OEMs Aim to Leverage Pull of Cash-for-Clunkers

The U.S. government launches its new-vehicle sales stimulus today and Volkswagen of America Inc., with its range of turbodiesel engines, considers itself a dark horse to take particular advantage of the program.

“The (VW Jetta) TDI is guaranteed to get the required 10 mpg (4.3 L/km) better than the turn-in vehicle, so it is guaranteed the $4,500 coupon,” says Mark Barnes, chief operating officer-VWA.

“Add that to the $1,300 diesel tax credit, you’re talking about $6,000 off on the (Jetta) TDI,” he tells Ward’s, displaying some of the industry’s enthusiasm for the $1 billion Car Allowance Rebate System, or “cash-for-clunkers,” program.

And unlike many auto makers, Barnes says VW-brand TDI models afford consumers a chance to take full advantage of the rebate without downsizing to a smaller vehicle. For example, a good number of SUV owners would likely qualify for the full $4,500 voucher if they opted for a Volkswagen Touareg TDI cross/utility vehicle, which seats five passengers, lays out a whopping 406 lb.-ft. (550 Nm) of torque and boasts a combined city/highway fuel-economy rating of 21 mpg (11.2 L/100 km).

Also seating five passengers, the Jetta TDI achieves a combined fuel economy rating of 33 mpg (7.1 L/100 km), making it a slam-dunk for the full coupon, as well, Barnes says.

“And let’s not forget,” he says with his best salesman’s pitch, “we’re not new to diesel here at Volkswagen. We’ve had it around since 1977 here in the United States, so we’ve sold about 850,000 already.”

Auto makers selling in the U.S. and smarting from the worst new-vehicle sales downturn in the post-Second World War era, have been anxiously awaiting cash-for-clunkers since Congress authorized the program last month.

Volkswagen of America calls Jetta TDI cash-for-clunkers champion.

It offers consumers a $3,500 or $4,500 voucher when they trade in an old vehicle and buy or lease a new, more fuel-efficient car or truck. Generally, the trade-in must get less than a combined 18 mpg (31.1 L/100 km) and be registered and continuously insured in the U.S. for the last year.

The new vehicle must achieve a combined fuel economy of at least 22 mpg (10.7 L/100 km) and light trucks 18 mpg. Leased vehicles must be under a 5-year contract and the program does not discriminate against foreign or domestic vehicles, a sticking point removed from CARS as it slugged through Congress.

The program expires Nov. 1, or whenever the funding dries up.

General Motors Co., which claims the greatest number vehicles eligible for the program, thinks the scheme will push this year’s industry sales up by 250,000 units. The auto maker is cautiously optimistic about winning 60,000 of those sales.

“I think all of us are anticipating it will give us a boost,” says Mike DiGiovanni, GM’s top sales analyst during a conference call last week. “We’re all waiting to see what happens when it is implemented – are we going to see the pick-up we’re all anticipating?”

According to a final rule released by the National Highway Traffic Safety Admin. on Friday, the impact of the program will not be enough to spur production increases. The group expects the nation’s 19,700 dealers to sell roughly 12 more vehicles apiece through the duration of the program.

NHTSA will add 30 employees and contract another 200 for six months to administer the program, but expects the new job roles to end there.

“Manufacturers’ and dealers’ employment levels are unlikely to be impacted,” NHTSA says.

Nonetheless, auto makers such as Volkswagen and GM are pitching their lineups as the best positioned.

Smart USA plans to use the program in conjunction with a new $99-per-month financing offer on its ForTwo minicar. Smart’s pitch urges consumers to “live smarter by consuming less and conserving more.”

Toyota Motor Sales USA Inc. touts 25 eligible models qualifying for the vouchers and has launched a television advertising program reminding consumers about the CARS program and highlighting regional incentive offers.

Kia Motors America says it has 12 models, or 85% of its lineup, eligible for the $4,500 certificate. Tom Loveless, vice president-sales at KMA, appeals to consumers with the industry’s old “no-better-time-than-the-present” maxim.

“There has been no other time in recent history when such an extensive national buyer incentive program has been implemented, and Kia Motors is pleased to provide consumers with a comprehensive selection of vehicles that are praised for their style, quality, value, fuel efficiency and long list of standard safety features,” Loveless says in his company’s pitch.

Chrysler Group LLC is offering to double the rebate for would-be buyers. More than two thirds of its lineup boasts the fuel-economy rating required for program eligibility.

Interestingly enough, the final CARS rule singles out at least one loser with the program: repair shops. NHTSA says shop owners could see less business because the older cars they service will get traded in and sent to the scrap yard.

The rule also appears to put to rest fears that fraud may occur while scrapping the vehicle. Dealers must introduce sodium silicate to the engine oil system, which dehydrates oiled surfaces and moving parts of the engine causing it to seize, and present a certificate the process was undertaken before receiving their reimbursement.

Failure to adhere to any rules surrounding cash-for-clunker transaction could lead to up to five years in prison and a $250,000 fine, the rule says.

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