each other) be damned. The American auto industry is no exception; they suckled away contently at the SUV/Pickup teat without ever foreseeing that it had to eventually dry up. Many say it’s there own fault…let them fail…you make your own bed, etc., but the overall well-being of the country and the economy would be severely harmed by the ripple effect of their downfall (and their supply chain suppliers).

It’s actually been rather galling to see CEOs of Ford, Chrysler and GM proselyte themselves to Congress, showing up without a plan in hand (only a tin cup), demanding corporate welfare yet without a clue as to how to fix themselves or professing any real desire to effect viable change.

And yet as humorous and sad as it is to watch the big 3 (formerly the BIG 3, but let’s peg ’em down a notch or two) beg our lawmakers, some sort of aid/action plan is necessary to stave of bankruptcy. No matter how much they deserve the stigma of bankruptcy, no manufacturer of durable goods can sustain any measure of robust sales to a public skeptical of their continued existence while in bankruptcy (uh, Mr. Salesman, will I be able to get parts for my Dodge RAM next year?).

As it stands Congress won’t do squat, but our lame duck administration is still willing to dip into the all purpose $700 billion dollar cookie jar (no matter that it was designated for specific financial remedies) to appease the beggars. How come I don’t feel good about this? Where the hell are this these funds Uncle Sam is dishing out coming from? Are we printing money like some Third World despot? Is this just the same ATM of USA that has used to bankrolled the war in Iraq being abused some more? Borrow now, let someone else pay later.

So enough griping and, you must be thinking, where’s my plan for the Three Stooges? Okay, I was getting to it, I just needed to set the stage with my indignation. Obama has been talking about economic stimulus as a means to recovery and freeing up the credit markets to get the economy going. Evidently the big banks aren’t about to lend out any of their bailout money when there’s no strings attached, they just are using it buy weaker rivals, consolidating their positions as pillars of the economy and further strengthening their position for the next bailout e.g. “were too big to let fail!”.

Keeping the Auto Industry Vital
What the (domestic) automakers need right now is to move some product. Selling backlogged inventory will generate cash flow and give a reason to restart production on bailout money only keeps the wolves at bay for a short while. They need to hit sales numbers to hold them over until they can start making the cars we really need to make the US less energy dependent. How can we do this?

Here’s my proposal: tax credits. Not for the manufacturers or for consumers who buy their cars.

Every taxpayer that purchases a US built car in 2009 gets a federal income tax credit. $3000 sounds reasonable and should be a sufficient incentive. Here’s the fine print on this proposal:

First, we the people (aka taxpayers) need to get something in return, so for every tax credit claimed, the US government gets XXX shares of stock or stock options in the automaker that the produced credit claiming auto.

The vehicle receiving the credit has to be built or assembled in the US and has to have at least 51% US sourced content (so Toyota, Honda, Nissan, BMW and lawmakers in those states can also benefit). If we want more complexity, the tax credit can vary by the US content percentage of the vehicle.

As a further incentive, taxpayers purchasing vehicles before April 1, 2009 can exercise the credit on their 2008 return.

Another prorated aspect might help garner wider support (among environmentalists) would be a another a fuel economy modifier: The base credit of $3000 increases by 2.5% for each MPG over the 2009 industry average in 2008 this figure was 20.8 mpg. So if I buy a Ford Focus 5 speed, that lists for $14,995, and it’s combined MPG in 2008 was 28 MPG, my tax credit would be $3540 combine this with any other rebates and dealer incentives Ford might be offering in addition to the additional tax savings, this is a viable incentive to go out and buy a new car. This same formula might be also used against vehicles under the industry average. An incentive such as this might even get Toyota to restart their construction of the Prius plant in Mississippi.

The last aspect of my proposal is to really grease the wheels for a surge in auto sales have the US Treasury lend $10 or $20 billion (of that $700) dollars at 0% to small local banks and credit unions for auto loans here it could be any manufacturer, US or foreign. The banks mark it up to 1.9% to make a profit and may recycle the principal for more auto loans for the next 5 years before paying the US government back.

Sounds perfectly doable to me – but, hey I was an art major.