First Fox and now Edmunds?

sphinx · Oct 30, 2009

The White House Stupidly Goes To War With Car Website Edmunds.com

It is an odd, and we'd say regrettable, pattern of this White House that it lets itself get dragged down into fights with specific media outlets.

George W. Bush experienced acrimony with the New York Times, but for the most part, other than general frustrations of a conservative administration, complaining about a liberal media, it was no big deal.

But in addition to Fox News, now The White House is going after highly-respected and influential car site Edmunds.com.

They're actually using The White House blog to dispute the site's analysis of Cash-For-Clunkers (via Detroit News).

The post is snarkily titled: "Busy Covering Car Sales on Mars, Edmunds.com Gets It Wrong (Again) on Cash for Clunkers"

Harsh!

Here's the full post:

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On the same day that we found out that motor vehicle output added 1.7% to economic growth in the third quarter – the largest contribution to quarterly growth in over a decade – Edmunds.com has released a faulty analysis suggesting that the Cash for Clunkers program had no meaningful impact on our economy or on overall auto sales. This is the latest of several critical “analyses” of the Cash for Clunkers program from Edmunds.com, which appear designed to grab headlines and get coverage on cable TV. Like many of their previous attempts, this latest claim doesn’t withstand even basic scrutiny.

The Edmunds analysis is based on two implausible assumptions:

1. The Edmunds’ analysis rests on the assumption that the market for cars that didn’t qualify for Cash for Clunkers was completely unaffected by this program.

In other words, all the other cars were being sold on Mars, while the rest of the country was caught up in the excitement of the Cash for Clunkers program. This analysis ignores not only the price impacts that a program like Cash for Clunkers has on the rest of the vehicle market, but the reports from across the country that people were drawn into dealerships by the Cash for Clunkers program and ended up buying cars even though their old car was not eligible for the program.

This faulty assumption leads Edmunds to a conclusion that is at odds with many independent analyses: Edmunds assumption that more than 80% of the payback from Cash for Clunkers would occur in 2009 isn't how many mainstream analyses, including Moody's and IHS Global Insight approach the problem (see pages 5 and 15 of this CEA report [PDF]). In fact, Deutsche Bank recently concluded that “The important takeaway from recent sales trends is that it suggests that there has been minimal 'payback' for the U.S. government’s 'cash for clunkers' program.”

2. Edmunds also ignores the beneficial impact that the program will have on 4th Quarter GDP because automakers have ramped up their production to rebuild their depleted inventories.

Major automakers including GM, Ford, Honda and Chrysler all increased their production through the end of the year as a result of this program, which will help boost growth beyond the third quarter. The actions of private market participants, who would not increase production if they didn’t think demand for their product would be there through the end of the year, is a far better indicator of market dynamics – and one that Edmunds.com conveniently ignores.

Most importantly, this program is helping boost our economy and create jobs now when we need it most. In a comprehensive report, the Council of Economic Advisers estimated that the Cash for Clunkers will create 70,000 jobs in the second half of 2009. The strength of recent auto sales data suggest that, if anything, this projection underestimates the actual impact of the program. CEA’s analysis is transparent and comprehensive, laying out all of its assumptions for the public to understand. Edmunds.com, on the other hand, is promoting a bombastic press release without any public access to their underlying analysis.

So put on your space suit and compare the two approaches yourself:

Edmunds.com

Council of Economic Advisors

Seriously, what's the point of this? Clunkers is over. It just makes The White House look thin-skinned, though it's great publicity for Edmunds. And yes, Clunkers massively distorted this morning's GDP number, as we demonstrated here, but we're with Edmunds that it was a giant waste with little long-term benefit.

Now The White House Is Fighting With Car Website Edmunds.com

sphinx · Oct 30, 2009

CHART OF THE DAY: Cash-For-Clunkers MASSIVELY Distorted GDP

If anyone mentions the just-released 3.5% U.S. third quarter GDP growth, just throw this chart in their face. Cash for Clunkers clearly distorted the U.S. economic figures in an unsustainable fashion.

According to the Bureau of Economic Analysis (BEA), motor vehicle output spiked a seasonally-adjusted 157.6% quarter on quarter. This is completely unprecedented. Vehicle output is clearly going off a cliff next quarter. The question will be how low can the blue line below go.

Next quarter, we won't just be returning to business as usual for auto output. Don't forget that Cash for Clunkers pulled future auto demand, ie. some of Q4 demand, into Q3. Thus Q4 is likely to be very weak since many people who planned to buy a car in Q4 probably took advantage of Clunkers and bought in Q3.

To put this into GDP terms, according to the BEA the spike you see below added 1.66% to the U.S. GDP growth figure reported. Thus without it, GDP growth would have been only 1.89% (3.5% - 1.66%) in Q3.

Now imagine if next quarter the blue line below goes down into negative territory as it did just two quarters ago. Next quarter, not only are we unlikely to get Q3's boost, but motor vehicle output data could subtract from GDP as well. So watch out for the cliff...

CHART OF THE DAY: Cash-For-Clunkers MASSIVELY Distorted GDP

jikelly · Oct 30, 2009

Yeah GDP was affected by CFC for sure. I can see the White House blogger's point about the Edmunds analysis.

We are still planing to buy a car and we couldn't take advantage of cash for clunkers. I'm going to bet like many other people in the US we are trying to eek as much out of our current vehicle as we can. Having a car payment again is not very attractive in these economic times.

strtrcr50 · Oct 30, 2009

Venom351R · Oct 30, 2009

jikelly said: ↑

We are still planing to buy a car and we couldn't take advantage of cash for clunkers. I'm going to bet like many other people in the US we are trying to eek as much out of our current vehicle as we can. Having a car payment again is not very attractive in these economic times.

Its not just that its also getting any kind significant kind of loan is probably not easy either.

1992 2.3LX · Oct 31, 2009

Venom351R said: ↑

Its not just that its also getting any kind significant kind of loan is probably not easy either.

There is no shortage of anyone loaning money to people with good credit.

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First Fox and now Edmunds?

sphinx Founding Member

sphinx Founding Member

jikelly Well-Known Member

strtrcr50 New Member

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1992 2.3LX New Member

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