Reports of Cash-for-Clunkers Death Exaggerated, for Now

The U.S. government's $1 billion "cash-for-clunkers" stimulus plan to generate new-vehicle sales appears to have run out of money in its first six days, prompting the White House, Department of Transportation and congressional members to meet in a late night session Thursday to find ways to keep the program going. Media reports claim the DOT notified some members of Congress late yesterday the Car Allowance Rebate System (CAR) was suspended at midnight because of fears the program might be out of money.

But the White House apparently has put the brakes on the suspension in the hope of finding new money to fund the scheme. No one is sure cash-for-clunkers actually is out of money, but car dealers nationwide are reporting the program has been a resounding success. However, part of the challenge with the higher-than-expected sales is the backlog of paperwork the program has created.

Dealers have to electronically submit as many as 36 documents per transaction to the National Highway Transportation Safety Admin., and that has stalled thousands of deals.

Through July 30, 22,782 transactions totaling $95.9 million have been submitted for reimbursement from the CAR, according to NHTSA.

Congressional members hearing from dealers about the submission problems reportedly have called Transportation Secretary Ray LaHood to correct the problem.

The National Automobile Dealers Assn. has conducted an informal survey of nearly 2,000 of the 20,305 dealers participating in cash-for-clunkers that reveals the paperwork for about 25,000 sales had yet to be processed.

The NADA survey, along with the calls from Congress, convinced LaHood a potential problem was brewing.

Federal money for clunker trade-ins sought.

Ward's reported in a July 27 story the possibility the $1 billion fund could be depleted as early as Aug. 1.

The cash-for-clunkers program officially launched July 24, when NHTSA published rules for how dealers were to administer the scheme. However, numerous dealers have been selling vehicles under the stimulus since July 1, the date Congress stipulated the program was to start. A government announcement as to whether cash-for-clunkers will be continued is expected sometime today. A number of scenarios are possible.

The U.S. House of Representatives reportedly held a vote late Thursday to add as much as $2 billion to the program. However, Congress leaves for its annual recess after today and will not be back until after Labor Day, so something would have to happen quickly.

Congress could vote on a resolution calling for the White House to release more funds using the Trouble Asset Relief Program.

A source tells Ward's the White House wants authorization from Congress to use the TARP money, but congressional members say the Obama Admin. does not need approval to move forward.

A statement from the White House says it is exploring all options to keep the program going.

The DOT also could suspend cash-for-clunkers until it can get a handle on how many deals actually are pending. NHTSA is doubling the number of employees from 30 to 60 to help get through the mounting dealer backlog.

NHTSA spokesman Rae Tyson tells Ward's in an email "the situation is fluid."

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