Posted by: David Kiley on August 13, 2009
Ford Motor Co. is upping its production of fuel efficient vehicles in the third quarter to meet demand, the company, says for vehicles being purchased under the extended Cash for Clunkers program, as well as overall increased interest in new cars by consumers.
Cash for Clunkers is pushing August sales so far this month to levels not seen since before the global credit meltdown last Fall. In the first few days of August, Edmunds.com says the auto industry was cracking at a 16 million a year rate. That’s up from less than a 10 million selling rate in the first half of the year, and less than 12 million rate in July.
Ford senior sales analyst George Pipas says that it is too early to project the selling rate for August on the whole. “But I can tell you that retail sales we are seeing is eyepopping versus a year ago.”
Pipas said that he fully expected that sales will fallback when the government program expires. “But it’s hard to say to what level, because it is so dependent on the economy,” Pipas said.
Ford will build 10,000 more Focus sub-compact cars and Escape crossover SUVs than it had planned. In July, the first month of the government’s Clunkers program, the Focus was the top model purchased with the help of government rebates, while the Escape was the only utility vehicle to make the top ten.
The Cash for Clunkers program gives care and truck buyers either $3,500 or $4,500 toward the purchase of a new, generally more fuel efficient, vehicle. The engine in the trade-ins are destroyed and recycled, along with the rest of the vehicle, to prevent traded in vehicles from hitting the used car market.
Congress extended the program with $2 billion, on top of the original $1 billion, before breaking for recess.
Ford has not only benefitted from the government program, but also, the company says, in increased interest in its vehicles from higher quality ratings on its vehicles. Analysts also point to the fact that Ford has been picking off customers of General Motors and Chrysler who deserted those automakers in recent months as they went through Chapter 11 Bankruptcy.
Ford is the only U.S. automaker not to take a government bailout or file Chapter 11 this year.
The increased production will come after the Clunkers program has run out of money, but Ford says it will need it to replenish depleted inventories and deal with increasing demand for more fuel efficient vehicles as consumers anticipate higher gas prices with a recovering economy.
Ford economists have also said that demand for new vehicles, independent of the Clunker program, will be stronger in the second half of the year than the first half as consumers see investment portfolios bounce back with the stock market and job loss data from the government improve.
Ford is increasing its North American production to a total of 495,000 units in the third quarter, an increase of 18% from the same quarter in 2008. Ford also plans to produce 570,000 vehicles in the fourth quarter, a 33% boost from the same quarter last year.
One of the problems facing Ford and other automakers is that dealerships are running short of the models that are most commonly sought under the program. A request has been made by some legislators to allow consumers to get vouchers for vehicles dealers do not have in stock, so they can get the car they want before the Clunker fund runs out of money.
Japanese automakers have objected to that request, claiming it would create confusion among dealers and consumers. However, some Japanese automakers have models that qualify, but haven’t been as popular in the program, and are hoping that as models in demand run short, they can use the program to drive consumers to other less popular models.
“It’s another whole level of complexity in a very complex program already,” said Mike Stanton, president and chief executive of the Association of International Automobile Manufacturers.
Transportation Secretary Ray LaHood earlier this week asking that consumers be allowed to receive vouchers from the manufacturers for vehicles that have yet to arrive at dealerships. The current rules, though, require the vehicles to be at dealerships to qualify.