Friday, August 14, 2009
'Clunkers' rules ease as sales soar
Purchases won't be limited to vehicles only in dealers' lots; change may relieve shortages
The Obama administration agreed Thursday to expand the "cash for clunkers" program to vehicles already in the production pipeline.
Car buyers had been limited to fuel-efficient vehicles in showrooms and on lots, and some dealers reported shortages. The Transportation Department's decision to broaden it came just days after a request by Michigan lawmakers who said it would increase consumers' choices and encourage more to take advantage of the incentive program, which already has spurred a dramatic increase in vehicle sales.
Some foreign automakers had opposed the expansion, saying it would create "confusion" among dealers and consumers.
Ford Motor Co. announced Thursday that it is boosting production at a number of factories to keep up with the demand.
The company said it saw no signs of abating interest in the program, and warned that the $3 billion Congress allocated for it would likely be exhausted in about three weeks. That was before the government announced the expansion, meaning the "cash for clunkers" program could run dry even sooner.
"The Department of Transportation is trying to make sure that everyone who wants to can participate in this wildly successful program," said Transportation Secretary Ray LaHood. "Allowing consumers to order vehicles and qualify for the rebate will expand buyers' choices and keep production lines running."
Two of Michigan's Republican members of Congress, Reps. Fred Upton of St. Joseph and Candice Miller of Harrison Township, urged LaHood to allow customers to order vehicles and not be limited to those on the lots.
"This change is necessary because many dealers have begun to run out of the most popular cars due to the incredible success of this program," Miller said Thursday. "We weren't asking for money."
Not all automakers like the change. Mike Stanton, chief executive of the Association of International Automobile Manufacturers, which represents foreign carmakers, said the change could open the door to fraud.
About 340,000 vehicles have been purchased under the program, with about 20,000 new sales submitted each day this week. Between June 22 and Tuesday, nearly 13 million hits had been registered at a government Web site detailing the program.
The program, officially known as the Car Allowance Rebate System, gives consumers vouchers for up to $4,500 for turning in vehicles of up to 25 years old and with a fuel efficiency of 18 miles per gallon or fewer, and buying more fuel-efficient models.
Congress originally allocated $1 billion for the program, but added $2 billion after unexpectedly strong demand threatened to burn through that in the first week. As of Thursday morning, $1.42 billion in voucher requests had been submitted.
Ford's chief economist, Ellen Hughes-Cromwick, expects between 700,000 and 750,000 vehicles to be sold before the program runs out of money. She estimated that between 30 percent and 40 percent of those represent sales over and above what would have occurred without incentives.
"This is exactly what fiscal stimulus is supposed to do," she said. "This has been well beyond anyone's expectations."
GM vice president of sales, service and marketing, Mark LaNeve, agreed the clunkers program had boosted industry sales 30 percent to 40 percent, if "you count increased sales from the interest and traffic, not just clunkers."
Ford said it is boosting third-quarter production in North America for the second time, adding another 10,000 units to meet increased demand for its vehicles. It plans to produce 495,000 cars and trucks -- 18 percent more than a year ago.
It also is increasing production targets for the fourth quarter to 570,000 vehicles -- a 33 percent increase over the same period last year and 15,000 units more than the company had planned to manufacture.
"Under the 'cash for clunkers' program, the Ford Escape and Focus are flying off dealer lots," said Ford Americas President Mark Fields. "We're doing all we can to ensure our dealers are well stocked with the fuel-efficient vehicles that customers really want."
To do that, Ford is increasing overtime at its Wayne Assembly Plant, which produces the Focus, and its Kansas City Assembly Plant in Claycomo, Mo., which manufactures the Escape. Later this year, it plans to boost output at its Twin Cities Assembly Plant in St. Paul, Minn., which makes the Ranger compact pickup.
Chrysler Group LLC said Thursday that nearly all of its factories will be working overtime in the next month, too.
Ford and Toyota Motor Corp. have been the biggest beneficiaries of the "cash for clunkers" program to date, with Ford, Lincoln and Mercury products accounting for 16 percent of the total sold.
Ford suggested the broader economy could benefit from more investment in the program.
On Thursday, Germany and France reported that their recessions have ended; analysts give their vehicle scrappage programs much of the credit.
LINK: 'Clunkers' rules ease as sales soar | detnews.com | The Detroit News