Euros für Klünkers?

Dec 3, 2009

A sales blip, an aberration, or was something afoot in the car sales world?

I don’t know whether Germans love their cars as much as we North Americans do, even if their autos are “German engineered.” But something happened in February that had them buying cars.

Really buying.

February domestic car sales in Germany rose dramatically, up 21% from the same period last year.

“It was the highest February sales level for 10 years, and the first time in more than six months that sales have grown, said Matthias Wissmann, VDA chairman,” according to The Associated Press. VDA is a German auto industry association.

Contrast that with February vehicle sales in the States: Dismal, is one word to describe it. With total sales that month at 41% below a year earlier, that was the lowest in 27 years. February was an all-time low for consumer confidence, too.

The Germans are suffering a bona fide deep recession just like the rest of us, as their economy, heavy on exporting, continues to contract. German vehicle exports were down 51% and production has been slashed 47%.

Yet, its automakers somehow found a way to sell cars.

What was it, then, that brought so many German consumers to car dealerships?

Cash for clunkers.

As part of an economic stimulus, Germany offered incentives worth 2,500 Euros (c. $3,150) if car owners turned in their older vehicles for new ones that polluted less; it was Germany’s version of a “cash for clunkers” program.

Historically, such programs in the States haven’t proved to reduce pollution or spur sales. But, historically, the U.S. economy hasn’t been in this kind of a mess.

Here, a federal “cash for clunkers” was stripped from the economic stimulus package. It had its problems. But the program is getting another look-see, with the president’s backing. It’s H. R. 1550, the Consumer Assistance to Recycle and Save Act, or CARS. It offers vouchers ranging from $3,000-$5,000 as discounts on the purchase of new fuel-efficient vehicles with an MSRP of $35,000 or less when certain, older high-polluting gas guzzlers are turned in and their engine blocks and drive trains are scrapped. This version still has its problems, such as not including vouchers for foreign-made cars that might get even better fuel mileage and be less polluting.

In March, there were pockets of new auto sales that offered a tick of an uptick-nothing to honk our horns about, but a positive is a positive. And with Ford and GM now following Hyundai’s successful sales promotion that gives payment protection to consumers who buy a new vehicle and lose their jobs within a specified timeframe, the auto industry is trying whatever it can to encourage sales, especially during this spring selling season.

“All automakers are trying to figure out different ways to attract consumers to showrooms,” said Jesse Toprak, executive director of industry analysis for Edmunds.com. “The traditional incentive programs don’t work any longer.”

When Hyundai introduced its we’ll-take-care-of-you-if-you-lose-your-job program, the auto industry greeted it with strong skepticism. Then Hyundai began selling cars.

Likewise may prove the case of a revised “cash for clunkers” program.

The “clunkers” program similarly has been excoriated by its detractors, lauded by its backers, each with solid talking points. You can Google on the topic and find perspectives and opinions to suit your own beliefs; there exist all manner of scenarios of the evil and the good of such a program.

The Detroit Three, their parts suppliers, their workers, the car dealers and others are into the program because it might spur sales and put more-efficient, less-polluting vehicles on the road. Other segments of the auto industry, including the aftermarket segment, have been soundly opposed to the idea. A main issue that continues to be raised against the program is that perfectly good vehicles will be traded in, then crushed, thus depriving car enthusiasts, repair shops and parts stores their due. The program does include a provision for recyclers to remove any parts other than the engine block and drive train and sell them as replacement parts.

I don’t buy the argument that enthusiasts will find a significant dearth of parts just because a “clunkers” program exists, especially with today’s eBays, Craig’s Lists and thousands of auto websites, message boards and forums available on the Internet. Just Google a vehicle model and year, and what enthusiasts used to have to spend months or more in parts searching is minutes away.

And I certainly don’t see a mass crushing of big cars, SUVs and light trucks. People who like those vehicles will keep them, and keep them maintained.

Besides, hasn’t the auto industry long encouraged consumers to trade in their old “clunkers” for something brand new (“Push, pull or drag in your vehicle”)? Haven’t we benefited from that marketing?

There’s too much political jockeying and posturing, and too much of one or another segment of this vast auto industry fighting another for its place at the top of the heap at the cost of another.

Not everyone, not every group will be pleased with any potential or, even, perceived consequences of any program deemed to help the auto industry. But our industry and our economy remain embroiled within extraordinarily challenging times, and change is afoot. A “cash for clunkers” program, besides benefiting auto makers and their work forces, car dealers and their employees, OEM suppliers and American consumers, is just another option incentive to reboot our own restyling business, giving our small-business owners and their employees greater opportunity.