Government’s Cash-for-Clunkers Program Crashes Just Days After Starting

July 31, 2009 - 4:40 AM
The White House is assessing its options amid concerns that the $1 billion budget for rebates for new car sales may have been depleted. The program officially began last week and has been heavily publicized by automakers and dealers.

A 1999 GMC S15 pickup truck sits in a long row of vehicles traded in as part of the Cash For Clunkers program at a dealership in a Denver suburb on Thursday, July 30, 2009. (AP Photo/David Zalubowski)

Washington (AP) - The government's popular "cash for clunkers" program may be running out of money after only a matter of days as car shoppers flock to dealerships to take advantage of the rebates.
 
The White House said Thursday it was assessing its options amid concerns the $1 billion budget for rebates for new car sales may have been depleted. The program officially began last week and has been heavily publicized by automakers and dealers.
 
Transportation Department officials called lawmakers earlier Thursday to alert them of plans to suspend the program as early as Friday. But a White House official said later the program had not been suspended and they were reviewing their options to keep the program funded.
 
White House press secretary Robert Gibbs said they were working to "assess the situation facing what is obviously an incredibly popular program. Auto dealers and consumers should have confidence that all valid CARS transactions that have taken place to date will be honored."
 
Dubbed the Car Allowance Rebate System, or CARS, the program offers owners of old cars and trucks $3,500 or $4,500 toward a new, more fuel-efficient vehicle, in exchange for scrapping their old vehicle. Congress last month approved the plan to boost auto sales and remove some inefficient cars and trucks from the roads.
 
The program was scheduled to last through Nov. 1 or until the money ran out, but few predicted it would be depleted in days. Through late Wednesday, 22,782 vehicles had been purchased through CARS and nearly $96 million had been spent.
 
But dealers raised concerns about large backlogs in the processing of the deals in the government system. A survey of 2,000 dealers by the National Automobile Dealers Association found about 25,000 deals had not yet been approved by the government, or nearly 13 trades per store.
 
It suggested that with about 23,000 dealers taking part in the program, car dealers may already have surpassed the 250,000 vehicle sales funded by the $1 billion program.
 
"There's a significant backlog of 'cash for clunkers' deals that make us question how much funding is still available in the program," said Bailey Wood, a spokesman for the dealers association.
 
The reports that the CARS program could be suspended created confusion among many dealers, who had showrooms filled with car shoppers looking to scrap their gas guzzlers.
 
Alan Helfman, general manager of River Oaks Chrysler Jeep in Houston, said he was worried that the government wouldn't pay for some of his clunker deals. His dealership has completed paperwork on about 20 sales under the program, but in some cases the titles haven't been obtained yet or the vehicles aren't on his lot.
 
"There's no doubt I'm going to get hammered on a deal or two," Helfman said.
 
The clunkers program was set up to boost U.S. auto sales and help struggling automakers through the worst sales slump in more than a quarter-century. Sales for the first half of the year were down 35 percent from the same period in 2008, and analysts are predicting only a modest recovery during the second half of the year.
 
So far this year, sales are running under an annual rate of 10 million light vehicles, but as recently as 2007, automakers sold more than 16 million cars and light trucks in the United States.
 
Lawmakers said they would try to find additional funding for the program, which under the legislation could grow to $4 billion for the funding of up to 1 million new car sales.
 
Rep. Edward Markey, D-Mass., who developed the legislation, said he would work with the Obama administration to keep the program going "until it reaches its goal of helping consumers take 1 million gas guzzlers off the road."
 
Others suggested using unspent economic stimulus funding. "I can think of no better use for unspent stimulus dollars that are gathering dust than financing 'Cash for Clunkers,'" said Rep. Fred Upton, R-Mich. Michigan lawmakers planned to meet on Friday to discuss the program.
 
Brendan Daly, a spokesman for House Speaker Nancy Pelosi, D-Calif., said they would work with "the congressional sponsors and the administration to quickly review the results of the initiative."
 
General Motors Co. spokesman Greg Martin said the automaker hoped "there's a will and way to keep the CARS program going a little bit longer."
 
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AP Auto Writer Tom Krisher in Detroit contributed to this report.