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‘Clunkers’ boosted auto sales in August

U.S. automakers are partying, even though they know the hangover is coming.
/ Source: The Associated Press

U.S. automakers are partying, even though they know the hangover is coming.

Auto executives on Friday said new vehicle sales in August likely did something they haven't done in a long time: they increased compared with last year, thanks in large part to the government's popular Cash for Clunkers program.

It was the best month of the year for the sputtering industry. But sales will probably slow in the coming months now that the program is over.

"Will there be a hangover? Absolutely, because we pulled some people ahead," said General Motors Co. Vice President Brent Dewar, in Novi, Michigan. "You're not going to see the strength that you saw, that the stimulus package brought forward in August."

Cash for Clunkers, which ended on Monday, drew hordes of buyers into sleepy showrooms, providing a much-needed lift in business. It spurred 690,114 new sales at a taxpayer cost of $2.88 billion, according to the Department of Transportation.

The program also helped boost sagging consumer spending, which rose 0.2 percent in July, matching economists' expectations.

"Overall, we thought it was a very, very successful program in jump-starting sales," Mark Fields, Ford Motor Co. president of the Americas, said of the clunkers program at a media event in New York.

The program enticed drivers to trade in gas guzzlers by offering big rebates on new, more fuel-efficient cars and trucks.

Automakers are scheduled to report monthly sales on Tuesday. Many analysts are forecasting a year-over-year increase for an industry that has taken a beating during the recession. But they note that the auto industry had already taken a turn for the worse by August 2008 when they sold 13.7 million vehicles on an annualized basis.

As recently as 2007, car and light truck sales topped 16 million vehicles, but a drop in consumer confidence sent sales plunging late last year.

Retail sales at Ford Motor Co. in August have already surpassed last year's levels with a weekend still to go, Fields said. In July, Ford's sales rose 2.4 percent.

Crosstown rival GM is also seeing an uptick. Dewar said the automaker is projecting U.S. sales of 10.5 million vehicles for 2009 and 12.5 million in 2010 as consumer confidence improves.

By contrast, automakers sold 13.2 million vehicles in the calendar year 2008 , which was down 18 percent from 16.1 million in 2007.

One analyst on Friday was especially bullish. Barclay's auto analyst Brian A. Johnson predicted August's annualized sales rate may reach 15.8 million.

But those gains are not expected to hold through September and the remainder of 2009, he said.

"Now that Cash for Clunkers is over, we believe that the debate will center on the impact of a potential pull forward effect on auto sales in the next few months," Johnson wrote

Ford was one of the top gainers from the clunkers program. The Ford Focus compact car and Escape crossover were among the top sellers.

GM sold more vehicles than Ford through the program, but none of its vehicles were among a much-followed list of top-10 clunkers sales.

Fields estimated about 30 percent to 40 percent of its clunkers sales were "truly incremental," meaning that they came from consumers who had no plans previously to buy a car. The rest, he said, came from people who were going to buy a car later on.