Clunkers Program Expected To Drive Up Auto Sales

DETROIT (AP) -- The federal government's "cash-for-clunkers" program, which turned out to be more successful than automakers dreamed it would be, likely will boost July's auto sales to the highest level of the year when figures are announced Monday.

Sales overall should decline about 16 percent from July of last year, when the economy was much stronger, according to the automotive Web site Edmunds.com. For the first half of the year, U.S. sales were down 35 percent.

But July also is expected to be 11 percent better than June and the strongest month of the year. Several analysts are predicting that July sales will exceed an annual rate of 10 million for the first time in 2009, a sign that the economy is starting a modest recovery predicted for the second half of the year.

When Congress approved the clunkers program early in July, it allocated $1 billion for the Car Allowance Rebate System, or CARS. Under the program, owners of old cars and trucks are offered $3,500 or $4,500 toward a new, more fuel-efficient vehicle, in exchange for scrapping their old vehicle.

But the $1 billion was used up in the first few days after the program's regulations were finalized, and the government even considered suspending it as the money neared depletion.

Yet the program continued and the House voted Friday to allocate another $2 billion to keep the sales going. Senators are to vote on the plan this week.

All major automakers are expected to report sales drops when compared with July of last year except for Hyundai Motor Co. and its Hyundai and Kia brands, which were expected to ride some new products, clever marketing, incentives and the clunkers program to an 8 percent increase, according to Edmunds.

Hyundai and Kia sales combined could beat Chrysler Group LLC and Nissan Motor Co. in July for the first time, Edmunds said.

Edmunds said Ford Motor Co., the only U.S.-based automaker to shun government aid, would see a decrease or 4 percent, far lower than in previous months.

But on Sunday, Ford's top sales analyst said demand from the clunkers program helped lift Ford's July sales to its first year-over-year gain since November 2007.

Ford's George Pipas declined to disclose a specific total before sales results are officially reported on Monday. Dearborn, Mich.-based Ford sold a total of 161,071 vehicles in July 2008.

Subaru of America also said that it expects to post a 30 percent year-over-year increase in July sales, largely due to the CARS program.

Edmunds expected Chrysler to continue its struggles, with a sales drop of 39 percent, while General Motors Co. was expected to report a 20 percent decline. Both companies went in and out of bankruptcy protection earlier in the year and are living on a combined $65 billion in federal aid.

Toyota Motor Corp. and Honda Motor Co. could see their best month of the year in July, according to Edmunds.

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