Cash for Clunkers Deal Drives Auto Sales

U.S. auto sales rose to their highest levels of the year in July as consumers rushed to trade in older vehicles under a government incentive program that has become so popular it is in danger of running out of money.

Automakers issued their sales reports Monday, raising hope that the sagging auto industry is headed for a recovery, although some analysts cautioned that a turnaround would still be slow. The uptick comes as Congress considers whether to provide up to $2 billion more for trade-in incentives to keep the effort going.

Ford said its sales were up 2.4 percent over the same period a year ago, its first monthly increase in two years. The automaker attributed much of the gain to the Cash for Clunkers program, which allows consumers to receive rebates for turning in older cars for more fuel-efficient models.

George Pipas, sales analyst for Ford, said the automaker thought it was going to fall short of last year's July sales level until the government's stimulus kicked in.

"Cash for clunkers put us over the top," Pipas said.

Subaru said it also benefited from the trade-in program, as sales were up 34 percent.

Chrysler, General Motors and other major automakers did not show gains, but interest in the rebates appeared to have eased their losses as well.

Sales slid 9.4 percent for Chrysler, 11.4 percent for Toyota, 17 percent for Honda, 19.4 percent for General Motors, 1.4 percent for Volkswagen and 25 percent for Nissan. Germany's Daimler AG said its U.S. sales dropped 24 percent in July because few gas guzzlers were being traded in for Mercedes-Benzs.

Companies sold 997,824 cars and trucks in the United States, a 12.2 percent decline from July 2008, according to preliminary data released Monday by research firm Autodata. The monthly figure for car sales translates to an annualized rate of 11.24 million cars, far off 2007's pace but one the government has said could help GM and Chrysler return to profitability.

George Augustaitis, market analyst for U.S. auto sales at auto consulting firm CSM Worldwide, said the monthly sales numbers showed the government's clunker program "really drove people into dealerships." But he predicted that the program's popularity could wane if the economy remains mired in recession and consumers remain reluctant to spend.

"With this economic recession, American households lost wealth. Savings rates were at all times low. Baby boomers are retiring. People are not going to run out and spend like they would have in the past. This is going to be a slow recovery, even in autos," Augustaitis said.

The clunker program kicked off a little more than a week ago and so many consumers sought to take advantage of the program that it almost ran out of money. The House hastily approved another $2 billion for the program on Friday, and many are hopeful that the Senate will pass that measure.

source : http://www.washingtonpost.com

House approves $2B more for 'cash for clunkers'

WASHINGTON — The House has voted to rush an additional $2 billion into the popular but financially strapped "cash for clunkers" car purchase program.

The bill was approved on a vote of 316-109. House members acted within hours of learning from Transportation Secretary Ray LaHood that the program was running out of money.

Called the Car Allowance Rebate System, or CARS, the program is designed to help the economy and the environment by spurring new car sales. Car owners can receive federal subsidies of up to $4,500 for trading in their old cars for new ones that achieve significantly higher gas mileage.

House Majority Leader Steny Hoyer said the new money for the program would come from funds approved earlier in the year as part of an economic stimulus bill.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

WASHINGTON (AP) — The House rushed Friday to pump $2 billion into a popular cash-for-clunkers program running near empty, with a leading Democrat saying "consumers have spoken with their wallets."

A floor vote was under way at midday on the bill to refuel the car-purchase program. House Majority Leader Steny Hoyer had said earlier that the additional money would come from funds Congress approved earlier in the year as part of a $787 billion economic stimulus bill.

Hoyer, D-Md., said that at the request of House Republicans — whose approval was required for swift passage — the bill would include provisions for government auditors to make sure the money was being spent as intended.

Republicans argued that Democrats were trying to jam the legislation through.

House Minority Leader John Boehner said it was unclear how many Republicans would support on the plan.

"There are a lot of questions about how the administration administered this program. If they can't handle something as simple as this, how would we handle health care?" the Ohio Republican told The Associated Press.

House Speaker Nancy Pelosi, D-Calif., said the cars purchased under the program were much more fuel-efficient than what the bill requires.

But some lawmakers complained that many dealers were left to contend with a chaotic government-run program.

"The federal government can't process a simple rebate. I've got dealers who have submitted the paperwork three times and have gotten three rejections," said Rep. Pete Hoekstra, R-Mich. "What is a dealer supposed to do?"

There had been a $1 billion budget for rebates for new car sales in the program that was officially launched last week and has been heavily publicized by automakers and dealers.

Called the Car Allowance Rebate System, or CARS, the program 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.

