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Whistle Blown on Fancy Auto Loan CPI Racket

PRESS RELEASE
Citizens for Corporate Accountability

-Price-setting and racketeering cycle by auto corp. finance arms

-Cars prices reported as "falling" in CPI, even though big car cos. inflating financing and volumes

(UPDATE 4)

(SEATTLE) 01/27/04 A complaint has been filed with the US Federal Trade Commission (FTC) regarding a newly uncovered cycle of price-fixing, racketeering, and credit profiteering by major US auto manufacturers. Because of the nature of the price fixing, this cycle affects areas far beyond just cars.

This problem was identified by examining details from official US BLS tables, and comparing long term trends and weightings against independent data and reports.

The scheme involves a gradual and consistent lowering of "reported" auto prices since 2000, by the manufacturing arms of major auto makers such as Ford and General Motors, while at the same time, the manufacturer unfairly increases profits through financing arms of the same("Ford Motor Credit Co.", "General Motors Acceptance Co."). The price fixing trend is clearly recorded in US Bureau of Labor Statistics (BLS)tables, which show a normal trend in prices over many decades for new vehicles-- which was inexplicably reversed in late 2000.

This shift follows a change in 1998, which removes auto finance charges from the US Consumer Price Index(CPI). Therefore, these corporations act as monopolies, who can inflate profit on financing without restrictions.

In addition, for the most recent BLS CPI assignment, the weighting of the vehicle figures in the CPI has been increased(which increases the effect of negative inflation). This is unexplainable based on normal economic trends, and mathematics--and has the effect of artificially lowering the overall CPI, which is used as the basis for many payments, such as social security and welfare. Moreover, such an artificial lowering of inflation figures has the effect of increasing loan demand for the auto financing arms, so the cycle feeds back on itself--apparently with increasing volume, judging from recent "stunning" US GDP figures---which consist almost entirely of vehicle sales (emphasis added).

This finding is significant in conjunction with the new "Hidden Finance Charges" report (01/26/04, Consumer Federation of America)--which provides extensive evidence of credit markups by auto credit companies, which inflate the actual and total cost of vehicles.

Specifically, the artificial lowering of figures reported to the BLS by the monopolies has the effect of an enticement on false terms, as the BLS statistics are systematically used to calculate the CPI--which in turn, serves as a loan basis, and when lowered, beckons consumers by providing a "supposed" rate for auto loans. However, as reported by CFA, the supposed rate is not applied when auto deals are closed-- instead, significant markups are hidden in the credit terms of the finance contract. So by lowering the base prices of vehicles at one end of the monopoly, the buyer is enticed, and ends up paying for it at the other end.

These discoveries therefore show a manipulation of prices by the auto companies, with a false enticement. Further, they show a manipulation of the US Consumer Price Index for private gain, as the CPI has a significant weighting for new vehicles (a component which has been reported as negative recently, and has thus caused the overall inflation number to be falsely reported as low).

It follows that the auto companies are liable for this manipulation as it impacts borrowers and other creditors--as well as to any and all consumers who lost benefits indexed against the US CPI, which would otherwise be higher, were it not for the monopolistic actions of these corporations.

This cycle was uncovered as a result of a recent study by Citizens for Corporate Accountability, concerning trends in the US Consumer Price Index(CPI), which was reported in a previous news release (see "hole found", below).

- Contact: Dan Spillane DanSLegal@aol.com Citizens for Corporate Accountability 410 Denny Way #229 Seattle, WA 98122 (206) 860-2858

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