U.S. Rebates Gave Auto Sales a Big Lift in August

U.S. Rebates Gave Auto Sales a Big Lift in August
By NICK BUNKLEY
Copyright by The New York Times
Published: September 1, 2009
http://www.nytimes.com/2009/09/02/business/02auto.html?_r=1&ref=global-home


DETROIT — The federal government’s “cash for clunkers” program made August the best month of the year for new-vehicle sales in the United States, automakers said Tuesday.

But the numbers also show that sales fell dramatically in the last week of the month, after the $3 billion program came to an end. Analysts say the rest of the year could be fairly slow, though sales are expected to be up on a year-over-year basis because the final months of 2008 were so miserable.

The first automaker to report, the Ford Motor Company, said its sales rose 17 percent last month from a year ago, marking the first time since 2006 that Ford’s sales rose in two consecutive months. Its sales rose 2.3 percent in July.

Ford also said its retail market share, which excludes bulk deliveries to businesses and governments, rose for the 10th time in 11 months.

Sales of the Ford F-series, a large pickup truck popular among building contractors, rose 13 percent to the highest level in more than a year, a positive sign for the automotive market and the broader economy, the company said.

“We’re very pleased with the balanced performance of our products — from Focus to F-Series,” Ken Czubay, Ford’s vice president of marketing, sales and service in the United States, said in a statement. “We are hopeful that the sales of our pickups and all-new Transit Connect are an indication that small business owners are seeing signs of recovery and gaining confidence in the outlook for stronger business conditions.”

Hyundai, the South Korean carmaker, is expected to report record-high sales for the month, far surpassing its year-ago numbers.

Other companies, though, are projected to report that their sales were about even with or below their August 2008s, despite the lift that the clunkers program provided. General Motors, Chrysler, Toyota and others are scheduled to report August sales later Tuesday.

The clunkers program, which gave consumers a credit of $3,500 or $4,500 if they turned in an older vehicle and bought a new, more fuel-efficient one, led to nearly 700,000 sales in a one-month period. It began July 24 and received a $2 billion extension from Congress after its popularity greatly outstripped expectations in its first week.

The surge in demand caused many dealers to run low on inventory of popular vehicles, especially small and midsize cars. Most automakers are ramping up production to replenish those inventories. G.M. is calling back about 1,350 hourly workers to factories in Ohio and Ontario, and factories operated by a variety of companies are suddenly running on overtime, something that has been extremely rare since the market’s slump began in 2008.

“We estimate that as much as 60 percent of vehicle sales under the program represented ‘stimulated demand’ from consumers who were not otherwise intending to buy,” Bruce Clark, a senior vice president at Moody’s in New York, wrote in a report this week. “While the program pulled forward some sales that would have occurred later, we are maintaining our base-case scenario of an 11.5 million unit” market in 2010.

That is still well below the type of market that automakers had been used to, until this year’s slump. Through the first half of 2009, sales were on pace to fall below 10 million for the full year, and in 2008, automakers sold about 13.2 million vehicles, the fewest since 1992. Earlier this decade, annual new-vehicle sales were around 17 million.

The clunkers program helped Asian automakers more than the Detroit companies, which accounted for 39 percent of sales through the program compared with their year-to-date market share of 45 percent.

About one out of every five vehicle bought through the program was a Toyota, making that the most popular brand among participants. It was followed by G.M., Ford and Honda, in that order.

Although the program has ended, most dealers still are waiting to receive reimbursement for the rebates they gave customers. After initial processing delays, the Transportation Department tripled the number of workers handling paperwork for the program.

The backlog has caused a cash crunch for some dealers, but the crowded showrooms were a welcome change from the gloominess that has characterized most of this year.