Car dealers facing clunker hangover

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YPSILANTI TOWNSHIP, Mich. (AP) - As Gene Butman Ford opened its doors Saturday, salesmen outnumbered the shoppers looking at a depleted stock of cars and trucks, and it didn't appear that many customers were ready to buy.

Like many dealers across the country, the dealership in Ypsilanti Township, Mich., west of Detroit, is suffering from a Cash for Clunkers hangover, and Sales Manager Paul Grahl isn't sure when it will end.

"We're getting some traffic, but my business is a long way from healthy," said the longtime salesman. "We suspect it's going to be 90 days before we get back to any kind of normalcy."

The clunkers program lured hundreds of thousands of people to dealers in July and August with government rebates of up to $4,500 to trade in older, inefficient vehicles for newer, more fuel-efficient ones.

While most dealers are grateful for the boost, they're paying for it now with fewer customers. The government rebates drew people into the market who otherwise would have kept driving their clunkers due to uncertainty over the sputtering economy. Those customers might have made their purchases later in the year.

"It was good while it lasted," said Phil Warren, sales manager at Toyota Direct in Columbus, Ohio. "Now we're a little bit concerned about what happens next."

Making matters worse, many dealers depleted their stocks with clunker sales, and automakers have been slow to ramp up production to replenish the lots. Grahl said Ford has built the cars he ordered but mysteriously hasn't shipped them. So the selection isn't very good for people who do want to buy.

"We've noticed that," said Amy Whiting, who with her husband, Frank, was shopping this weekend at a Pontiac-Buick-GMC dealer near Butman Ford. "You drive in the lot and it's gone."

The Whitings, who had trouble finding a Toyota Matrix compact, instead bought a used Pontiac Vibe, a General Motors version of the Matrix built at a soon-to-be-shuttered California factory that's a joint venture between GM and Toyota.

Dealers across the country reported sparse selections on their lots as inventories shrunk to near-record low levels. At the end of August, GM reported 379,000 cars and trucks in its supply, about half of what it had in August of last year. Ford Motor Co. had 243,000 cars and trucks, down from 461,000 a year ago.

Some economists are predicting that clunkers and other stimulus programs will pull the economy out of a recession this quarter. Consumer confidence rose from a reading of 65.7 in August to 70.2 in early September as measured by the University of Michigan-Reuters survey.

Yet employment is still on the decline. Companies shed 216,000 jobs in August and unemployment rose to 9.7 percent, its highest level since 1983.

Scott Kesel, owner of a Chrysler-Dodge-Jeep dealership in Canandaigua, N.Y., near Rochester, thinks the September sales drop is seasonal as vacations end, students return to school and people focus on new routines.

"I think there's more demand out there yet, and the right dealers and the right products will bring those customers out."

Kesel, like many dealers, still hasn't been paid for most of his clunker sales.

"Most dealers are in a cash-flow crunch because of the federal government not paying up on this," he said.

The government reported Friday that it has approved $1.22 billion in reimbursements, about 40 percent of what is due. The Transportation Department said it is on track to pay eligible dealers by Sept. 30. The rebates, which ended Aug. 24, led to more than 690,000 new car sales at a taxpayer cost of $2.88 billion.

As a result, U.S. sales of cars and light trucks rose to 1.3 million in August, a roughly 30 percent increase from July.

Even though customers are few now, dealers still are happy that Cash for Clunkers helped them in a difficult year with sales running at an annual rate of around 10 million.

"The CFC program definitely had an impact for a brief period of time, but it was like throwing a life jacket on a sinking boat," said Dan Mahan, desk manager of Riverside Auto Mall with Jeep, Dodge, Chrysler, Toyota, Honda and Nissan outlets in Marquette, Mich.

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