Automakers Get $13.4 Billion Bailout Immediately, but Automotive Industry Needs More Than Money, States Edmunds.com

SANTA MONICA, Calif. December 19, 2008; Now that Chrysler and General Motors have been granted an immediate $13.4 billion loan from the government, additional steps must be taken to preserve taxpayers’ investment in the automotive industry, according to Edmunds.com.

First, the government must create a stimulus to motivate hesitant car-buyers to re-enter the marketplace.

“Our December sales forecast indicates a Seasonally Adjusted Annual Rate (SAAR) of 9.8 million vehicles sold, but no automaker can survive as a viable business in the United States if fewer than 11 million vehicles are sold annually industry-wide,” according to Edmunds.com Senior Analyst Jesse Toprak.

Second, credit must be further loosened so that car-shoppers have an easier time getting loans.

“All around the country, dealers are expressing concerns that their showrooms are largely empty, and that many of the customers they do have are unable to get financing, even when they have decent credit scores,” reported Edmunds’ AutoObserver.com Editor Michelle Krebs. “Taxpayer money bailed out the financial institutions, so there should be a way for the government to grease the skids as far as credit is concerned.”

Third, legislators should implement a coherent energy policy that helps to shift consumer demand consistently to more fuel-efficient vehicles so automakers can focus their product development efforts more narrowly and efficiently.

“There is a clear correlation between gas prices and interest in fuel efficiency,” stated Edmunds.com Senior Analyst David Tompkins, PhD. “Car-shoppers flock to compact cars and hybrids when gas prices are high, but now as the national average gas price is below $1.70 per gallon, trucks and SUVs are expected to outsell cars for the first time since February.”

Meanwhile, Edmunds’ GreenCarAdvisor.com recently reported that since the economic collapse and the nearly concurrent drop in gas prices, construction has been delayed on new production facilities for the Toyota Prius and Chevrolet Volt, perhaps the two most widely acclaimed “green” cars.

"This is not merely affecting domestic carmakers and plants,” said John O’Dell, Editor of Edmunds’ GreenCarAdvisor.com. “Audi has put its hybrid plans on hold and both Toyota and Honda have mothballed plans to develop clean, fuel efficient diesel engines for the U.S., largely because gas prices have fallen well below diesel prices -- thanks in part to misguided federal tax rules that penalize diesel and encourage increased use of gasoline."