Automakers scramble to keep up with 'clunkers' demand

The Obama administration's "cash for clunkers" program has gotten the U.S. auto industry off its deathbed.

The program, which gives people up to a $4,500 incentive to exchange their old gas guzzlers for new, fuel efficient models, is more popular than officials imagined in their wildest dreams.

Therefore, U.S. automakers are doing something unthinkable a few months ago -- increasing production -- as dealers report shortages of some models. Spurred by the huge popularity of the program, Congress recently added another $2 billion to it after the first $1 billion allocation was exhausted.

Chrysler LLC, the struggling automaker recently acquired by Italy's Fiat SpA, is planning to boost light truck production in the second half of the year, according to Bloomberg News. Ramping up production is difficult for Chrysler since it shut down its factories during its bankruptcy. This may represent the beginning of better times for Chrysler, which saw sales plunge 36 percent in June.

"Chrysler plans to run two plants on overtime and is operating a third shift at another factory to restock dwindled inventory on dealer lots," said Bloomberg, who said its source would not be more specific. Nonetheless, that's a rare bit of good news for Chrysler, which was forced to seek protection from creditors after posting a $16 billion loss in 2008.

General Motors Co. (GMGMQ), which emerged from bankruptcy last month following a $50 billion government bailout, also is benefiting from "cash for clunkers." GM executives recently told the Wall Street Journal that the number one -- at least for now -- North American automaker may announce production increases to meet rising demand. The Journal noted that as of July 31, GM had a 64-day supply of cars and trucks in its dealerships, down from 82 at the end of June.

Meanwhile, Ford Motor Co. (F), the U.S. automaker in the best financial shape, has seen demand surge for its Ford Focus compact and other fuel-efficient models, according to the Detroit News. The automaker may produce fewer F-150 pick-up trucks so that it can assign more workers to build the popular Ford Edge SUV, the Detroit Free Press said.

The Detroit News reported that employees at Ford's Wayne Assembly Plant, which makes the Focus, began working nine-hour shifts and were given notice that they would be moving to 10-hour shifts. "Workers were also told they would be working this Saturday, and every other Saturday into September," the paper said.

The additional work suits Ford worker John Kujat who told the Detroit News, "I'm just buying a house, so I could use a little extra money."


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