Clunkers Program Clears Out Car Lots
Surge in Demand Is Welcome Change For Automakers That Had Idled Plants

By Dana Hedgpeth
Washington Post Staff Writer
Wednesday, August 12, 2009

Car buyers flocking to trade in their clunkers have stripped dealerships of inventory over the past two weeks, giving automakers a signal they have eagerly awaited: It's time to make more cars.

Customers who have heard accounts of overflowing showrooms have been frustrated to find few cars when they show up ready to buy, but auto industry experts said this is exactly what automakers need.

Before the government's Cash for Clunker program sparked demand, Chrysler dealers had piled up unsustainable inventories to last roughly 100 to 120 days, according to Kathy Graham, a Chrysler spokeswoman. Now, she said, the supplies average 45 to 60 days in large part because of the clunker program.

"Now we're not just building to build," Graham said. "We're getting customer orders. We're getting dealer orders. That's the right thing for the company to do."

Before July 24, when the government began offering vouchers of up to $4,500 to entice owners of old gas hogs to trade up for new fuel-efficient cars, mostly Camrys and Corollas were tightly parked in 400 spaces at Koons Toyota on Leesburg Pike in Tysons Corner. Now there are dozens of empty spaces. The overflow garage with 500 spots is filled with clunkers, customers outnumber salesmen and the usual supply of 15 to 20 Priuses is gone. Instead, there's a waiting list of 50.

"We're selling cars as fast as they can come," said Bill Oakes, a Prius salesman. "It's tiring. We're all exhausted."

Toyota said it plans to increase its production by 65,000 vehicles. Of those, about 8,000 would come to the mid-Atlantic region, said Tammy Darvish, who owns more than two dozen dealerships in the Washington region. But it will be several weeks before she and other dealers see them on their lots.

On Monday, Jackie Connelly, a 44-year-old mother and secretary for the U.S. Postal Service who lives in Woodbridge, called Koons Toyota and was told they had three Corollas. When she arrived Tuesday for a test drive, two were left.

As she tried out the metallic blue car, another salesman asked about it for another customer. "Sorry, it is sold," said Connelly, and traded in her 1996 Ford Ranger with 172,000 miles. With a $4,500 clunker voucher, rebates and other deals, she ended up paying roughly $14,000 compared with the nearly $18,000 list price.

"I wouldn't have been able to afford a new car without the clunker rebate," she said, as she took the keys.

Alex Perdikis, executive vice president of Jim Koons Automotive Company, said the 16 Koons dealerships in the region have taken in 980 clunkers. "Inventory is coming in, but it is not coming in at a pace where we can sustain this sales rate," he said. "This thing, in terms of stimulus, has been the best thing I've seen."

Koons Toyota had 200 new vehicles on the lot at the start of August. As of 1:38 p.m. Tuesday, there were 79. Koons Chrysler in Tysons had 11.

About 18 months ago, General Motors inventory was running at about 1 million, said John M. McDonald, a GM spokesman. Now after the company cut back production and furloughed workers at some plants, inventory is hitting historically low levels at 466,000 vehicles. GM plans to increase production by 35 percent in the third quarter.

"Clearly Cash for Clunkers is depleting our inventory," McDonald said. Sales for the company's smaller sport-utility vehicle, for example, were up 164 percent in July compared with June, he said.

Graham said 10 of Chrysler's plants started up again in the past two weeks. The Jeep Compass, Jeep Patriot and Dodge Caliber are in short supply, she said, but dealers should begin to see deliveries within weeks.

She said so many customers had heard about the clunker offer that Chrysler dealers had 2,000 people on a waiting list for vehicles before the program even officially launched July 24.

Hyundai said it has gone to a five-day workweek from four at its plant in Montgomery, Ala., to keep up with a surge in orders for its smaller, fuel-efficient models.

Honda spokesman Edward Miller said the company was already increasing production, bringing in workers at two plants in Ohio and Alabama that make the Honda CRV, the Odyssey minivan, the Element, the Accord and the Pilot to work overtime in September and October.

"We're seeing sales rising because of the clunker program," he said. "We are benefiting from it."

Transportation officials said Tuesday afternoon that 273,077 vehicles worth $1.147 billion have been traded in since the clunker program began. The first $1 billion is spent, according to new figures from the National Highway Traffic Safety Administration.

Last week, the Senate followed the House and approved another $2 billion in funding for the program. Officials said they expected that would last until Labor Day.

The program has had its troubles. The Web site that allows dealers to file paperwork was slow, and people were confused about which vehicles were eligible. Some dealers are offering their own clunker-type program that is not approved by the government.

Dealers say the Web site is not running as slowly as it was at first, but they still worry that the government won't reimburse them in a timely fashion for the vouchers.

Darvish said she's owed nearly $3 million. "I haven't been paid the first penny," she said Tuesday morning. "There's no one to call. You get prerecorded messages," she said of the clunkers hot line, run by the National Highway Traffic Safety Administration.

Some dealers say the rush will soon wear off; others predict it won't last through Labor Day.

"The availability is only going to get smaller and smaller," Perdikis said. "That finish is just going to be unbelievable around Labor Day."

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