White House To Phase Out Cash for Clunkers

Cars White House Announcement May Come This Week on When Incentives for Trading in Old Vehicles Will End...

by CBS/AP

Published: Thu, August 20, 2009 - 9:46 am CST Last Updated: Thu, August 20, 2009 - 9:48 am CST

(CBS/AP) The Obama administration is developing plans to wind down the popular Cash for Clunkers program and could announce by Friday when the incentives will no longer be available.

Transportation Secretary Ray LaHood said Wednesday the department would announce within 48 hours how it intends to discontinue the program that offers car buyers rebates of $3,500 or $4,500 for trading in older vehicles for new, more fuel-efficient models. Department officials met with car dealer trade groups on Wednesday to discuss how the program will eventually end and respond to complaints over a backlog of rebate payments to dealers.

Through early Wednesday, auto dealers have made deals worth $1.81 billion and are on pace to exhaust the program's $3 billion in funds in early September. The incentives have generated more than 435,000 vehicle sales but dealers want a clear plan on when the rebates will no longer be available so they don't end up on the hook for any of the incentives.

"We want to make sure that dealers know when we're getting close" to running out of the money that was allocated for the program, LaHood told reporters. LaHood said he recognized that "dealers are frustrated. They're going to get their money."

The National Automobile Dealers Association said its trade group met with Transportation officials to discuss dealer concerns about reimbursement delays and ways of fixing the problems. NADA spokesman Charles Cyrill said the association "stressed the importance of addressing - as soon as possible - how the program will end, including the possible suspension of the program."

Dealers have complained of delays in getting their reimbursements approved, causing a cash crunch at their dealerships. Dealers typically borrow money to put new cars on their lots and must repay those loans within a few days of a sale.

"We do not know how many deals are in the pipeline. We don't know how many dollars are left in the program at this very moment," said Ted Smith, president of the Florida Automobile Dealers Association. "That's fundamental to the health of the dealerships that are participating. If you run out of money before you run out of deals, that's not a good situation."

Some dealers are no longer participating in the Clunker program. The Greater New York Automobile Dealers Association, which represents dealerships in the New York metro area, said about half its 425 members had left the program because they cannot afford to offer more rebates.

Matt Luzio's Flemmington, New Jersey dealership has sold 103 cars under the program, reports CBS News correspondent Terrell Brown. So far, he's only been reimbursed for one.

"It amounts to about a half a million dollars outstanding right now," Luzio told CBS News.

Melanie Bible, spokeswoman for the Pennsylvania Automotive Association, also said about half of the state's 950 dealerships have stopped cutting new Cash for Clunkers deals. She said the figure was anecdotal because no formal survey of dealers had been conducted.

So far, reports Brown the program has been seen as a big success. General Motors says it is increasing production by 60,000 vehicles this year. The company also plans to reinstate more than 1,300 jobs. Ford, Toyota, Honda, and Chrysler have also increased production.

The financial arms of several automakers have begun offering help to cash-strapped dealerships, in some cases by floating loans to help cover clunker-related shortfalls. Toyota Financial Services is offering loans to dealers for up to 60 days to cover the lag between a dealership's payment and its reimbursement. The financial-services arms of Honda Motor Co., Nissan Motor Co., Ford Motor Co. and other automakers are offering similar programs.

The government's online reimbursement system was flooded with reimbursement requests shortly after the program began in late July, overwhelming the computer system and staff set up to process the deals. That led to big delays for dealers trying to file the paperwork they needed to get paid back for the rebates.

LaHood said some of the submitted paperwork has been incomplete or inaccurate, leading to delays. He acknowledged the Transportation Department did not have enough people to process the paperwork but said DOT was ramping up staff.

DOT said earlier this week it was tripling its work force to handle the rebates and expected to have 1,100 workers dealing with the paperwork by the end of the week.

Michelle Primm, managing partner of a four-franchise dealership in Cuyahoga Falls, Ohio, said her store has stopped making deliveries on clunkers purchases until the sales are approved by the federal government. Primm's dealership has made 31 clunkers deals since the program was launched last month, but has only been paid for 3.

"I've got payroll and I've got taxes to pay and all those things," she said. "We're small."

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minimay87 Says:

Fri, Aug 21, 2009 at 2:34 pm

I must say I have learned to stretch our dollar. I use to think it was impossible to get everything I need for a family of three food wise, plus diapers, wipes, training pants and other misc. items for around 600 a month. No I do not get any kind of financial help government wise. That is all out of my husbands paycheck. Also made a habit of making him and I both put any change into this cup that counts the change. Usually comes to around 40 or 50 by the time the 2 weeks is up since he gets paid bi-weekly. That helps to get any extras that might come up between paychecks. Not very garden savy. Even if I was I live in apartments. Thankfully my daughter is down to the once a year check-ups. That frees up a significant amount of money. We use to eat out at least once a week, however now what we call “eating out” is grabbing something off the value menu. That is probably ever other week.

Razorsharp Says:

Fri, Aug 21, 2009 at 1:57 pm

You have got the right idea claycity. I too have tightened my belt, and have cut back on a few things here and there. Let me know if you need any help with the cows and chickens…or even a garden…I’d be glad to help out in exchange for some veggies and a few cuts of beef.

claycitymadness Says:

Fri, Aug 21, 2009 at 10:12 am

its time for all of us to lock down and not spend, but i guess that woudlnt expand the economy. none the less, i am only driving off the farm once a day for anything other than business, its 10 miles to town, and i dont spend nearly as freely as i did six months ago. eating at home a lot more. havent even been to a restautrant this week which is unusual. its a rough time. need to figure out how to raise beef and chickes again.

BamaBob Says:

Fri, Aug 21, 2009 at 9:12 am

I hope too many people didn’t jump on this without thinking it through. That new car feel wears off about the time that monthly note comes due.

The government would have done a better job managing this program, if they had just dropped bails of money out of helicopters.

minimay87 Says:

Fri, Aug 21, 2009 at 7:54 am

Priceless, have to show that one to my husband when he wakes up. I have been seeing a lot of new vehicles in my complex from dealerships. Already seen a repo truck come twice. I am sure I will see many more as time progresses and payments are not made. Until then I can sit with my cup of coffee on my balcony and see the peoples reactions to the whole ordeal. Not quite as entertaining as Operation Repo on Tru TV, but still entertaining.

claycitymadness Says:

Fri, Aug 21, 2009 at 7:39 am

it was indeed funny bob, humor crosses the isle both ways

shrimpfire Says:

Fri, Aug 21, 2009 at 6:55 am

? Why was all the money wasted to begin with? We have dealers that have never been paid, so to me the program was a waste of taxpayers money. Again I say why

Razorsharp Says:

Thu, Aug 20, 2009 at 11:01 pm

Now we get to see the backlash from this idiotic idea unfold in the coming weeks. I wonder how many dealerships will be put in the hole because of this? Lets not forget about all of the people who rushed out to buy, buy, buy just because their president told them to…when they really couldn’t afford to in the first place. Repos and defaults galore… Sounds like the housing market. People will never learn.