Automakers Bump Up Production
DETROIT - Gleeful automakers are reacting to the Cash for Clunkers-driven spike in car demand with production plans for the third and fourth quarters.
That comes even as one leading industry researcher said the rebate program's appeal is waning and there are few signs a broad recovery has begun.
If automakers are premature in their plans they will end up in a cycle seen many times before: ramping up production and leaving dealers with lots of inventory that then requires profit-killing rebates to unload.
Jessica Caldwell, senior analyst at consumer Web site Edmunds.com, said she's worried the automakers are diving in too fast. When sales were so slow earlier this year, the automakers piled on incentives. With sales up, incentives are going down, and that should fatten bottom lines, she said.
"It's very important that automakers are realistic and not too fast to think things will go back to normal levels," she said. "If we start down that road, we'll be back piling on incentives, and that would put them in a very bad position."
Unfortunately, predicting is more of an art than a science, so the answer won't be known until the year is over. But automakers say they're confident they're adding just enough inventory to replace cars bought during the clunker spree.
Tuesday, GM announced it would manufacture 60,000 more cars and trucks in the third and fourth quarters than originally planned, bringing back 1,350 idled workers and providing overtime for nearly 10,000.
"Our dealers are clamoring for more products," said Mark LaNeve, vice president of U.S. sales. Sales have been stronger than GM predicted, and if they continue showing strength, it may add more production in the fourth quarter, LaNeve said.
Ford, too, is increasing production. It will make 10,000 more cars and trucks in the third quarter, and plans to make 141,000 more in the fourth quarter than in 2008.
Mark Fields, president of the Americas for Ford, said dealers have thin supplies thanks to the clunkers program. He said demand now is moderating, but there is still healthy traffic in showrooms.
"We'll see how the month ends up - it always comes down to the last couple of days," Fields said.