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Cash for Clunkers Program Draws to Close

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By Justin Hyde

RISMEDIA, August 24, 2009-(MCT)-There has never been a better time to take $3,500 or $4,500 from the government for trading in your gas-guzzler. But come 8 p.m. EDT today (Monday, August 24), time’s up.

That’s when the Obama administration ends the cash-for-clunkers program to prevent car dealers and shoppers from claiming more than the $3 billion Congress approved.

The decision means that the program expected to generate 250,000 vehicle sales over three months will have triggered more than 700,000 in about a month. While meeting goals of destroying gas guzzlers and spurring auto production, the larger effects of the plan on the economy and environment will be long debated.

It also has generated many complaints from dealers who say the government has been slow to reimburse them. Federal officials claim dealer mistakes are often to blame for the delays. So far, 8% of the $1.9 billion in deals submitted have been paid.

Dealers can appeal those calls after Monday’s deadline, but it could take weeks for the backlog to clear. President Barack Obama told a Philadelphia radio show recently that dealers “will get their money, but we’ve got to process it properly.”

Only about one in five of the cash-for-clunker deals reviewed by federal officials has won approval so far, raising questions about whether dealers have been too lax in enforcing rules or federal officials too strict.

Monday’s 8 p.m. deadline applies only to new deals as the program winds down; the government will continue processing deals turned in for some time, and dealers will have chances to correct any transaction kicked back by the government. In recent days the U.S. Department of Transportation had boosted the number of people processing clunker deals to 1,200.

The Obama administration has struggled to keep the clunkers’ plan in check, pushing an emergency $2 billion extension through Congress earlier this month when the plan burned through its original $1 billion in about a week. Backers of the plan previously said they would not seek any additional money, and the White House reiterated that stance last week. “We’re confident that with this window, we’ll be bringing the program in within the range allocated to it,” the official said.

The U.S. Department of Transportation said $1.9 billion has been claimed so far through 457,476 transactions, but estimated dealers are likely sitting on an additional $400 million in deals that have yet to be submitted. With the costs of overseeing the program likely close to $100 million, that would leave about $600 million available.

“This program has been a lifeline to the automobile industry, jump-starting a major sector of the economy and putting people back to work,” said U.S. Transportation Secretary Ray LaHood.

But a White House official said that only $145 million, or 8%, of the $1.9 billion claimed by dealers from the program so far has been paid out by the government. Of the 457,476 deals submitted, the administration said about 170,000 had been reviewed, with a “large number” rejected for incomplete or inaccurate paperwork. Under the law, customers had to meet several requirements such as having the clunker registered and insured continuously for the past year, proof of which dealers have to submit to get reimbursed. Given the average clunker voucher of about $4,200, the government’s figures suggest less than 35,000 deals have passed muster. Several dealers have warned that the backlog of claims was threatening their business; General Motors Co. and Chrysler said they would advance cash to dealers while they waited for clunker payments.

The National Automobile Dealers Association had warned dealers of a rising chance that the program could run out of money unexpectedly, leaving dealers on the hook for vouchers of $3,500 or $4,500 per sale. Federal officials said the Monday deadline included some buffer to absorb any surge of last-minute deals this weekend. The typical cash-for-clunkers deal involved an older model SUV or truck from a Detroit automaker traded in for a car that was more likely to come from a foreign automaker than a domestic one. The federal government said the new vehicles typically improved on the fuel economy of the clunker by more than 9 mpg.

GM, Ford Motor Co. and other automakers have boosted production for the remainder of the year mostly in response to the clunkers program. GM sales chief Mark LaNeve said Thursday that the company’s sales have run 60,000 vehicles ahead of its plan over the last two months, mostly due to clunkers. As of last Friday, GM was the second-largest beneficiary of the clunkers plan among automakers, claiming 17.6% of sales to Toyota Motor Co.’s 18.9%. Detroit automakers had started to run so short of some car models that the government allowed dealers to turn in pre-orders of new vehicles that would be delivered later.

(c) 2009, Detroit Free Press.
Distributed by McClatchy-Tribune Information Services.

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