Cash for Clunkers Gives GM a Boost

Aug. 18, 2009— -- General Motors announced today that it will build 60,000 more cars and trucks this year as supplies have dropped and sales have spiked more than expected, in part because of the "Cash for Clunkers" program.

The announcement will lead to additional shifts and overtime at several factories and the reinstatement of 1,350 workers at two plants.

GM said that sales in the month of July and August are between 60,000 and 70,000 units above what the company had predicted as recently as two months ago. In July, the automaker had approximately 300,000 units for sale compared to a peak level of 1.3 million vehicles available at one point in the past four years.

"We are running much hotter, as is some of our competition as well," said Mark LaNeve, GM's vice president of U.S. sales. "I would say a big chunk of that is obviously attributable to the success of the Cash for Clunkers program."

LaNeve said the increase in production is not, however, just for the Cash for Clunkers program, a government incentive for people to trade in their gas-guzzling old cars for new fuel-efficient models.

"Some of the lift that we are seeing from that program, we are anticipating in our sale forecast, obviously, that will fall off, and even with that given, we definitely need to have this production, if not more," he said.

As Cash for Clunkers enters its fourth week, Edmunds.com, a Web site for car buyers and sellers, reports the number of people taking advantage of the program appears to be on the decline.

"Now that there is plenty of money in the program and the most eager shoppers have already participated, the sense of urgency is gone, and the pace of intent decline is accelerating," said Edmunds.com CEO Jeremy Anwyl. "Inventories are getting lean and prices are climbing, giving consumers reasons to sit back."

Edmunds.com concluded that sales activity last week was down 15 percent from the peak in July.

Even with the additional 60,000 vehicles, however, GM's production will not match the level seen just a year ago.

According to IHS Global Insight, GM produced more than 1.7 million in the second half of last year. This year, with today's increase, the company will build just more than 1 million cars and trucks, a decline of nearly 39 percent.