The Senate was not scheduled to vote on Friday but lawmakers hoped to win approval for additional funding next week.

Senate action is likely next week, making sure the program would not be affected by the sudden shortage of cash.

"Consumers have spoken with their wallets and they've said they like this program," said Rep. David Obey, D-Wis.

House members acted within hours of learning from Transportation Secretary Ray LaHood that the program — designed to help the economy as well as the environment — was out of funds. Under the program, car owners can receive federal subsidies of as much as $4,500 if they trade in their old car for a new one that achieves significantly higher gas mileage.

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."

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 would not commit to any timeframe beyond that.

It was unclear how many cars had been sold under the program.

Sen. Debbie Stabenow, D-Mich., said about 40,000 vehicle sales had been completed through the program but dealers estimated they were trying to complete transactions on another 200,000 vehicles, putting the amount of remaining funding in doubt.

John McEleney, chairman of the National Automobile Dealers Association, said many dealers have been confused about whether the program will be extended and for how long. Many had stopped offering the deals Thursday after word came out that the funds available for the refunds had been exhausted.

The clunkers program was set up to boost U.S. auto sales and help struggling automakers through the worst sales slump in more than a quarter-century. Sales for the first half of the year were down 35 percent from the same period in 2008, and analysts are predicting only a modest recovery during the second half of the year.

With so much uncertainty surrounding the program, North Palm Beach, Fla., dealer Earl Stewart said he planned to continue to sell cars under the program but would delay delivering the new vehicles and scrapping the trade-ins.

"It's been a total panic with my customers and my sales staff. We are running in one direction and then we are running in another direction," he said.

Copyright © 2009 The Associated Press. All rights reserved.

Gray Market Cars, a Cash for Clunkers Stumper

Even before Transportation Secretary Ray LaHood held a news conference Monday to explain the Car Allowance Rebate System (C.A.R.S.), also known as “cash for clunkers,” it was a busy weekend at the National Highway Traffic Safety Administration. The agency’s hot line received around 45,000 calls from folks eager to learn more about the government’s program to create an economic stimulus for the troubled auto industry and encourage the move to more fuel-efficient cars.

“We’ve gotten thousands of thousands of questions regarding issues that Congress never dreamed of,” said Rae Tyson, a spokesman for N.H.T.S.A., when I called to find out if my 1985 Mercedes 230E would qualify. The car is gray market, meaning it was privately imported after being purchased outside of the United States and brought into compliance with Department of Transportation and Environmental Protection Agency regulations.

The eligibility of gray market cars is one of those issues that Congress did not plan for, but will certainly have to be addressed as more than a half million cars have been imported into the United States over the last 25 years. Bringing European cars to America was big business in the mid-1980s and again in 2001 and 2002.

Don’t let the brand name fool you. My Mercedes is hardly deluxe. It’s a manual transmission, four-door sedan with thin fabric seats and rubber mats for carpeting. Nevertheless, over the years it has been a reliable means of transportation. Three of my four children learned to drive in it, and with the car’s reputation for crashworthiness, I don’t worry when they are at the wheel. These days, my 17-year-old son Sam is driving the car and complaining about never having enough money to pay for gas.

I dismissed this as typical teenager griping until he spent a few weeks calculating the mileage he was getting — barely 12 miles a gallon. So we were primed to explore our options when the cash for clunkers program was announced.

After an hour on the user friendly Web site, I learned that to qualify for the rebate a car has to be rated at 18 miles a gallon or less on fueleconomy.gov, the Web site of the E.P.A. (and the source for determining eligibility in C.A.R.S., according to Mr. Tyson). But because my Mercedes 230E was not sold in the United States, the model is not listed.

“It’s a question of determining if there’s a comparable model being sold in the U.S. that can determine fuel economy,” Mr. Tyson said. “Our lawyers are going to have to make a decision.”

Gray market cars like mine aren’t the only vehicles falling through the cracks in the new program, Mr. Tyson told me, while admitting my particular question did have him stumped. The common industry practice of badge engineering is also causing problems, where one car is listed and a nearly identical car is not.

“If the question has stumped me, it’s going to stump the hot line too,” Mr. Tyson said. “It’s going to require an interpretation that we’re not equipped to make right now.”

Having once worked for lawyers, I did not find the idea that determining eligibility for my clunker might require a legal opinion to be welcome news, and I reminded Mr. Tyson that the program is designed to expire in November. But he hastened to reassure me and others in a similar situation.

“We look upon it as a challenge,” he said. “We’ve just created an entire program in 30 days. You don’t think we can answer a question quicker than that?”