Video: Rough ride for cash for clunkers

updated 8/3/2009 7:58:37 PM ET 2009-08-03T23:58:37

The popular but overwhelmed “cash for clunkers” program is zooming toward a quarter-million trade-ins with the initial $1 billion in rebates, but the White House warns the special deals could sputter to an end by Friday unless the Senate quickly approves $2 billion more.

Senate skeptics appear to be in no hurry.

On Monday, the Obama administration pointed to environmental gains made during the first week of the program, which gives rebates of as much as $4,500 to motorists who trade in gas guzzlers for more fuel-efficient vehicles. The White House also highlighted recovery news from Ford Motor Co., which reported its first U.S. sales increase in nearly two years.

“It’s good for consumers. It’s good for dealers and auto manufacturers,” White House spokesman Robert Gibbs said. “It’s good for our energy security and our environment.”

Gibbs said if the Senate failed to provide the extra money, “it’s unlikely that we’ll make it to the weekend with a program that can continue.” He estimated the additional $2 billion would allow consumers to take advantage of the incentives through September.

In the Senate, Democrats remained concerned about lining up enough support for the plan, which the House approved last week before heading home for the August recess. “I’d like to see the program extended,” said Dick Durbin of Illinois, the Senate’s second-ranking Democrat. “I hope we can get it done.”

While the House approved the funding by a nearly 3-to-1 margin last Friday, the clunkers program faces strong headwinds from conservatives who view it as another taxpayer bailout for the auto industry and environmentalists who complain that it ought to wring out more fuel efficiency. There’s little time left on the calendar — the Senate plans to take a four-week recess beginning Friday after it votes this week on Sonia Sotomayor’s nomination to the Supreme Court.

Despite the assurances from the White House, many dealers said they were concerned they could be on the hook for some of the money if the Senate fails to approve the $2 billion. John McEleney, chairman of the National Automobile Dealers Association, said his organization was warning dealers there were no guarantees they would be reimbursed for sales they make under the program this week. McEleney said he has stopped offering cash-for-clunkers deals at his own Iowa dealerships.

Transportation Secretary Ray LaHood said the average mileage of new vehicles purchased through the program is 9.6 miles per gallon higher than for the vehicles traded in for scrap. Buyers of new cars and trucks that get 10 mpg better than their trade-ins get the $4,500 rebate. People whose cars get between 4 mpg and 10 mpg better fuel efficiency qualify for a smaller $3,500 rebate.

LaHood said some 80 percent of the traded-in vehicles are pickups or SUVs, meaning many gas-guzzlers are being taken off the road. The Ford Focus is a leading replacement vehicle. General Motors Co., Chrysler Group LLC and Ford accounted for 47 percent of the new vehicles purchased.

Ford said its July sales rose 1.6 percent in July from the same month last year, its first year-over-year increase since November 2007, while Chrysler Group LLC posted a smaller year-over-year sales drop compared with recent months, helped by “clunkers” deals. Other automakers showed gains, giving ammunition to supporters of the car rebate program.

Senate Republicans appeared to be in no hurry.

“We were told this program would last for several months,” GOP leader Mitch McConnell of Kentucky said. “It ran out of money in a week, prompting the House to rush a $2 billion extension before anybody even had time to figure out what happened to the first billion.”

McConnell said, “It’s not a bad idea to look for a second opinion. All the more so if they say they’re in a hurry.”

Sen. Jon Kyl of Arizona, the Senate’s second-ranking Republican, suggested lawmakers “take a time-out” so they could receive more details about the program before providing more money. “I’m concerned that somebody’s going to have to pay for this, and $4,500 for everybody that wants to take advantage of this program is a lot of money.”

Making its case for more funding, the administration collected information on 80,500 vehicle transactions logged into the government’s operating system through Saturday afternoon. Gibbs said the fuel efficiency improvements would save a typical customer $700 to $1,000 a year in fuel costs. The new vehicles were getting 25.4 miles per gallon on average, a 61 percent increase over the models traded in.

The data were aimed at appeasing lawmakers such as Sens. Dianne Feinstein, D-Calif., and Susan Collins, R-Maine, who have questioned whether the program’s environmental benefits go far enough.

Those two senators and New York Democrat Charles Schumer praised the gains in a Monday afternoon news conference.

“The best solution is to continue and extend the program as it is,” Feinstein said. “The program appears to be running very well.”

The lawmakers said administration officials told them that 120,000 new vehicle sales had been processed through the program and an additional 100,000 to 130,000 were expected to be processed to reach the $1 billion in funding.

LaHood said on MSNBC, “We’re encouraging senators to listen to their car dealers and the people they represent. If they do that, it will pass the Senate.”

The administration has been coy about just how long dealers would be reimbursed for rebates, after saying Sunday that the program would have to be suspended if the Senate failed to act.

Fierce lobbying for the program came from other quarters: The National Automobile Dealers Association and the American International Automobile Dealers contacted thousands of dealerships, telling them to bombard the Senate with phone calls and e-mails.

“This is the one true stimulus that seems to be working out of all the things that have been tried in the last few months,” said Cody Lusk, president of the international group.

The Senate narrowly approved the initial money in June. But some lawmakers who voted for the plan, including Feinstein and Collins, have said the additional dollars should push consumers to buy even more fuel-efficient vehicles and also to 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.

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


Discussion comments


Most active discussions

  1. votes comments
  2. votes comments
  3. votes comments
  4. votes comments

Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 3.79%
$30K home equity loan FICO 4.99%
$75K home equity loan FICO 4.69%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 13.83%
Cash Back Cards 17.80%
Rewards Cards 17.18%