Can 'cash for clunkers' drive Detroit out of a hole? Well, not quite...

×
On first reading, today's press release from Chrysler sounds like great news. The company's sales are up 30 percent from June, and five models have set sales record for July. Sales of Jeep Patriots have increased by 134 percent over last year, and Caliber sales are up 63 percent. PT Cruisers have shot up by 24 percent, and "consumer traffic" in Jeep, Dodge, and Chrysler showrooms was more than twice that of July 2008.

On the surface, then, it was a fine month for Chrysler. The company's sales of 88,900 units were fairly impressive, as were the figures of 76,693 retail vehicles moved. In fact, retail sales were up 52 percent over July 2008 and 106 percent over June 2009.
Of course, the government's Car Allowance Rebate System (CARS) -- aka "cash for clunkers" -- had a lot to do with the beleaguered automaker's turnaround. In a very canny move, Chrysler decided to offer customers $4500 or zero percent financing, in addition to the $3500 to $4500 that the government was putting on the table.

But on closer inspection, Chrysler's July numbers weren't really all that great. Over the past few months, as it appeared increasingly likely that the automaker was going under, customers stayed away in droves, no doubt worried that it would be all but impossible to extract warranties -- not to mention spare parts -- from a defunct car manufacturer. In that context, a major month-to-month increase between June and July would not only be expected, but would be a prerequisite to any discussion of Chrysler's hopes of a long-term future.

The July 2008-to-July 2009 numbers tell a less optimistic story. Even with the CARS stimulus and their own matching offers, Chrysler sales dropped nine percent. On the bright side, it did significantly better than General Motors, which reported a 19 percent drop from July 2008 and only an eight percent increase over June 2009.

Of course, it wasn't all bad news: Detroit's best-performing brand, Ford (F), reported a 2.3 percent increase over July 2008 and a nine percent growth in non-fleet sales. Given that Ford is also the only auto manufacturer that isn't currently a ward of the state, its superior performance make sense.

Increase your money and finance knowledge from home

Portfolio Basics

What are stocks? Learn how to start investing.

View Course »

Introduction to ETFs

The basics of Exchange Traded Funds and why ETFs are hot.

View Course »

Add a Comment

*0 / 3000 Character Maximum