To the Editor:
I was sorry to see Citigroup economist Itay Michaeli falling back on that age-old myth that North America's new-car sales will spike thanks to a "scrappage balloon" that, as Automotive News put it, will send "clunker owners streaming into showrooms" ("Boom is on; enjoy the ride," Aug. 12).
Try to imagine the owners of 11.4-year-old cars (the average age of the U.S. fleet, according to R.L. Polk) leading the new-car market to robust sales.
Here's what really happened. When the crisis occurred, new-car sales dropped like a stone. Why? Because the market is highly dependent on replacers of cars bought new, and those people can easily postpone their purchases.
That deferability is precisely what makes the industry so cyclical. The deferral of replacements increases the average car age and by ripple effect down the chain reduces the stock of potential clunkers, thus throttling back scrappage. When the crisis fades, new-car owners return to the showrooms and reverse the process, causing scrappage to increase, causing the "scrappage balloon."
So scrappage is a delayed consequence of new-car sales, not the cause. What we are now witnessing is normal recovery of confidence by new-car replacers. Expect that to put pressure on prices of used vehicles and send more clunkers off to the scrap yard.
Scrappage will increase because of the market's recovery, not the other way round.
Corona del Mar, Calif.
The writer is retired. He was manager of marketing research at Ford Motor Co.