washingtonpost.com
Many 'Clunker' Dumpers Buy Foreign
$664 Million Has Been Requested in Vehicle Vouchers; Most Top Sellers Are Japanese

By Dana Hedgpeth and Sholnn Freeman
Washington Post Staff Writers
Wednesday, August 5, 2009

Four of the five top-selling cars in the government's "Cash for Clunkers" program are made by foreign automakers, according to new data released Tuesday by federal transportation officials.

The trade-in program has proved so popular that the government is in danger of running out of money for the rebates; Senate leaders said they plan to schedule a vote this week to boost funding.

Transportation Secretary Ray LaHood said 157,000 trades had occurred as of Tuesday morning, eating up $664 million of the $1 billion appropriated for the effort.

More than 80 percent of the vehicles turned in were trucks and sport-utility vehicles, the government said. The top-selling new car is the Ford Focus, followed by the Toyota Corolla, Honda Civic, Toyota Prius and Toyota Camry. The new vehicles on average get 25.4 miles per gallon, compared with an average of 15.8 mpg for the trade-ins.

The clunkers program was meant to stimulate sluggish auto sales and spur people to buy more fuel-efficient cars. Congress approved it in mid-June, and the program was supposed to last until Nov. 1 or when the funds run out. However, on Friday the House hastily moved to add $2 billion to the program by using money intended for energy loan guarantees.

Eric Fedewa, an analyst with the consulting firm CSM Worldwide, said it is logical that foreign names would top the car-buying list because most of the smallest and most fuel-efficient vehicles in the market are built in Asia. But he said the program is a hit because it is stimulating demand for all vehicles -- foreign and domestic.

"In dealerships nationwide, the showroom traffic is unbelievable right now," Fedewa said. "Even if people don't qualify, they are still being enticed to go look at vehicles."

LaHood said the $2 billion approved by the House would probably last until Labor Day, assuming the Senate goes along. Senate Majority Leader Harry M. Reid (D-Nev.) said a vote should come before the August recess begins Friday. Several prominent opponents said they would not stand in the way of a vote.

"We'll pass cash for clunkers before we leave here," Reid (D-Nev.) told reporters Tuesday.

Auto dealers across the country have been pushing congressional leaders to keep the program going. Under the deal, people can turn in their gas-guzzling cars and trucks for a voucher worth up to $4,500 toward a new vehicle.

Some dealers have complained about the government's administration of the program, saying they've had trouble processing paperwork and getting their reimbursements for trade-ins.

LaHood said the agency has fixed problems with its Web site. He said that Citigroup, which is helping manage the clunker program, also beefed up its staff on the project to 300 workers from 100.

The jolt in sales has left some dealers with dwindling inventory.

Allen Foster, general manager of a dealership in Madison, Wis., said his sales lot holds 600 cars but he's down to 150 and trying to get more cars from manufacturers and other dealers. He has 100 people waiting for the Toyota Prius.

"This is a pretty big swing from two months ago, when we had a lot more supply than we had demand," Foster said.

Still, some dealers and manufacturers worry whether sales will return to their sluggish pace once the trade-in program runs its course. Toyota said Tuesday that it lost $819 million for the quarter as its global sales continued to drop.

But Roy Bavaro, director of corporate marketing for DCH Auto Group, which owns 27 dealerships in Connecticut, New York, New Jersey and California, remained optimistic. He said his company has taken in more than 1,000 clunkers.

"This might start to trigger some consumer confidence to go back into the market and purchase a vehicle," Bavaro said of the clunker program. "I don't know if it is the silver bullet that's going to turn this whole thing around, but this might be a good jump-start."

Staff writer Perry Bacon Jr. contributed to this report.

View all comments that have been posted about this article.

© 2009 The Washington Post Company