Tom Hayes: CNNMoney.com gets "Cash for Clunkers" wrong

You'd expect an author at CNNMoney.com to understand the relationship between cashflow and business success.  You'd expect an editor to send this article back to re-write either for more research or more objectivity.  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 editors 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.  Nor was it intended to. The goal was simple: turn over inventory in one segment of the industry - to keep dealerships from failing in huge numbers before the manufacturers could recover. Save some jobs and hopefully avert a catastrophic spread of deterioration in the auto industry that would further delay economic recovery.

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 obviously wants to, but 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:

In business, my friends, timing is everything.

 
Thomas Hayes is an entrepreneur, journalist, and political analyst who contributes regularly to a host of web sites on topics ranging from economics and politics to culture and community.