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Thread: let's apply US Ethanol laws to save the US Auto Industry !!!

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    Default let's apply US Ethanol laws to save the US Auto Industry !!!

    in the course of posting in other threads, it finally hit me over the head like a hammer that the US Auto industry could be 'saved' if only it were subjected to the same sort of laws which apply to the US Ethanol industry ....


    A - Erect a quota on the importation of foreign cars that limits total imports to 10% of US auto production. Such a quota exists to limit the importation of foreign ethanol. However, this would probably have to be pro-rated for % of US content, such that foreign car companies with 50% US content assembly plants in the US would be allowed to import enough parts to assemble a total number of cars that equals 20% of US auto production. While this isn't as good as quotas guaranteeing US ethanol refiners a 90% market share, it would probably guarantee US automakers a 70% market share.

    B - Enact a 'surcharge' equal to 15% of the cost of every new car sold in the USA ... domestic or foreign produced. Such a 'surcharge' exists in the form of a 56 cent tariff on every gallon of $3.50 cent ethanol that goes into US blended gasoline. Although this 'surcharge' will be collected from sales of US and foreign cars alike (as it is with US and foreign ethanol), the US gov't would then return 100% of the money collected via this 'surcharge' ONLY to US auto makers and NOT to foreign automakers (as is currently the case with US ethanol refiners versus foreign ethanol refiners). Again using the American content pro-rate, foreign automakers doing US assembly with imported parts would receive 1/2 the 'surcharge' back from the US gov't.

    C - take the leftover 'surcharge' money that was in fact collected on only the sales of foreign cars (foreign ethanol) and use it to fund US government grants to US auto companies for research and development funding to assist in the offering of better, more efficient cars in the future (as is currently the case with US grant money to US corn farmers and US ethanol producers). Again using the American content pro-rate, foreign automakers who are doing all of their research / design / engineering overseas would receive zero grant money from the US gov't.


    Let's put some dollars into this equation. Since cars span the gamut , let's pick a $20,000 price point for ease of calculation. Let's break this down to a $20k Chevy (with 100% US content) versus a $20k Honda (with 50% US content) to a $20k Hyundai (with 0% US content). First order of business would be to tack on the 15% 'surcharge' causing the price of all three of these vehicles to jump to $23,000 at the dealership.

    For every $23,000 spent by an American customer buying a Hyundai, Hyundai will actually receive $20,000 net of the 'surcharge'. There is no kickback due to US content, and no R&D grant money. Net to Hyundai $20,000 for each car sold.

    For every $23,000 spent by an American customer buying a Honda, Honda will receive the $20,000 net of the 'surcharge'. Because there is 50% US content due to assembly in an American plant, Honda will also receive a $1500 kickback on the surcharge. Because Honda does not do design / engineering in the USA, there is no R&D grant money. Net to Honda $21,500 for each car sold.

    Now we come to the $23,000 Chevy. Chevy will receive the same $20,000 net of the 'surcharge'. Chevy also receives a kickback of the full $3,000 'surcharge' since it has 100% US content. In addition, Chevy would receive some portion of the $3000 collected in 'surcharge' on the Hyundai (but not paid out to Hyundai) plus some portion of the $1500 collected in 'surcharge' on the Honda (but not paid out to Honda) in the form of R&D grant money. Depending on relative market shares, because Chevy does do design / engineering in the USA the net to Chevy would be in the neighborhood of $24,300 for every car sold.

    comments ?

    My first comment would be that, just as is the case with US ethanol (and US blended gasoline containing ethanol), the first requirement to any such plan is charging more money for every sale due to the 'surcharge'. This prevents every American customer from being able to take advantage of the lower 'world market' price versus the 'official price' within US borders. But hey nobody seems to complain about this at US gas pumps, so why should they complain at the car dealer ? This would particularly be the case if, like the 56 cent tariff on ethanol and the resulting 5.6 cent tariff on 10% ethanol blend gasoline, the 15% US auto 'surcharge' isn't itemized but simply tacked onto the 'base price' of each new car (as is the case with US wholesale ethanol and US ethanol blend gasoline) !!!

    ~
    Last edited by Melonie; 01-26-2008 at 10:28 AM.

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