Automakers Race to Meet "Clunker" Demand

To Keep Cars - and Customers - In the Showroom, Carmakers are Increasing Production for First Time in Years

(CBS)  At McEleney Auto Plaza in Clinton, Iowa, the clunkers are adding up along with new car customers.

"We've seen an increase in traffic and sales probably of a hundred percent," general manager Mark Chasey told CBS News correspondent Dean Reynolds.

With the cash-for-clunkers dealer discount of $4,500, Max Covell traded in his 19-year old Chevy pickup for a new Toyota Corolla.

"It was just too good a deal to pass up," Covell said.

And according to the government, the Corolla is the number one seller followed by the Honda Civic, the Ford Focus, the Toyota Camry and Toyota Prius.

On average, customers are trading mostly trucks that get 15.8 miles per gallon for cars getting 25.

And of the top ten sellers, 54 percent were manufactured in the United States, meaning cash for clunkers is boosting the economy.

"It's one of the main reasons we actually will see positive growth in the second half of 2009," said Diane Swonk, chief economist at Mesirow Financial.

But it's not all roses.

Dealers are increasingly annoyed that the government has been slow to reimburse them for the $3,500-4,500 markdowns they've given buyers.

"Every dealer is winding up making a decision, how far do you go into this thing before you have to just cut it off," said Dana Fordyce, general manager at Hammonasset Ford.

So the Obama Administration announced this week it's tripling the number of workers processing the backlog of transactions.

Still one survey is detecting a slowdown in deals and it may have to do with a lack of cars to sell.

"Of course demand's going to go down when people don't think they're going to be able to get the vehicles that they want out of the dealers," Swonk said.

To keep cars - and customers - in the showroom, Ford, GM, Toyota and Honda are all increasing production now for the first time in years.

[CyCarConsulting]

54% were built here. But how many were Domestic cars?

[thomderr1]

Only 54% were made in the USA? One provision of the CARS program should have been that all cars were made in North America. That easily means that we just sent 46% of three billion dollars overseas. More, if you factor in that the profits from the vehicles, although made here, are still going overseas. Let's encourage more trade deficits.

[helloall34]

"Ford, GM, Toyota and Honda are all increasing production now for the first time in years."

Yeah, this is a real tragedy for the workers being called back to the US plants that make these cars. Dealers are making money, their workers are making money, and people feel good about buying a new car. Tragic!

[ffoulkes-2009]

Of course, the Dealerships are taking a big hit. Most of the apps are being turned down after the deal is done.