(JAI: Twice as big as the US 'Cash for Clunkers", programs which compel the destruction of still useful automobiles so as to encourage the purchase of new ones through taxpayer funded subsidy, the German program (as the US') is but modified Keynesianism, itself a re-reading of Marx exposition on the crisis of overproduction "Capital. Vol 3." Chap XV. Sec 3. "Excess Capital, Excess Population". http://marxists.org/archive/marx/works/1894-c3/ch15.htm , is but yet another further attempt to inject purchasing power into a sector of the market (in this case auto and relateds) in hopes that the buying power of this sector will translate into the purchses of the products of other sectors. It is the same thing as the stock market bubble which burst in 2000, the Fed Reserve created housing bubble burst in 2006 (itselff created in response to the collapse of the stock market and the oil and commodities bubbles which burst last year. What next. Believe me they are thinking of something right now.)
AUGUST 31, 2009 Germans Debate Whether Car Trade-In Plan Will Backfire By GEOFFREY T. SMITH FRANKFURT -- Germany's auto makers are worried about slumping sales when the government's "cash for clunkers" program expires this fall after running through its allocation of ?5 billion, or $7.15 billion. Even so, they don't agree with the dire forecasts in a study issued by German management consultancy Roland Berger. In the study, published Friday, Roland Berger said car sales in Germany may fall more than 20% next year, and that as many as 90,000 jobs may be lost across the industry by the end of 2011. One in two car dealerships could be threatened with failure, and gross domestic product could take a hit, it said. The detailed report by a well-known company with a long history in the auto sector caused a stir, underscoring nagging fears of a slump in demand and another sharp rise in unemployment once the Germany government winds down this part of its fiscal stimulus. The car scrappage program, which subsidizes new car purchases on old trade-ins, was a model for similar plans adopted elsewhere, including the U.S. Since early this year, it has bolstered Germany's big auto industry and helped gross domestic product to return to growth in the second quarter after a year-long recession. "The German car market is good for roughly 3 million to 3.3 million cars a year. This year, we will probably sell 3.7 million, and our forecasts are for 2.7-2.8 million next year," said Ralf Landmann, a partner with Roland Berger. "If you have 20% less demand for your products, its clear there's going to be an impact on the labor market," Mr. Landmann said. The Federal Statistics Office calculates that Germans spent ?36 billion on new cars in the first half of the year, generating a modest 0.1% increase in overall private consumption. But without the scrappage scheme, consumption would have fallen 1%, and the economy would have shrunk by even more. As it is, output in the second quarter was still down 5.9% from a year earlier. Carsten Dreger, an economist with the DIW research institute in Berlin, contends that not only was the cash-for-clunkers plan increasing 2009 demand at the cost of 2010's, it is also cannibalizing potential demand for other consumer goods this year. "Cash for clunkers" boosted August sales, but as WSJ's Neal Boudette and Dow Jones Newswires' Jeff Bennett report, auto dealers are already starting to see consumer interest drop off now that clunkers is over. Germany's car makers have already laid off most of the 100,000 temporary workers they employed a year ago, according to a spokesman for the Federal Association for Temporary Work in Berlin. The Roland Berger forecasts refer to cuts in their core personnel, an acutely sensitive topic. A spokesman for the Association of German Automakers, an industry body, disagreed with the Roland Berger forecasts, saying the industry hadn't taken on excess labor in the boom years in any case. "What wasn't built up in the first case doesn't need to be reduced," the spokesman said. Volkswagen AG has even promised to add jobs at Porsche AG once it completes its planned takeover of the company. VW has also just started its annual pay round negotiations with the IG Metall union. With unemployment already nearly at 3.5 million, and a jobless rate of 8.3%, the government is hoping that the recent economic improvement will be strong enough to stop another wave of job losses. The fate of Adam Opel GmbH's German employees has been one of the key sticking points in negotiations over the restructuring of GM's European operations, with the German government anxious to avoid any job losses. The Federal Labor Office is due to report August's unemployment data Tuesday. Analysts predict another 30,000 increase in those out of work. The government has subsidized companies to keep their workers on shorter working hours, rather than lay them off. Write to Geoffrey T. Smith at geoffrey.sm...@dowjones.com Printed in The Wall Street Journal, page B3 http://online.wsj.com/article/SB125167281358170797.html ________________________________________________ YOU MUST clip all extraneous text when replying to a message. Send list submissions to: Marxism@lists.econ.utah.edu Set your options at: http://lists.econ.utah.edu/mailman/options/marxism/archive%40mail-archive.com
