Clunker program depleting inventories

Chattanooga auto dealers say the $2 billion extension of cash for clunkers will keep fueling car sales, but the stimulus program also is pressing inventories.

"Some dealers may be out of cars come Sept. 1," said Herb Adcox, owner of Herb Adcox Chevrolet.

Automotive News said preliminary inventory figures for Aug. 1 indicate unsold vehicles fell below 2 million units, which is the lowest number since at least 1992.

Brad Cobb of Bowers Transportation Group said the highly successful initiative is depleting vehicle inventories.

"Factories will have to go back on line to produce cars," he said.

Mr. Adcox said that with vehicle inventories as they are, some buyers may have to sacrifice color or equipment.

He said it will take some automakers two to three weeks to get back up to production capacity.

Still, he said, cash for clunkers is "a shot in the arm" for dealers and an encouragement for manufacturers.

Keith Sanford, executive vice president for First Tennessee Bank in Chattanooga, said that while the program is helping the economy and the environment, his institution isn't getting much of the business.

The captive finance companies of the automakers get a lot of the vehicle loan trade, he said.

Mr. Cobb said the program has a lot of upside in terms of sales tax revenues, and customers are often putting more equity into their vehicles with the $3,500 to $4,500 rebates under cash for clunkers.

But, he bemoaned the destruction of some of the vehicles.

"It's a shame we've got to destroy some pretty good cars," Mr. Cobb said. "We could have given them to charity. That's the only shortsighted item."

Ken Hunt, owner of Hunt Nissan, said while the first 10 vehicles it disabled under the program had been on the road quite awhile, the owners hadn't intended to trade anytime soon without the program.

"Eventually, (the vehicles) were going to die," he said. "But at that point, people weren't going to trade next month or next week."