'Clunkers' popularity gears up automakers' production in U.S.
NEW YORK — After a lot of heartbreak, the nation's automakers aren't looking to commit.
They're taking small, tentative steps to raise production to meet the revived demand for new cars and trucks sparked by "cash for clunkers." Carmakers are offering overtime or Saturday shifts at slack plants, but aren't willing to go as far as opening shuttered factories, concerned that demand may ebb when the program ends.
It typically takes a month for factories to ramp up for a full-fledged sales revival, and automakers worry levels of demand won't last that long. Sales usually are dry in the early fall anyway, when the next model-year's vehicles hit dealer lots and summer clearance sales end.
"It's like dating versus getting married," said Jeremy Anwyl, CEO of the auto Web site Edmunds.com. "Overtime you can do for a while and then stop, but opening a plant is a much more serious commitment."
It's a delicate balancing act for automakers. Build too few cars and dealers are stuck turning away customers. Build too many, and they have to slash prices to get rid of inventory — the same situation many in the industry were stuck with earlier this year.
"They're watching (sales) daily," said Ron Harbour, partner in charge of the North American automotive practice at consulting firm Oliver Wyman. "No one's going to get caught with their shorts down again."
General Motors Co. and Chrysler Group LLC shut down nearly all of their factories during their time under bankruptcy protection. Chrysler now is adding overtime at most of its plants to respond to expected demand for its 2010 models, spokesman Max Gates said.
Ford, meanwhile, also is working to raise production. Spokeswoman Angie Kozleski said the company is "taking some action to add production" at its assembly plant in Wayne, Mich., but declined to offer specifics. The plant makes the Ford Focus, the No. 2 cash for clunkers seller.
Foreign automakers with U.S. plants are taking similar steps. Honda Motor Co. is adding Saturday overtime shifts at its auto assembly plants in East Liberty, Ohio; Lincoln, Ala.; and Greensburg, Ind. Honda spokesman David Iida said the company has seen a resurgence in demand for vehicles like the Ridgeline truck, the Odyssey minivan and the Pilot SUV, along with the Civic sedan, all of which are built in the U.S.
Toyota Motor Corp. last month increased production of "core" models, such as the Corolla sedan — the best-selling new model for traders of clunkers — the RAV4 crossover and the Tacoma truck at its U.S. plants. And Hyundai Motor Co. is recalling more than 3,000 employees at its plant in Montgomery, Ala.
GM is being more cautious. Mark LaNeve, GM's vice president of U.S. sales said the company is doing careful analysis on whether to increase production but no final decisions have been made. Inventories are low, he said, because GM slashed production earlier in the year. But it's unclear whether July's sales momentum will continue through the remainder of the year.
Some dealers say the pickup in sales is causing shortfalls in their inventory — a problem that many showrooms haven't faced in a long time.
Bill Feinstein, general manager at Planet Honda in Union, N.J., said he expects to sell nearly twice as many Civics as he usually does in August thanks to the program.
The sedan is the third most popular cash for clunkers vehicle.
"We're begging the factory for more," said Feinstein, whose stock of Civics is about half the size it normally would be in August.