Money Matters, Simplified.
GM another beneficiary of the clunkers program
by Jamie Anderson - August 19, 2009 - comments
While GM and the auto industry have a reason to rejoice, the news of enhanced production by the automaker has to be taken with a pinch of salt. Even after the production is augmented; fourth-quarter output will be close to 22 percent less than what GM churned in the last few months of 2008
Michigan, August 19: Times have changed! Not so long ago, the automakers in the U.S were reeling under the weight of huge inventories as the demand refused to pick up in the wake of global recession.
Two of the Detroit’s Big Three managed to keep their heads above the water primarily because of the government bailout funds. Eventually they filed for bankruptcy protection.
Suddenly, things appear to be going their way. Few weeks back Ford reported that it had swung into profits after a long hiatus. General Motors Co. too has some good news to offer now.
Surge in sales
Fresh out of bankruptcy and buoyed by the overwhelming success of the cash for clunkers program, the brainchild of the Obama administration to boost the ailing auto market in the U.S, GM said that it intends to increase production due to the sudden surge in demand.
Mark LaNeve, GM U.S. sales chief said something that may have not been heard for a long time, “We are extremely short on a number of products and our dealers are clamoring for more vehicles in almost every segment.”
“We're probably not done. We are probably going to continue to ratchet up (production) in the next several months," he added.
"The uptick is an encouraging sign that vehicle sales are turning around, and we will ramp up quickly to meet that demand," said Tim Lee, GM group vice president of global manufacturing and labor.
Overtime production plans
In order to meet the spurt in demand, GM intends to add shifts and run some plants on overtime. The automaker’s endeavor is to churn out an additional 60,000 vehicles by the end of 2009.
G.M. is hopeful that it will beat its internal sales forecast by a minimum 50,000 vehicles in August. The feat will make this the best retail month of the year.
Not so rosy
The Michigan based company will manufacture 535,000 vehicles in the third quarter of this year, 42 percent less than what it manufactured in the comparative period of last year.
Edmunds.com, a research web site that tracks consumer purchases revealed that the interest in the clunkers program is fast waning.
“Now that there is plenty of money in the program and the most eager shoppers have already participated, the sense of urgency is gone, and the pace of intent decline is accelerating,” Jeremy Anwyl, the chief executive of Edmunds, said.
If the report of Edmunds is anything to go by, the current euphoria of enhanced production and a bounce back of the auto sector may be short-lived.