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The New Economy

'Cash for clunkers' helped foreign automakers more

By / September 1, 2009

Winner Ford in Cherry Hill, N.J., showed off the clunkers it accepted last month. The popular stimulus program boosted Ford's sales – but also those of several foreign automakers.

Matt Rourke/AP/File

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The "cash for clunkers" program helped Ford – and Toyota. Chrysler saw auto and light-truck sales rise 5 percent in August from July's total; Hyundai set a new US sales record.

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That's the challenge with government stimulus programs. Paid for by one nation's taxpayers, they can help the companies of another.

This leakage across borders doesn't create much political tension as long as trading partners are also stimulating their economies. Or, as in the case of several of the automakers, the production is locally based.

Ford saw its sales of cars and light trucks jump 17 percent in August from the same period a year ago. But that was unique among the US automakers. General Motors saw sales fall 20 percent. Despite the small sales increase from July to August, Chrysler also saw its year-over-year sales decline – a 15 percent drop.

The federal stimulus certainly helped several Asian automakers. Hyundai's sales rose 47 percent year-over-year, hitting a record. Toyota was up 10.5 percent – and its car division enjoyed its best month ever. Its North American-built vehicles accounted for all the increase – and more. Sales of imported Toyotas actually fell 7 percent year-over-year.

Honda posted a 10 percent gain. Nissan saw a 3 percent decrease.

So "cash for clunkers" will probably go down as a success in the annals of federal stimulus programs, even though it probably helped foreign carmakers more than domestic ones. It was short and targeted. As long as sales of cars don't tank too much in the fall, the program will also be regarded as well-timed.

The challenge is the Buy America provisions in other stimulus programs. Canadian firms are angry that their components have been shut out of the bidding process for such things as US highway improvements and other infrastructure projects. In May, China set up its own 'buy Chinese' provisions in its $586 billion stimulus package.

Stuck in the worst recession since the 1930s, the world so far has avoided the rush to protectionist measures that prolonged and deepened the Great Depression. But that doesn't mean that protectionism is dead. On the contrary, it is creeping along and, occasionally, upward.
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