October 29, 2009

CNN & Money.com aren’t qualified to assess “Cash for Clunkers”

Posted in economic recovery, media coverage, Obama administration, U.S. Economy tagged , , , at 3:38 pm by realitytax

You’d expect an author at this CNNMoney.com to understand the role of money in business.  You’d expect an editor to send this back to re-write.  Here was the basis of Peter Valdes-Dapena‘s misguided assessment:

“…majority of sales would have taken place anyway at some time in the last half of 2009, according to Edmunds.com”

So? This isn’t news, and it misses the point of the Cash for Clunkers initiative.

Valdes-Dapena and/or his editor may think selling cars sooner rather than later is a valid reason to criticize the program, but as any businessman can tell you: success in business is about cash flow. Any retail operation needs to keep their stock turning over. At a time when the inventory was sitting idle on the lots this program provided a much needed infusion, enabling dealers to pay staff, utilities, creditors, and suppliers.

Did the Cash for Clunkers program solve the economic crisis? Of course not.  The goal was to turn over inventory in one segment of the industry – to keep dealerships from failing in huge numbers just before the manufacturers started to recover, thereby saving some jobs and hopefully averting a situation that would spread and further exacerbate the economic downturn.

The article may fool a person with no entrepreneurial experience, but it reflects either a shallow grasp of money and business or a thinly-veiled attack on the government’s attempt to avert a breakdown in the delivery mechanism of an industry it was actively seeking to save – without proposing any alternative that might have been even marginally effective.

The public may think “Cash for Clunkers” was as simple as just selling cars, the author evidently wants to; the reality is much subtler. Edmunds didn’t surprise anybody (except maybe CNNMoney.com staff) with the news that one of the primary effects was to accelerate the decisions and purchases – that was the point.

In business, my friends, timing is everything.

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