Production Increases, Clunkers Boost Sales, Chrysler Changes Warranty

The success of the “Cash for Clunkers” initiative is having a number of effects on the domestic auto industry. Perhaps most jarring is the fact that dealerships and automakers alike have had to make the abrupt transition from having a surplus of inventory crammed into storage lots and cargo ships to suddenly possessing a relatively short supply of the most desirable models in their lineups.

Interestingly, it is not only those vehicles which display outstanding fuel economy which have been hit by shortages. Ford, for example, is being forced to scale up production of the Escape, the Edge and the Lincoln MKX crossover vehicles. The Ford Ranger compact truck – one of the few truly small pickups left on the market – has also been a popular choice amongst rebate applicants. For its part, Honda has had to suddenly build a greater number of Accords and Odysseys than planned. In addition, almost every crossover vehicle or SUV in its lineup is also undergoing a surge in orders.

One of the most dramatic sea changes has occurred at General Motors. The formerly ailing company has actually had to hire back 1,350 workers in order to fill gaps in its inventory. Dealers have been operating on just a two week supply of Camaros, and less than a 10 day supply of the Chevrolet Equinox SUV, and extra shifts of employees are putting their nose to the grindstone building Chevrolet Camaros, Buick LaCrosses, GMC Terrains and several Cadillac models. GM has announced that its end of year production numbers will most likely be 60,000 units higher than any previous projection it had made. This is in stark contrast to the dark atmosphere that hung over many car companies earlier in the year when almost all North American production plants were reduced to idling.

In addition to shortages helping snap car companies out of their production doldrums, the air of desperation that previously surrounded several automotive brands is beginning to dissipate thanks to several confidence-related moves being made. Two of the most interesting come from Chrysler. Fresh from bankruptcy reorganization and newly bankrolled by corporate parent Fiat, the Pentastar has announced that it is changing the terms of its unprecedented lifetime powertrain warranty coverage. The previous plan, which protected the original owner from any mechanical defects for the life of the vehicle but which could not be transferred once the car or truck was resold, was a move clearly designed to draw buyers into showrooms by a company frantically scrambling for auto sales.

Chrysler’s announcement that it will be returning to a more standard, 5 year / 100,000 mile warranty – one which this time covers 98 percent of the vehicles in its lineup, even the specialty performance models that the previous warranty omitted - is a signal that the fire sale is drawing to a close. This is even more apparent when compared to the pricing changes that the company is making on some of its most appealing cars, such as the Dodge Challenger. Each model, from the entry-level on up to the SRT8 is seeing a sticker increase that further indicates that Chrysler is changing its own evaluation of its role in the market. Car shoppers may have only a short time remaining to take advantage of some of the most generous rebates and incentives on new vehicles ever offered in the United States.