Cash-for-clunkers demand has carmakers boosting production
DETROIT -- Gleeful automakers are reacting to the cash-for-clunkers-driven spike in car demand with increased production plans for the third and fourth quarters.
That comes even as one leading industry researcher says the rebate program's appeal is waning and there are few signs a broad recovery has begun.
If automakers are premature in their plans they will end up in a cycle seen many times before: ramping up production and leaving dealers with lots of inventory that then requires profit-killing rebates to unload.
Jessica Caldwell, senior analyst at consumer website Edmunds.com, says she's worried the automakers are diving in too fast. When sales were so slow earlier this year, the automakers piled on incentives. With sales up, incentives are going down, and that should fatten bottom lines, she says.
"It's very important that automakers are realistic and not too fast to think things will go back to normal levels," she says. "If we start down that road, we'll be back piling on incentives, and that would put them in a very bad position."
Unfortunately, predicting is more of an art than a science, so the answer won't be known until the year is over. But automakers say they're confident they're adding just enough inventory to replace cars bought during the clunker spree.
"Our dealers are clamoring for more products," says Mark LaNeve, vice president of U.S. sales. Sales have been stronger than GM predicted, and if they continue showing strength, it may add more production in the fourth quarter, LaNeve says.
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