U.S. Ends ÂCash for Clunkers' Program Months Ahead of Schedule
Friday, August 21, 2009
The federal government, acknowledging that the "Cash for Clunkers" program was running out of money, declared it a success Thursday and killed it off, effective 8 p.m. Monday.
After just a week, the program, which began July 24 and was expected to last until as late as Nov. 1, ran out of the $1 billion originally appropriated by Congress. An additional $2 billion was approved two weeks ago, and it was supposed to last until Labor Day. Now that's almost gone, too.
In his radio address on Thursday, President Obama said the program, designed to stimulate auto sales and production and get gas guzzlers off the road, had "been successful beyond anybody's imagination. And we're now slightly victims of success because the thing happened so quick, there was so much more demand than anybody expected, that dealers were overwhelmed with applications."
With the end in sight, many dealers are preparing for a flurry of last-minute customers over the weekend, and some are calling and e-mailing customers who were on the fence, perhaps threatening a surfeit of business.
"It's not clear at all if there's enough of the $3 billion to last through the weekend," said John McEleney, chairman of the National Automobile Dealers Association. "My concern is if we go past the $3 billion between now and Monday." He said, however, that he had been assured that the government has done calculations to make sure there is enough money left to get through the weekend.
Dealerships have been swamped with consumers wanting to trade in their clunkers for a voucher worth up to $4,500 toward the purchase of a new, more fuel-efficient vehicle. The demand set off increased production runs at General Motors, Ford and Toyota, and meant that some factories called back laid-off workers.
The program also raised complaints from dealers that it was poorly managed because they weren't getting reimbursed quickly for the vouchers. Car buyers complained that they weren't able to find popular new vehicles at dealerships -- on lots that only a few months ago had been overflowing with too many new cars.
Transportation officials said paperwork representing 457,000 transactions, worth about $1.9 billion -- or about $4,000 on average for each trade-in -- had been turned in to the government as of Thursday.
Just under 40 percent -- or 170,000 -- of the applications have been reviewed so far. The government has paid out about $145 million on applications that have been reviewed and approved. A large number of applications are incomplete or have inaccurate information, which means the application is sent back to the dealer to be re-submitted, according to a senior administration official who briefed reporters on Thursday.
"It has been a whirlwind," said Tammy Darvish, the area director for the NADA. "It has been a lot of late nights. It's been a lot of uncertainty with the rules. We submit paperwork and we submit. And we just keep hoping we'll get paid. And then they end up ditching it after 30 days."
Obama was reassuring on that score. "I understand dealers want to get their money back as soon as possible, but the fact of the matter is this is a good-news story; they are seeing sales that they have not seen in years," Obama said. "And they will get their money, but we've got to process it properly."
He called it a "high-class problem to have -- that we're selling too many cars too quickly and there's some backlog in the application process. It is getting fixed."
In response to complaints, the government had said this week that it was tripling the number of employees processing claims, to 1,100. General Motors said on Thursday that it would help cash-strapped dealers waiting for clunker repayments by advancing them a 30-day interest-free loan until their rebates were processed.
Some dealers, including about 200 in the greater New York area and one in Bowie, pulled out of the program earlier this week because of the reimbursement issue. Marc Cannon, a spokesman for Auto Nation, the biggest auto dealer in the country, said it is owed about $45 million from the government for the roughly 10,000 trade-ins it has taken at its 160 dealerships that are participating in the clunker program.
Darvish, who owns more than two dozen auto dealerships in the Washington area, said she's only received reimbursement from the government for five vehicles. She said that she is owed nearly $5 million and is worried about when she'll get the payments.
But "Cash for Clunkers" has also stimulated some private enterprise. Brian Benstock, who has three Honda dealerships in New York, said he and 40 dealers across the country started their own version of cash for clunkers -- with looser terms than the government's -- at http:/
He said the government had helped him sell more than 200 cars, and he got his first $4,500 repayment on Thursday. But he had been unhappy with the fits and starts of the federal program.