'Cash for Clunkers' program runs out of cash

Buyers burn through $1 billion, but White House looks for more By G. Chambers Williams III • THE TENNESSEAN • July 31, 2009 Update 10:19 a.m. (from Associated Press) WASHINGTON (AP) — The House raced Friday to pass legislation pouring an additional $2 billion into the popular — but financially strapped — "cash for clunkers" car purchase program. Rep. Sander Levin, D-Mich., revealed the floor plan after he and other lawmakers were assured by Transportation Secretary Ray LaHood that the program would continue at least through Friday while the Obama administration looked for more money. Democrats in both the House and Senate were exploring the possibility of votes as early as Friday to replenish the funding. At the White House, press secretary Robert Gibbs sought to assure consumers that the program is still running and will be alive "this weekend." "If you were planning on going to buy a car this weekend, using this program, this program continues to run," Gibbs told reporters. He would not commit to any timeframe beyond that. But Gibbs said administration officials and bipartisan leaders of Congress were working Friday morning "to find and develop ways to continue to fund this program." Sen. Carl Levin, D-Mich., said it wasn't clear when a Senate vote would be held. Previously reported Car dealers and congressmen were told Thursday that the wildly popular "Cash for Clunkers" new-car rebate program was being suspended less than a week after it began out of fear that the $1 billion appropriated for it had already been used up. But a White House spokesman said later the Obama administration is "evaluating all options" to keep the program funded and that all valid deals made so far will be honored. Under the program, which began last Friday, consumers were able to trade in older vehicles with fuel-economy ratings of 18 miles per gallon or less for vouchers of either $3,500 or $4,500 toward the purchase of a new vehicle that gets better mileage. Middle Tennessee dealers reported being flooded with customers looking to take advantage of the program, but some said they began cutting off the sales Thursday afternoon after the chairman of the National Automobile Dealers Association warned the government that the program might already have run out of money. "I just cut it off a few minutes ago until we find out what's going on with it," Barry Huber, general sales manager at the Freeland Chevrolet Superstore in Nashville, said Thursday evening. "We only did one deal today." Transportation Department officials called lawmakers' offices earlier Thursday to alert them of plans to suspend the program as early as today. But the White House said later the program had not been suspended. "We are working tonight to assess the situation facing what is obviously an incredibly popular program," White House press secretary Robert Gibbs said. The National Highway Traffic Safety Administration, which is administering the program, reported at the close of business Thursday afternoon that only about $95 million of the money had been approved for payment to dealers. But NADA Chairman John McEleney, a Clinton, Iowa, General Motors/Toyota/Hyundai dealer, said that a poll of about 2,000 of the group's 23,000-plus dealers showed that with deals already in the works, it was probable that the rest of the $1 billion was already tied up in transactions that had not been submitted or approved by the government. The Safety Administration said earlier in the day that the vast majority of applications submitted by dealers were being rejected because of incomplete or illegible paperwork, but it was expected that those transactions eventually would be submitted properly and would receive the government money. Sen. Debbie Stabenow, D-Mich., said late Thursday that lawmakers had been informed of the government's decision to suspend the program. "It is amazing that 'Cash for Clunkers' would be this successful this quickly," she said in a statement. "I urge Congress and the administration to provide additional funding." The Transportation Department called Congress members to alert them to the decision to suspend the program. Congress last month approved the Car Allowance Rebate System, the official name of the clunkers program, to boost sagging auto sales and remove some vehicles with poor fuel economy from the roads. Deals in works Officially, the program began July 1, but dealers were not able to begin submitting paperwork to recover the rebates from the government until last Friday afternoon, when final rules were published. Some Nashville-area dealers said they had dozens of deals in the works, and by Monday, many of those consumers had already driven home in their new vehicles. Because some dealers nationwide actually began delivering vehicles under the program as early as July 1, there is "a significant backlog of … deals that make us question how much funding is still available in the program," NADA spokesman Bailey Wood said. Even before the suspension announcement, some in Congress were seeking more money for the program. Rep. Candice Miller, R-Mich., wrote a letter to House leaders requesting additional money. "This is simply the most stimulative $1 billion the federal government has spent during the entire economic downturn," Miller said. "The federal government must come up with more money, immediately, to keep this program going." General Motors spokesman Greg Martin said Thursday the automaker hopes "there's a will and way to keep the CARS program going a little bit longer." Dealers had already reported, however, that many consumers who wanted to use the clunkers program did not have eligible vehicles. Dealers said many customers were buying cars anyway, which was one of the intended benefits of the program — getting people into showrooms that had been mostly vacant for the past year. So far this year, through June, U.S. new-vehicle sales had fallen about 35 percent, to an annual level of fewer than 10 million vehicles. That compares with 2007's record year of about 16.3 million new vehicles sold. Strict restrictions on the trade-in vehicles kept many would-be consumers from taking advantage of the program. The rules stated that to qualify, the vehicle's EPA combined city/highway mileage rating must be 18 mpg or lower, the vehicle must have been a 1984 model or newer, and the buyer must have owned the vehicle for at least a year, and must have had it continuously registered and insured for the past year. But there were reports this week that before the final rules were announced July 24, some dealers took in trades that didn't qualify under the registration and insurance rules. It was not clear Thursday whether those dealers would be able to undo the deals or recover the money from customers who had already concluded their deals but whose trade-ins didn't qualify. Middle Tennessee dealers who were contacted said they were holding the new vehicles for customers until the rules were finalized and had not delivered the cars before finding out whether the trade-ins were eligible.