The rules placed on the vehicles eligible for the rebates are not the only regulations put in place. The folks who are going to be receiving the “clunkers” have specific rules as well. The bottom line is that the vehicles are destroyed so they cannot find their way back on U.S. roads. This has many if not all auto recyclers upset about the program. In fact, they downright despise it. The salvage (or recycler) industry argue that the program will hurt their bottom line.

New car dealers are advised to replace the oil in the clunkers with a sodium silicate and to run the motors in order to seize them. This ultimately destroys any and all parts that can be removed from the engine before being sold to a scrap yard. Since engines and drive trains make up about sixty percent of the business acquired by the salvage industry, industry leaders argue it would significantly hurt the industry. All of this comes after one of the worst years in the aftermarket industry’s history where more than a dozen auto-supply chains had filed for bankruptcy.

Additionally, not only do the regulations on destroying the vehicles hurt the salvage industry, but it is also affecting the low income customers who can’t afford newer cars even with the rebate program. The crushing of the vehicles will destroy parts, which will minimize the availability of salvaged and refurbished parts, and in turn cause prices to go up for any remaining parts. The rise of these prices would even hurt low income customers that use the parts to keep their vehicles running.

In terms of the effect that this program may have on the market of classic Japanese vehicles is a little bit unseen. With the regulations placed on the vehicles that can be traded in, it’s safe to say that an old Mazda RX-2 that is in a garage somewhere will not be destroyed. It would also be unlikely that there will be any Datsun’s hanging out of a dumpster at the dealership. However, cars that are not yet considered classics may be harder to find in the future.

Even though this program is meant to help the industry, it’s hurting at least an equal percentage. It’s great that the auto dealerships have seen a rise of thirty to fifty percent rise in sales because it will definitely fueling the economy, but for every car that is traded and destroyed a countless number of parts are also being wiped off the face of the earth. How this ultimately affects the economy and people’s lives is yet unknown, but let’s hope that there are more positives than negatives that come out of this.

Do you want to find out how to qualify for the CARS (Cash for Clunkers) program? Read our article on the program rules.

Even though the program started a month ago, the 136-page rulebook with detailed regulations was released just this last Friday, and by the looks of it, there are very stringent obligations if anybody is interested in taking advantage of this deal.

If anybody has a car to be traded into the Cash for Clunkers program, it must be a 1984 model year or newer. This can be tricky however; for example, if the car that is being traded was manufactured in July 1984 and the new vehicle was manufactured in August 2009, it will not qualify. The trade-in and the new vehicle must be less than 25 years of each other to the month of manufacture.

The fuel economy of the trade-in must have a combined city and highway rating of 18 mpg or less. (The fuel economy of any vehicle can be checked at this website: www.fueleconomy.gov.) One exception to this rule is the case of work trucks which may not have been rated for fuel economy and will be judged by instead by age. They must be from 2001 or earlier, but also be within the 25 year mark.

The total amount of the refund will be determined by how much of a difference there is in fuel economy between the two vehicles. If the difference 4 mpg and 10 mpg there is a $3,500 credit; if it is more than 10mpg then there is a $4,500 credit.

Even with all that said, don’t go to the dealership thinking and expect to take the old ’89 Ford Bronco that’s been rusting away in the backyard and expect to get $4,500 for it. The most overlooked rule is that the vehicle being traded in must be in driving condition, registered in a timely manner and insured for at least a twelve full months prior to the trade.

Qualifying purchases must be model year 2009 or 2010 and can be purchased or leased. However, if leased it must be leased for at least 5 years. The new vehicle also has a maximum MSRP cap of $45,000, so your dream Skyline GTR will not qualify under the program.

There are a lot of different and precise requirements for qualifying for the rebates, so make sure to research as much as possible before taking the plunge. All of the regulations and FAQ’s can be found at the official Government page: www.cars.gov.

Toyota’s income dropped a dismal 437 billion Yen ($4.4 billion USD) from the year prior for fiscal year ending in March. Making it their first net loss in 72 years since Toyota was founded.  This shows that even historically strong players in the market are not immune to the current recession.  The loss comes only one year after taking over GM for the top automaker in the world based on sales.

The car maker announced this week that they will be cutting their production by almost 30 percent, causing a significant number of jobs to be eliminated.  Both Toyota and Lexus brands will be affected since the sales of both companies took a hit of almost 30 percent. The majority of jobs lost this year will be overseas in Oye and Thailand. However, between the two factories Toyota is expecting to eliminate 15 percent of their workforce.

There are a many different reasons for Toyota’s loss. All over the world and especially in the US, people are just not able to buy cars at the moment.  Unemployment rates in the US are at some of the highest rates in decades.  Those who are lucky enough to have jobs are even taking major pay cuts in their salary.  On a global scale, overall new car sales are down in the US and many other countries in Europe, South America and Asia.

Another factor in Toyota’s profit loss is the fluctuations in the money market.  The Dollar is at a 13 year low against the Yen at almost 100 Yen to a Dollar. The prices of raw materials used are majorly affected and with the value of the dollar dropping, we see how the U.S. crisis has sent a ripple effect around the world.

