Possible new life for "Cash for Clunkers" program

AP Auto Writer
NEW YORK (AP) - This was one government stimulus plan that
yielded quick results. Maybe too quick.
Far more drivers signed up for the "cash for clunkers" program
than anyone thought, overwhelming showrooms, blowing through the
initial $1 billion set aside by Congress and leaving dealers
panicked over when or if the government would make good on the
hefty rebates.
Confusion reigned, even as dollars flowed into dealerships
starved for business for months.
The government Web site set up to process rebates of up to
$4,500 per new car could not keep up with demand. Washington
scrambled to come up with more cash and sent mixed signals about
how the program would unfold.
"A borderline train wreck," said Charlie Swenson, general
manager at Walser Toyota in Bloomington, Minn. In Glen Burnie, Md.,
Bob Bell, who owns Ford, Kia and Hyundai dealerships, said his
employees were overwhelmed filing for reimbursement from the
government's clunky system.
He compared the program to a military operation: "It is a
disaster," Bell said. "We met our objective, but the losses were
The House voted Friday to replenish the program with $2 billion,
setting up likely Senate action next week. Sen. Carl Levin,
D-Mich., said the administration assured lawmakers that "deals
will be honored until otherwise noted by the White House." But he
suggested that "people ought to get in and buy their cars."
The White House told consumers the program continues
uninterrupted "this weekend," leaving unclear what happens after
that, until more money is approved for it.
The Car Allowance Rebate System offers owners of old cars and
trucks $3,500 or $4,500 toward a new, more fuel-efficient vehicle,
in exchange for scrapping their old vehicle. Congress last month
approved the plan to boost auto sales and remove some inefficient
cars and trucks from the roads.
It was unclear how many cars had been sold under the program on
Friday, but the number was far higher than anyone had expected.
About 40,000 vehicle sales were done through the program but
dealers estimated they were trying to complete transactions on an
additional 200,000 vehicles, said Sen. Debbie Stabenow, D-Mich.
"I think the general public right now is looking for a bargain
in any way to spend their money," said Kitty Van Bortel, who owns
Ford and Subaru dealerships in Victor, N.Y., "and this was
perceived as an incredible bargain and people took advantage of
The backlog had been building for weeks. Auto dealers could
begin offering the rebate at the beginning of the month, and many
began doing so over the July 4 weekend. But it was not until a week
ago that dealers could begin filing for reimbursement, leaving them
on the hook for as much as $4,500 per car until they get the
federal money.
That's when they ran into difficulties with a federal Web site
ill equipped to handle the volume of claims and the multiple
documents each submission requires. Some dealers said the process
took upward of an hour for each transaction, caused repeated
rejections and consumed many hours submitting and resubmitting
At Walser Toyota in Bloomington, customers began lining up July
24 before doors opened at 7:30 a.m.. Swenson said. Three days
later, his dealership had done 150 trade-ins under the program. His
salesmen worked overnight to scan and submit forms.
But of the 150, he said, only 30 received responses and all of
those were rejections.
Dennis and Marcia Strom hurried into that dealership Friday,
fearing the rebates might not last, and filled out paperwork for a
new car.
"I might have waited until the truck died," Dennis Strom said
of his 14-year-old Dodge Dakota. "It's a good vehicle that suits
our needs. But it's not worth $3,500."
About 100 people were looking to sign deals there but were
holding off because of uncertainty over the rebates.
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.
In Victor, Van Bortel 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
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.
President Barack Obama said the program has "succeeded well
beyond our expectations" and praised the House for moving quickly
to establish new financing.
"This is a test drive," Rep. Steve Israel, D-N.Y., said of the
program, "and people bought it big time."
Bell, in Glen Burnie, said the rebates have "pulled forward a
tremendous market."
"It's wonderful to sell them," he said. "But if you have to
pay off a vehicle immediately, you're going to have a severe cash
flow deficit."
Dealers are used to working with similar incentive programs
offered by auto manufacturers, said John McEleney, chairman of the
National Automobile Dealers Association. But the rules are much
less stringent under those programs, and automakers generally don't
require nearly as much documentation, he said.
His group surveyed dealer franchises using the program and
realized the money for it might be getting short. One survey
finding: Consumers were opting to use the higher $4,500 rebate over
the $3,500 amount by a margin of 2-to-1, eating through the money
"It has been very problematic," McEleney said. "I don't
believe that anyone anticipated the volume would be this great."
Associated Press writers Stephen Manning in Washington, Nomaan
Merchant in Minneapolis, Ben Dobbin in Rochester, N.Y., and Ken
Thomas in Washington contributed to this report.

(Copyright 2009 by The Associated Press. All Rights Reserved.)

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