Car Wars

I was surprised that this morning's papers made no mention of the biggest downside to the emerging automobile price war: the Big Three are borrowing from future sales to liquidate yesterday's production. The entire focus was on internet savvy shoppers now accustomed to getting the best deals. But the motivator behind the huge price cuts is the fact that all the car companies have huge unsold inventories. GM, which kicked off the price wars, was successful in eliminating about a quarter of its million-plus stock of cars and light trucks (a euphemism for suddenly unfashionable SUVs). One analyst suggested this good news meant that GM would resume full production, probably in the fourth quarter, and that it would extend into next year.

Maybe. The other way to read these economic tea-leaves is that today's price wars are bringing people into the market who might otherwise have waited until next year for their next new car. With high gasoline prices showing no signs of abating, those good deals today could be a harbinger of harder economic times ahead.