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Can Auto Makers Thrive Post Clunkers?

Car Allowance Rebate System
Car Allowance Rebate System

The conventional wisdom out on the street is Cash for Clunkers has been a sugar high for the auto industry. Dealerships that were dead have had a great four week run. Auto manufacturers that went through two years of closing plants and cutting shifts are now ramping up production. And talk about the collapse of America's auto business has faded away.

But there's a new concern creeping into conversations about the post-clunker future for auto makers: can they thrive without the Federal incentive? From talking with dealers around the country, I believe sales, while they will fall back a bit, will eventually hold up at an annual pace over 10 million. Is that a level to thrive at? Yes and no. The key will be how well auto makers manage their production.

In that area, the track record is not good. These guys got into trouble over the last five years by continuing to crank out cars and trucks even as sales were slipping. The meltdown earlier this year and the bankruptcies at General Motors and Chrysler shocked everyone into saying, "We get it. We won't make that mistake again.". Skeptics aren't so sure.

As GM, Ford, Chrysler and others have boosted production, there's been an uneasy feeling of, "Here we go again." Granted, the latest production increases have been judicious. Still, people are asking if these guys have really learned how to manage their inventories?

We really won't know until later this fall, after the Clunker boom has passed. The challenge now is selling cars and trucks with $4,500 from Uncle Sam to grease the deal.

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- Ford Motor

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