Cash for Clunkers: $2 Billion Fill-Up Required


WASHINGTON (AP) — With the "cash for clunkers" program essentially running on fumes, the Obama administration served notice on the Senate that it must pour in $2 billion more to keep it on track.

Transportation Secretary Ray LaHood set the latest policy marker for the popular car-purchase program, saying Sunday that he thought the existing $1 billion pool would be exhausted by the end of the weekend.

Only the Senate can help at this point; the House last Friday voted for the money to be put into the popular program, and the House members have left on their summer recess. The Senate is scheduled to start its vacation by week's end.

"If we don't get the $2 billion from the Senate ... we would have to suspend the program next week," LaHood told C-SPAN's "Newsmakers" show. He said the administration "will continue the program until we see what the Senate does and I believe the Senate will pass this."

"Any deal that is made (Monday) or the next day and that is in the pipeline, ... the dealer will be reimbursed and the car buyer will be reimbursed," the secretary declared.

At least one GOP senator questioned the need to speed the money.

"This is crazy to try to rush this thing through again while they're trying to rush through health care, and they want to get on to cap and trade electricity tax," said Sen. Jim DeMint, R-S.C. "We've got to slow this thing down."

Obama officials scrambled last week to add money to the Car Allowance Rebate System (CARS), which is designed to get old, polluting vehicles off the road and scrapped while helping car dealers emerge from the recession. The $1 billion has led to the sale of 250,000 new vehicles.

Owners of gas-guzzlers can receive rebates of $3,500 or $4,500 toward the purchase of a new fuel-efficient car. LaHood said 62% of the traded-in vehicles were trucks and "these people are buying cars that get much better gas mileage."

The program helped lift Ford Motor Co. to its first monthly sales increase in two years, the company's top sales analyst said Sunday.
July sales results mark the first year-over-year gain for Ford since November 2007 and apparently the first uptick by any of the six biggest carmakers since last August, George Pipas said.

"We were having a good month — and Ford's been having some good months lately — but the (clunkers) program really put us over the top for sure," Pipas said.

The Senate narrowly approved the initial money in June. But some lawmakers who voted for the plan, including Sens. Dianne Feinstein, D-Calif., and Susan Collins, R-Maine, have said the additional dollars should push consumers to buy more fuel-efficient vehicles and allow people to buy fuel-efficient used vehicles. Sen. Jeff Bingaman, D-N.M., has said he was concerned with the way the House paid for the extension, shifting $2 billion from a renewable energy loan program.

LaHood said dealers will be reimbursed for deals in the pipeline and that the government will make a "good-faith effort" for transactions beginning Monday.

Even as dollars flowed into dealerships starved for business for months, confusion reigned.

The government Web site set up to process rebates of up to $4,500 per new car could not keep up with demand.

It took three hours Thursday for employees at one of Sam Pack's Dallas-area Ford dealerships to submit just eight documents. Pack said he feared that many deals made under the program wouldn't be properly reimbursed.

"The details of processing this is beyond what anybody would think is reasonable," he said.

Federal officials said they have increased the capacity of the submission system and added staff to work hot lines and process voucher applications.

Kitty Van Bortel, who owns Ford and Subaru dealerships in Victor, N.Y., considered pulling the plug on rebates at the Ford and Subaru dealerships she owns, even though her ads promoting the rebates were locked in for the weekend.

"Honestly, in all my years in the car business, I have never seen such a mess," she said.

Still, it was a mess created by too much action, instead of not enough.

Officials hoped that when the dust cleared from the confusion, the program would be a tonic for the beleaguered auto industry and a benefit for the environment, with many inefficient cars taken off the road.

"This is a test drive," Rep. Steve Israel, D-N.Y., said of the program, "and people bought it big time."

Associated Press writers Stephen Manning in Washington, Nomaan Merchant in Minneapolis, Ben Dobbin in Rochester, N.Y., Ken Thomas in Washington and Dan Strumpf contributed to this report.

Copyright 2009 The Associated Press.  All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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