The Border Adjustment Sleight of Hand
With Republicans in control of Capitol Hill and the White House, this should be an opportune time for major tax cuts to boost American growth and competitiveness. But much of the reform energy is being dissipated in a counterproductive fight over the “border adjustment” tax proposed by House Republicans, writes Veronique de Rugy and Daniel J. Mitchell in a Wall Street Journal piece. Start with the political blunder: Republican tax plans normally receive overwhelming support from the business community. But the border-adjustment tax has created deep divisions. No country has ever imposed a border-adjusted corporate-income tax, so this is uncharted territory. But many countries have value-added taxes, or VATs, that are border-adjustable, and their experience might serve as a reasonable proxy. If the currency adjustment were perfect, there should be no effect on trade volume. But research has shown that VATs are associated with both lower exports and imports. For more on how the border adjustment tax will really impact U.S. businesses, click here.
How Volvo Defied the Odds
"It shouldn't be possible for the bumblebee to fly, but it does. This falls into the same category." For Hakan Samuelsson, Volvo CEO and embodiment of the Swedish distaste for boastfulness, this borders on swagger, reports Automotive News. Samuelsson was answering a question on the sidelines of the Geneva auto show in March: Why had Volvo succeeded when conventional automotive wisdom rated its chances of survival as slim at best when Ford Motor Co. sold the brand to China's Zhejiang Geely Holding Group in 2010? Volvo's success can be attributed to smart decisions, a tactfully handled sale by Ford, seductive vehicle design, and an advantageous introduction to the world's largest car market, China. Geely, contrary to early fears, sensibly kept Volvo anchored in its Swedish homeland but also gave it access to Chinese finance, paid for a new Chinese manufacturing base, and generally gave it the security it needed to think big. Volvo is now a success by any measure. Read more about Volvo’s successful strategy here.
Who's at Fault Unclear in Driverless Car Crashes
Automakers are rushing to put self-driving cars on the road, but questions remain about who will be responsible for accidents that occur when vehicles are in control of primary driving tasks, reports The Detroit News. A consumer safety group is trying to get ahead of the problem by pushing automakers to assume responsibility for crashes involving self-driving cars that they are testing now. To date, no manufacturers have made such a pledge to the Safe Autonomous Vehicles (SAVe) Campaign. Carmakers argue existing state insurance laws that determine liability are sufficient. The debate occurs as Apple Inc. signaled Friday it’s in the autonomous vehicle game: California OK’d Apple’s application to test three self-driving Lexus SUVs. General Motors Co. plans to put as many as 300 more self-driving vehicles on the road, according to government filings; GM already is testing more than 50 self-driving Chevrolet Bolt EVs on public roads in Detroit, San Francisco, and Scottsdale, Arizona. For more on who is at fault in driverless car crashes, click here.
Where the New Model SAAR Should Be to Keep Used Market Healthy
AIADA reported that average length of time a new model sat on a dealer’s lot hit 70 days in March — the longest stretch of time since July 2009. Edmunds contends current new-vehicle inventory levels haven’t been this high since 2004. Cox Automotive chief economist Tom Webb sees the assertions from AIADA and Edmunds stemming from franchised dealers starting both February and March with more than 4 million new units in stock as a headwind for both used- and new-vehicle sales. According to Auto Remarketing, Webb explained that hefty incentives were applied to that new-model inventory — a move that eventually places pressure on used-vehicle values — and the industry achieved a seasonally adjusted annual selling rate (SAAR) of 17.5 million in February. The strategy repeated in March, but the new-model SAAR fell to 16.5 million — the lowest reading since February 2015. “Last month’s weak sales pace, plus less-than-needed production cuts, has left dealers with still too much new metal on the ground,” Webb said. For more on dealer inventory, click here.
Consumer Prices Down 0.3%, Biggest Drop in 2 Years
Consumer prices fell in March by the largest amount in more than two years, pushed lower by another sharp decline in the price of gasoline and other energy products, reports the Detroit Free Press. Consumer prices dropped 0.3 percent in March following a tiny 0.1 percent rise in February, the Labor Department reported Friday. It was the first monthly decline in 13 months and the biggest drop since prices fell 0.6 percent in January 2015. In addition to a big 6.2 percent fall in gasoline prices, the cost of cell phone plans, new and used cars and clothing were all lower last month. Core inflation, which excludes volatile food and energy, dropped 0.1 percent last month. Over the past 12 months, inflation is up a moderate 2.4 percent while core prices have risen 2 percent. For March, energy prices dropped 3.2 percent, led by the big 6.2 percent plunge in gasoline prices. Even with the decline, gasoline prices are 19.9 percent higher than a year ago. For more on consumer prices, click here.
Join Tomorrow's Webinar: Fast Track to Hiring the Best
Employee turnover costs a dealership with 55 employees about $400,000 a year due to search and training expenses and potential lost sales and service business. Join AIADA and Cox Automotive for an informative 30 minute webinar tomorrow, Tuesday, April 18, at 10:00 a.m. and 4:00 p.m. EDT to learn about best practices for hiring and retaining your dealership employees. In this AutoTalk webinar brought to you by AIADA and Cox Automotive, featuring Nicole C. Ashe, Vice President of Talent, Diversity, and Culture at Cox Automotive, dealers will learn how to hire the best in class through recruitment and staffing, employ a fast track to sales and service with an onboarding/new hire program, and more.
To register for the 10:00 a.m. EST session, click here.
To register for the 4:00 p.m. EST session, click here.
Around the Web