However, what goes down must come up and history has shown that economic issues like this come and go. Despite the recent downturn, Toyota does have plans for the future. Even though their homeland competitor Honda recently introduced the new and improved Honda Insight Toyota is already in the works of building a smaller more affordable version of the Prius. Toyota knows that it is imperative to retain customers from their main rival, so they will have to position themselves to put up a strong fight coming out of this downturn.

Considering the economic condition of the world and the major struggles of other car companies, it is not a complete surprise that Toyota would end up feeling the pinch.  It is less than a year until we will be in a new decade and even though things are tough now it is intriguing and exciting to see what our car companies have in store for us.  As cliché as it may be, it’s true when they say only time will tell.

Sponsored by Rep. Betty Sutton, D-Ohio, and co-sponsored by Rep. Bruce Braley, D-Iowa, John Dingell, D-Michigan, and Candice Miller, R-Michigan, the bill originally offered vouchers starting at $3,000 to owners of vehicles that are at least eight years old upon trade-in to purchase more fuel-efficient vehicles. The aim of the bill was to give owners of “high polluting automobiles” tax-payer paid vouchers to help replace the vehicles with “new fuel efficient and less polluting automobiles or public transportation”. But it is not quite as simple as it seems be on the surface.

With non-North American makes originally excluded, the Detroit Three automakers and the United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) supported the bill while foreign automakers and aftermarket associations opposed the bill.

SEMA and AAIA have argued that the bill could do more harm than good by allowing individuals to take advantage of taxpayers by trading in cars that are underutilized, especially if those individuals own more than one car. SEMA states that the program may produce artificial increases in car sales, but will not do enough to reduce emissions, increase fuel efficiency or decrease dependency on foreign oil. They further attest that the program will eliminate a source of parts for aging cars and consequently be a threat to businesses in the industry which serve those vehicles.

“Cash for Clunkers would prematurely destroy vehicles and their valuable parts and components, denying more affordable used vehicles and parts to millions of low and middle income families…”

AAIA has added that “Cash for Clunkers would prematurely destroy vehicles and their valuable parts and components, denying more affordable used vehicles and parts to millions of low and middle income families who cannot afford to purchase a new car even with a $3,000 to $5,000 government voucher.” They suggest that the scrappage program will increase landfills and junkyards and increase the demand of energy and resources to build new cars.

Those who support the bill call the arguments “dubious” stating that useful parts could stripped off vehicles before they are destroyed citing that 84 percent of cars by weight are recycled and 95 percent of vehicles go through some sort of recycling process in the U.S. Supporters state that vehicles which are collectible and/or historical would also be unaffected as owners of such cars are unlikely to take advantage of the program. As evidence of success, supporters point to programs in foreign countries such as in Germany, the European Federation for Transport and the Environment.

Through multiple revisions, the final guts of the CARS Act hinges on gas efficiency. Passenger cars and light trucks must get less than 18 MPG for owners to be eligible for vouchers. The program now applies for both imported or domestic vehicles as long as the new car gets at least 4 MPG more than the trade-in model. At 4 MPG, owners receive $3,500 vouchers. If the mileage is at least 10 MPG or better, owners receive $4,500 vouchers towards the new vehicles.

Trade-in’s will still be scrapped in order prevent gas-guzzling vehicles from re-entering the used car market.

The program may be offered only to the first 1 million customers, so anyone who is interested will have to act fast. However, Brian J. O’Conner, columnist at Detroit News warns that although “Cash for Clunkers seems like a no-brainer” keep in mind the depreciation of a new car compared to a slightly used model. He exemplifies buying a new Pontiac Vibe at an average of $19,800 which becomes $15,300 (after a $4,500 voucher for trade-in) to a slightly used 2-year old Vibe for $13,200.

Currently serving in the US Army, Alan has recently returned from his tour. Cruising with the top down in his S2000 and enjoying the wind on his Gixxer is what he does in his spare time. His contributions include writings and photography to many of the articles on JDMOrigins.com.

For the future, like many other manufactures in the industry, HKS says they plan to stop their participation in major industry shows, “including SEMA, PRI and Tokyo Auto Salon” but instead they will increase in operations and research and development to ensure products are delivered to the market more optimally.

It looks like even though HKS will be increasing R&D efforts, we won’t be seeing any cool new products and cars from HKS at the big shows for the near future. Maybe instead we can get them to remake some nostalgic 1980’s style HKS gauges?

PRESS RELEASE

HKS CO., LTD. & HKS USA, INC. ANNOUNCE STRONG EARNINGS

LOS ANGELES (November, 2008) – HKS Group, the premier manufacturer and supplier of automotive performance systems, components, and light-weight aircraft engines, has reported strong earnings for HKS Co., Ltd. and its subsidiary HKS USA, Inc. Anticipating the significant downturn in the global economy over the last year, HKS implemented a “lean operations plan” early in 2007 that was a major factor in increased earnings and financial strength, positioning the company to come through the on-going downturn in an even stronger position.

