Today our country has an astounding 1.5 trillion dollar deficit and that deficit is having its own growth spurt. Current government policy may, according to the chart below prepared by the Heritage Foundation, bring us close to a 2 trillion dollar deficit by 2019.
As we speak, the government is proposing another bailout of GMAC - this time to the tune of $5.6 billion dollars in exchange for a stake higher than the 35% position it has already taken. Take a look see at the bailout history:
12/2008 12.5 billion
05/2009 7.5 billion
Proposed 10/2009 5.6 billion
Total Bailout 25.6 billion
Next we will need to incentivize private spending in order to keep some of our bailed out companies afloat and therefore the personal debt of our citizens will increase.
In order to stimulate cautious consumers we will require more car rebates and home buying subsidies. As we have already seen with cash for clunkers, the market can only be artificially manipulated for short unsustained periods and the stagnation that ensues thereafter is often even more devastating.
It is doubtful that the current stimulus plan will have any positive effect on increasing business or personal income over the next 6 to 12 months and the effect of that condition on the auto industry will be a sustained period of no to low growth.
The new industry average for vehicle sales may hover in the 10 to 14 million range for years to come which means that if you wish to remain an auto dealer you must learn how to make your dealership profitable in the new environment we have today.
The Phillips Report
