After Taking In the Clunkers, Car Dealers Report an Extended Wait for the Cash
Wednesday, August 19, 2009
Car dealers are growing increasingly impatient with the government's slow pace in reimbursing them for accepting trade-ins as part of its popular "Cash for Clunkers" program, even though Transportation Department officials say they are working to address the delays.
The National Automobile Dealers Association estimates that dealers have hundreds -- and in some cases thousands -- of applications pending that are "worth hundreds of thousands or millions of dollars."
In Maryland alone, dealers have put in $36 million in claims under the clunkers program but have been reimbursed for only about 2 percent of the total, said Peter Kitzmiller, president of the 325-member Maryland Automobile Dealers Association.
"It is ludicrous at this point," Kitzmiller said. "We've got deals that are just sitting there waiting to be reviewed. The customer is gone, the car is gone, and you don't have your money."
Under the program, people who scrap their gas guzzlers can get a voucher worth up to $4,500 toward a new, more fuel-efficient vehicle.
Dealers essentially front the money for the cash incentive with the understanding that the government will reimburse them once they file the necessary paperwork online and the deal is approved.
Fitzgerald Automotive, one of the largest Washington area dealerships, says it is owed $2.7 million from the government. Darcars, another large area dealership, says it is owed $5 million after taking in roughly 1,300 vehicles.
To deal with the issue, the National Highway Traffic Safety Administration said it is tripling the number of workers who are processing claims to 1,100 contract and federal employees. Trade groups are offering Web seminars to help dealers figure out how to properly submit paperwork so they get their money faster.
In the roughly three weeks since the program officially began, 411,624 transactions, worth $1.7 billion, have been submitted, according to government numbers released Tuesday. Most of the clunkers traded in were trucks and sport-utility vehicles. Toyota Corolla, Honda Civic and the Ford Focus have been the top three new vehicles bought under the program.
To keep up with demand some automakers have said they are increasing their production.
For the first time since filing for bankruptcy, General Motors is hiring back workers to meet higher-than-expected demand for cars and trucks. The company will reinstate 1,350 workers and add overtime for about another 10,000, the result of a broad surge in sales at least partly due to the clunkers program.
The rehires represent only a small portion of the tens of thousands of GM workers who have been laid off in recent years, but the news is a marked turnaround from just months ago when the company was undergoing bankruptcy proceedings.
"We're running much hotter," said Mark LaNeve, GM's vice president of U.S. sales.
Most of the jobs will be added at the company's Lordstown, Ohio plant, where the Chevy Cobalt, a small car, is built, while others will be added in Ontario.
The news from GM follows Ford's announcement last week that it is boosting North American production to meet the increased demand spurred by the clunkers program.
Ford said its third-quarter output would rise by 10,000 vehicles to 495,000, primarily because of increased demand for Escape small utility vehicles and Focus small cars, the two most popular Ford vehicles under the federal incentive program.