DETROIT (Aug. 4, 2009) — While many are hailing the U.S. government's “Cash for Clunkers” program as a success for sparking showroom traffic and new vehicle sales, some car dealers are worried about how it will translate financially for their businesses.
Chrysler Group L.L.C. is crediting the old vehicle trade-in program for a 30-percent U.S. monthly sales jump in July compared with June—although sales are still off 9 percent from July 2008.
“The government's program is doing what it is designed to do: spur consumers to trade in older gas guzzlers for new, fuel-efficient vehicles,” said Peter Fong, president-CEO of the Chrysler Brand and the head of sales for the auto maker. “While we don't expect the industry sales forecast to change dramatically, we are seeing encouraging signs that consumer confidence is building, and more consumers are considering purchasing a new vehicle.”
Lifts for Ford, GM
Ford Motor Co. also cited the program for driving its Ford, Lincoln and Mercury sales up 2 percent in July vs. the same year-ago period, to 158,838 units. Ford said its Cash for Clunkers Web site, at letfordrecycleyouride.com, attracted more than 1 million consumers.
General Motors Corp. also credited the federal program for a retail sales lift from June to July of nearly 12,000 vehicles—its best retail sales month in the past 10. GM sold a total of 189,443 retail and fleet units in July, down 19 percent from a year ago. The company's Mark LaNeve, vice president of U.S. sales, said, “We anticipate an additional sales lift in August if Congress approves more funding for the wildly popular Cash For Clunkers economic recovery program.”
Toyota Motor Sales USA said the program generated incremental sales in July that led to sales for Toyota, Scion and Lexus models of 174,872 vehicles, up 27.7 percent from June, but still off 11 percent from July 2008.
Dick Withnell, an Oregon car dealer with separate Hyundai and Dodge stores, said Uncle Sam owes him about $250,000 for the 60 new qualifying vehicles he sold in the first week of the program. He criticized the “mumbo-jumbo” on the government's Web site, where dealers must file data to collect the $3,500 to $4,500 Washington is backing in a consumer credit per new qualifying vehicle sold. He said it takes roughly two hours per transaction to get into the site and input the info.
“I give them 100 percent for the concept, but an F for the mechanics of it,” he said.
However, Mr. Withnell credited the program—officially called the Car Allowance Rebate Systems (CARS) —for stimulating his Hyundai store to a new July sales' record of more than 85 units. But he called the clunkers' program designers in Washington “short-sighted” and unschooled in the auto industry as the $1 billion allotted for it would have generated only about 10 car sales per U.S. dealer.
Extension up for vote
Cash for Clunkers, aimed at driving Americans to more fuel-efficient models, started July 24, but ran out of its $1 billion allotment a week later. The Senate will consider House-approved legislation this week to shift $2 billion from a Department of Energy plan to extend the trade-in program.
The nonprofit U.S. Chamber of Commerce, which is urging the Senate to pass the bill, estimates 200,000 new vehicles were sold in that one week because of the program.
The average fuel economy of vehicles traded during the first week of the program was 16.3 miles per gallon, replaced by new models averaging nearly 25 miles to the gallon, CNW Market Research reported.
Auto makers, stung by the worst sales year in over a decade, started advertising online weeks before the program started in hopes of capturing prospects. Michelle Morris, national auto sales manager of Google, said virtually every car maker bought a total of “thousands of search terms” related to Cash for Clunkers and some marketers backed up their search buys with display ads. She said Google saw a huge increase in consumers looking for information about it from the first to second quarter.
Chrysler got aggressive, advertising “Double Ca$h for Your Old Car,” offering an incentive $4,500 or zero-percent financing in addition to the government's offer if the 2009 model Dodge, Chrysler and Jeep model qualified.
An ‘onerous' program for dealers
Bob Bakshi, a Cadillac, Buick-Pontiac-GMC dealer in Santa Clarita, Calif., called the government's online approval process for the program “onerous” for dealers because of all the info needed. He said it took him four hours to input one deal, including vehicle stock numbers. For another deal, he was up until midnight when the site “blew up” and he had to start from scratch. “I have absolutely nothing good to say about the system.”
Mr. Bakshi said his Volkswagen and Hyundai stores are “going gang-busters” from the program, while Pontiac is his only GM brand that clicks with the program. “I am not going to make a bunch of money from this program,” he added.
This report appeared in Advertising Age, a New York City-based sister publication of Tire Business.