Cash for Clunkers Deal Drives Auto Sales

U.S. auto sales rose to their highest levels of the year in July as consumers rushed to trade in older vehicles under a government incentive program that has become so popular it is in danger of running out of money.

Automakers issued their sales reports Monday, raising hope that the sagging auto industry is headed for a recovery, although some analysts cautioned that a turnaround would still be slow. The uptick comes as Congress considers whether to provide up to $2 billion more for trade-in incentives to keep the effort going.

Ford said its sales were up 2.4 percent over the same period a year ago, its first monthly increase in two years. The automaker attributed much of the gain to the Cash for Clunkers program, which allows consumers to receive rebates for turning in older cars for more fuel-efficient models.

George Pipas, sales analyst for Ford, said the automaker thought it was going to fall short of last year's July sales level until the government's stimulus kicked in.

"Cash for clunkers put us over the top," Pipas said.

Subaru said it also benefited from the trade-in program, as sales were up 34 percent.

Chrysler, General Motors and other major automakers did not show gains, but interest in the rebates appeared to have eased their losses as well.

Sales slid 9.4 percent for Chrysler, 11.4 percent for Toyota, 17 percent for Honda, 19.4 percent for General Motors, 1.4 percent for Volkswagen and 25 percent for Nissan. Germany's Daimler AG said its U.S. sales dropped 24 percent in July because few gas guzzlers were being traded in for Mercedes-Benzs.

Companies sold 997,824 cars and trucks in the United States, a 12.2 percent decline from July 2008, according to preliminary data released Monday by research firm Autodata. The monthly figure for car sales translates to an annualized rate of 11.24 million cars, far off 2007's pace but one the government has said could help GM and Chrysler return to profitability.

George Augustaitis, market analyst for U.S. auto sales at auto consulting firm CSM Worldwide, said the monthly sales numbers showed the government's clunker program "really drove people into dealerships." But he predicted that the program's popularity could wane if the economy remains mired in recession and consumers remain reluctant to spend.

"With this economic recession, American households lost wealth. Savings rates were at all times low. Baby boomers are retiring. People are not going to run out and spend like they would have in the past. This is going to be a slow recovery, even in autos," Augustaitis said.

The clunker program kicked off a little more than a week ago and so many consumers sought to take advantage of the program that it almost ran out of money. The House hastily approved another $2 billion for the program on Friday, and many are hopeful that the Senate will pass that measure.

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