Below are the financial highlight statements release by HKS Japan, LTD. and HKS USA, Inc.

HKS Co., Ltd. Financial Highlights (FY 2008)

HKS Co., Ltd. FY 35 (2007-2008)

During HKS Co., Ltd’s Fiscal Year 35 (CY2007-2008), the Japanese Automobile market declined to its lowest level in the past 30 years due to global economic anxiety resulting from record price of crude oil and the U. S. sub-prime financial crisis. Japan’s top selling car segments were high MPG small cars and Mini cars while other segments declined significantly.

Recognizing the difficult global situation and domestic challenges, especially the saturated and stagnant Japanese Aftermarket Auto Parts Industry, HKS has executed a three prong corporate plan to grow and prosper in spite of the economic storm. These are; First, to reinforce and enhance our market position as a pioneer and the leader in the industry. Second, to aggressively expand our business in the overseas markets. Third, to cultivate new business opportunities by utilizing our technological expertise and experience.

Despite, the successful launch of a totally new electronic device, “CAMP2″ and aggressive expansion of the HKS GT Supercharger and Suspension product lines, the Japanese After-Market has declined due to less consumer consumption caused by the rise of consumer price index. At the same time, HKS Co., Ltd.’s business with Original Equipment Manufacturers (OEM) was growing. The newly introduced Supercharger for watercraft was a solid contributor to sales due to a major OEM contract. Because of these factors, the revenue from the Japanese market has increased from last fiscal year.

For the overseas markets, the weaker European economic trend was a concern, but businesses with OEM helped increase the revenue in that region. Additional distribution channels brought increased revenue in the Asian region. However, the U. S. economic downturn triggered by the sub-prime financial crisis and the conclusion of a contract for automobile assistive device to OEM resulted in decreased revenue from the North American Market. Overall, the revenue contribution of overseas markets during this fiscal year was lower than the previous fiscal year.

As a result, the consolidated sales with our subsidiaries for the Fiscal Year were 8,551 Million Yen which was a 2.3% increase from the previous fiscal year.

HKS-Strong Earnings

On the subject of profit, the incremental sales, cost reduction due to a higher level of manufacturing operations, and expense reductions in the sales and marketing area, successfully offset the material cost pressure due to global material cost hike.

As a result, The Operating Profit for the Fiscal Year was 392 Million yen (US$3.92 million) versus previous FY loss of 47 Million Yen (US$-.47 million), the Current Profit was 390 Million Yen (US$3.9 million) versus previous FY loss of 9 Million Yen (US$-.09 million), and the Net Profit was 223 Million Yen (US$2.23 million) versus previous FY loss of 166 Million Yen (US$-1.66 million).

*100JPY = $1 USD

HKS USA, Inc. Financial Highlights (FY 2008)

HKS USA, Inc. FY 2008

As HKS Co., Ltd.’s public disclosure statements show, the HKS Group is financially sound, with its substantial asset base of 11 Billion Yen (US$112.0 million) and liabilities of 3 Billion Yen (US$30 million). In fact, liabilities have been reduced by 9% versus prior fiscal year as a result of efficient operating and accounting controls. HKS’s solid financial standing will allow the company to continue to implement its R&D and dealer support plans during the global downturn.

For the fiscal year, the North American operation (HKS USA, Inc.) made a significant contribution to the HKS Group despite the developing U.S. financial crisis and significant decline in auto sales and aftermarket industry sales. While sales revenue decreased by 18% versus prior fiscal year, profit increased 11% versus prior fiscal year as a result of the implementation of a “lean operations plan” and cost containment.

Plans and Outlook for Next Fiscal Year

The HKS Group forecasts that the global economy will continue to lose momentum into calendar year 2009, placing significant pressure on the auto and aftermarket industries. In spite of the weak global economic outlook, HKS believes it will continue to perform successfully in the Fiscal Year 2009 (FY36) with the benefit of the HKS Group’s strategic direction already in place. The “lean-operations plan” will continue to go forward in HKS’s relentless efforts to contain and reduce costs.

To achieve better capital efficiency – return on capital employed – HKS Group will not participate in major industry shows, including SEMA, PRI and Tokyo Auto Salon. The capital will be employed in operations and R&D to ensure all new products are delivered to the market to better support our loyal customers and strengthen the HKS Dealer network.

HKS will continue to invest in our technological resources (R&D) and continue to lead the industry in innovative driving performance products. The efficiency and productivity improvements described above will have a positive impact on HKS Group earnings and growth

About HKS USA, Inc.

HKS USA, Inc. is a leading manufacturer and supplier of automotive aftermarket performance systems, parts and accessories. Delivering its products to both the import and domestic car markets, HKS has been recognized for its engineering and performance excellence in the automotive industry since 1973. Established in 1982, HKS USA, Inc. is a wholly-owned subsidiary of HKS Company, Ltd. Japan and distributes its products through its worldwide dealer network. For more information about HKS USA., visit their website at www.hksusa.com.

Contact:  Michael Caudill, DRIVEN, (951) 587-9465