auto

Automakers receive $17 billion in Bush bailout

Reed said the incentives being offered now are unparalleled.

"These are wild incentives, never before seen; things like buy-one, get-one-free (offers)," he says. "You think, 'wow, that sounds good.' But then you think, 'how practical is that for most people?'

"If you need two cars, then that's great. But if it is just being thrown in to sweeten the deal, then the cost of insuring and maintaining two cars might start to get a bit overwhelming," Reed says.

These deals are likely to continue until cars start rolling off the lots. And it might take more time, and more than just a single bailout bill, Reed says.

"Everyone is looking closer at everything in their household budgets," Reed says. "Why aren't people buying now? What are people waiting for? Perhaps that is the most basic question."

Sitting on the sidelines 
Auto sales have fallen across most demographics and most vehicle categories. In a typical year, 16 million cars are sold in the United States. Reed says the numbers are showing that fewer than 13 million will sell this year.

The fact that automakers are selling fewer vehicles is forcing them to take drastic steps to cut inventories. Chrysler announced it will be shuttering all 30 of its factories for a month. Ford is suspending operations at 10 plants for a week, and GM is closing 20 factories for much of January.

"We have gotten into the habit of changing cars more fluidly and quickly, but needing has replaced wanting," he says. "Discretionary buying has ceased."

Many observers are hoping that the deferred buying will translate into pent-up demand as people try to limp their cars along until they finally give out.

But economist Johnson says he wouldn't bet on the market unleashing that demand any time soon.

"The consumer has seen a big drop in income and a big drop in wealth. People are doing the normal thing that you would expect to see in this situation. They are reacting by cutting back on discretionary costs," he says.

The pent-up demand only becomes relevant if the general economy recovers, which Johnson says isn't likely until the middle of 2009 at the earliest.

Michael Giusti is a freelance writer who teaches journalism at Loyola University New Orleans.

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