Auto sales revive amid 'Cash for Clunkers' program

GM, Chrysler saw smaller declines in sales in July. Ford, Subaru, and Hyundai, meanwhile, registered actual sales increases compared with a year ago.

By , Staff writer

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    A sign promoting the federal government's "cash for clunkers" incentive program hangs off a clunker vehicle at Mankato Ford, on Monday in Mankato, Minn. Ford reported its first US sales increase in nearly two years and other major automakers said sales showed signs of stability.
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Has "Cash for Clunkers" jump-started the auto industry back to life?

That's what the Obama administration is arguing as it appeals to the Senate to join the House and vote more money for the US government program, which is rapidly using up its original allocation of $1 billion.

The Car Allowance Rebate System, as it is officially known, gives consumers a credit toward a new vehicle if they turn in an older, less fuel-efficient model. Without an infusion of new funds, CARS will have to be suspended sometime this week, according to Transportation Secretary Ray LaHood.

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"I believe the Senate will do this because of how wildly popular this is," Secretary LaHood said Monday on C-SPAN.

The Cash for Clunkers Effect

The latest auto sales figures appear to bolster the contention that Cash for Clunkers is drawing customers into sales rooms like nothing else tried since the recession began.

Ford on Monday reported its first US sales increase in nearly two years. Other major automakers said July sales, measured against those in July 2008, were either rising again or declining more slowly than anticipated.

Ford's total retail sales were 118,197 in July, up 9 percent versus the same period a year ago. Smaller, fuel-efficient vehicles were the big gainers, not SUVs. The new Ford Fusion mid-size car sold 17,610 units, up 66 percent versus a year ago. The small Focus sold 21,830, up 44 percent.

Ford credits federal program, in part

The CARS effort was not the only reason for this rise. But it certainly helped, said Ford officials.

"We had another strong month in progress before the 'Cash for Clunkers' program started," said Ken Czubay, Ford's vice president for marketing, sales, and service, in a statement released with the new numbers.

Chrysler, which emerged from bankruptcy earlier this year, said its sales posted a smaller drop – down 9.4 percent – than in previous months.

GM posted its smallest decline of 2009, measured against the previous month in 2008. That drop was still a jarring 19 percent, however.

Subaru's US sales, meanwhile, went up 34 percent. Hyundai's went up 12 percent.

Cash for Clunkers drove a surge of customers into dealerships over the past week, surprising salesmen and overwhelming the ability of the program's website to keep up.

Would sales have materialized anyway?

But the jury is still out as to whether government payouts for qualifying auto purchases are creating new sales or just accelerating sales that might otherwise have occurred anyway, says Bruce Belzowski, an associate director at the University of Michigan's Transportation Research Institute.

"We just can't tell," says Mr. Belzowski.

He sees Cash for Clunkers as a government experiment, a sort of preliminary effort that was shaped to see if a larger such program would work.

"Now that the [US government] effectively owns two car companies, they want to see them succeed," he says.

Over the past six months or so, auto sales have been running at an annualized rate of about 9 million units per year. That's the lowest since 1967, when there were half as many drivers on the road as there are today.

That means it's likely that there was a pent-up demand for new vehicles just waiting for the right moment. Belzowski himself is something of a test case: He says he's thinking about trading in his old minivan on something new that he can use for camping.

Material from Associated Press was used in this report.

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