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Here comes the clunker hangover


Here comes the hangover from the cash for clunkers program. Recall that last month, the seasonally adjusted rate of car sales was 14.1 million vehicles. That was a banner month considering that sales rates for most months this year were around 10 million cars. For most of the decade, Americans were buying easily 16 million cars and trucks a year. But the economy tanked last year and we only bought 13.5 million. So the cash for clunkers program was a welcome boost for carmakers, parts companies and dealers.

Now comes a bit of payback. Edmunds.com predicts that September will have had a selling rate of 9.3 million vehicles and J.D. power says it will be 9.2 million vehicles. That’s a 41% drop from August. That means that some buyers who would have bought this month just bought last month instead. In a recent interview, General Motors CEO Fritz Henderson told me that we would see some payback for the cash for clunkers program, but he doesn’t think it will last long. With the economy showing signs of life, we may see sales slowly inch back up once the clunker hangover ends.

Does that mean the clunker program was a failure? Not really. But in the end it will have added a modest 7% boost to sales for a dismal year. It helped carmakers as some of them called employees back to work to rebuild inventory. If car sales really start to rise over the next few months, it won’t be due to the clunker program. It will be due to the Obama Administration’s other stimulus moves and because the U.S. economy is starting to bounce back.


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