US Automakers Face Post-"Clunkers" Uncertainty

Voice of America
September 1, 2009

The U.S. government's bid to boost auto sales and kick-start the U.S. economy, the so-called "Cash For Clunkers" program, seems to have paid off for automakers around the world. But some industry analysts fear to program could lead to more volatility for the U.S. auto industry.

The incentive program, which offered rebates to drivers who traded in their old vehicles for new, fuel efficient models, boosted sales for Hundai, Toyota and Honda, but had dubious results for U.S. automakers. Only Ford placed cars among the 10 most popular models sold as part of the program. Auto giant General Motors and Chrysler saw sales increase slightly from July, but both were still well below last year's numbers.

Dim Prospects Without Incentives

Those results worry auto analyst Jeremy Anwyl, chief executive for Edmunds.com. His company offers information to auto buyers. He says his main concern is that the "Cash for Clunkers" program may have dried up demand.

“A lot of people had put off buying a car all year waiting for the traditional sales period when cars are thought to be cheaper," Anwyl said.

Now, he fears that without the government incentives, auto buyers will be scared away. "New cars are probably going to be more expensive and sales won’t keep pace with current levels," said Anwyl. "We probably face a pretty tough September and October ahead." The result for automakers is that inventories will start building back up toward the end of the year.

The Outlook For Foreign Automakers

The results from the "Cash For Clunkers" program was good news for Asian producers. Japanese auto manufacturers saw their first sales increase in 13 months in August. Toyota, the world's biggest car maker, placed three vehicles among the top 10 models purchased in the program. So did Honda. Korea's Hyundai had one model in the top 10, and reported a 47 percent jump in August sales.

Anwyl says Asia appears to be on its way to recovery, but he says he expects continued volatility in the U.S. marketplace. “ It’s certainly not ‘fun times’ if you’re planning production for a car company,” said Anwyl.

Car dealers sold hundreds of thousands of vehicles during the ‘Cash for Clunkers” program which ended August 24th. The auto industry is a major part of U.S. manufacturing, a key component of the world's biggest economy. But, the economic downturn and high gas prices have hurt the industry, making it a struggle for auto-makers and dealers to stay in business.