'Cash for Clunkers' Passage Poised To Help Auto Companies and Suppliers (F, GMGMQ, LEA, ARM)
Congress passed the 'Cash for Clunkers' plan yesterday which will give rebates of up to $4,500 for those trading in their old gas-guzzling autos for new more fuel-efficient models.
Under the plan, owners of passenger cars will receive a $3,500 voucher if they trade in a car getting 18 mpg or less for a new car getting at least 22 mpg; they can receive a $4,500 voucher if they trade in a for a new car that gets 10 mpg more. Owners of small trucks and SUVs will receive a $3,500 voucher if they trade in a vehicle getting 18 mpg or less for a new model getting at 2 mpg or more; they can get a $4,500 if they buy a new model getting at 2 mpg or more. For Large Light-Duty Trucks, if mileage for new truck is at least 1 mpg higher, the voucher will be worth $3,500; if the new truck gets at least 2 mpg higher than the old truck, the voucher will be worth $4,500.
The program will be authorized from July 1, 2009 to November 1, 2009 with $1 billion in emergency funding.
For those that plan to game the system by buying a $500 car on Craigslist and turning it in, don't waste your time. The trade-in vehicles must be in drivable condition, be a 1984 model or later, and be continuously insured and registered to the same owner for at least one year. Damn!
It remains to be seen how much this plan helps the car companies, but it certainly doesn't hurt. And what is good for the car companies is good for the auto suppliers, which have been drowning due to production cuts.
Stocks: Ford (NYSE: F), GM (OTC: GMGMQ), Toyota Motors (NYSE: TM), Lear Corp. (NYSE: LEA), American Axle (NYSE: AXL), BorgWarner Inc. (NYSE: BWA), ArvinMeritor Inc. (NYSE: ARM), Tenneco Inc. (NYSE: TEN).
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