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Big Three auto makers will take a hit from budget incentives

From theglobeandmail| March 22 , 2007

Federal incentives to encourage a shift from gas-guzzling SUVs to fuel-efficient “green cars” could hurt struggling North American auto makers by keeping some drivers out of the marketplace without significantly boosting sales of gasoline-electric hybrid cars, industry watchers say.

Auto analyst Dennis DesRosiers said Tuesday the government should be concerned with how auto makers might react to its budget plan, which favours hybrid cars with a rebate of up to $2,000 on the purchase but puts a $4,000 tax on SUVs and other vehicles that use high amounts of fuel.

“If I was General Motors, Ford and Chrysler, I'd be real (upset). Right now, these companies are in real sensitive mode in terms of their very survival,” Mr. DesRosiers said.

“Key decisions are being made in their head office boardrooms in terms of plans of what to keep open, what plants to close and where to put their investments. And what does the federal government do? They send a bomb — a missile — into these boardrooms saying we're going to put a $4,000 tax on your most profitable vehicles,” he said.

Mr. DesRosiers suggested consumers will find other ways to acquire an SUV, if they really want to make the purchase, such as buying used — an area that isn't covered by the incentive plan — or travelling stateside to make a purchase.

The taxes “don't deter consumers from buying these kinds of vehicles, mainly because you can drive a large SUV through the loopholes in them.”

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