White House Says ‘Clunkers’ Rebate Plan Will Go On

White House Says ‘Clunkers’ Rebate Plan Will Go On
By MATTHEW L. WALD
Copyright by The Associated Press
Published: July 31, 2009
http://www.nytimes.com/2009/08/01/business/01clunkers.html?hp


WASHINGTON — The House of Representatives voted to provide an emergency $2 billion for the “cash for clunkers” program on Friday, and the White House declared the program very much alive, even though new-car shoppers appear to have already snapped up all the $1 billion that Congress originally appropriated for it.

A car was displayed in a dumpster at a dealer in Springfield, Vt., as a promotion for the rebate program, which was said to have exhausted its funds within a week.

The House shoved other business out of the way on its last day before the August recess to rush through a measure to address the cash shortage of the car program. The vote was 316 to 109, with significant support from Republicans as well as Democrats.

The Senate, which will be in session next week, will take up the program then. A spirited debate is likely, as some senators are expected to use the opportunity to push for tougher fuel-efficiency requirements. If the Senate does not go along with the House’s version, the House might have to return to work on a compromise.

The sudden legislative action was prompted by the overwhelming response to the program, formally known as the Car Allowance Rebate System, which its backers say has helped not only car-buyers but the struggling American automobile industry.

Earlier Friday, Robert Gibbs, the chief White House spokesman, offered assurances that the administration was looking for ways to continue the popular new program, which offers $3,500 to $4,500 for people who trade in an old car for a new one with higher fuel economy.

“If you were planning on going to buy a car this weekend using this program, the program continues to run,” he said. “If you meet the requirements of the program, the certificates will be honored.”

Mr. Gibbs declined to say how long the program could continue without an infusion of funds.

“We feel confident that we’ll have a solution that people can agree on moving forward, and that the program continues,” he said.

The $2 billion infusion approved by the House would come from money already set aside for an Energy Department’s loan guarantee program and give it to the rebate program.

“Consumers have spoken with their wallets,” Representative David R. Obey, Democrat of Wisconsin of chairman of the House Appropriations Committee, said in urging quick passage.

The panel’s ranking Republican, Jerry Lewis of California, complained that Democrats, who have a 256-to-178 majority in the House, were rushing the measure through with too little thought, let alone debate — “shoveling another $2 billion out the door,” in his words.

But in the end, there was enough support from Republican in states that rely on the auto industry to speed the measure along.

Before the House vote, Senator Carl Levin, Democrat of Michigan, said it was not clear how long funds for the program would last, “so people should go to their car dealers now if they want to take advantage of the program.

Representative Steve Israel, Democrat of New York, predicted that $2 billion would be enough until Congress returns in September. But he added, “there’s going to be a lot of confusion among consumers. We need to wrap this up today.”

The program has proved a boon to the battered auto industry as it struggles to regain its footing, drawing crowds of customers to some showrooms as dealers aggressively promoted the rebates in ads over the last week.

Representatives of the nation’s car dealers said Thursday that they had been told by the Transportation Department to stop offering the rebates because the funds had been quickly exhausted.

But a White House official then said the program had not been suspended, creating confusion about its status.

There was wide support for an additional appropriation for “cash for clunkers,” with members of the Michigan delegation in the forefront. But support was not unanimous and some members of Congress thought the requirements should be tightened.

Senators Dianne Feinstein, a California Democrat, and Susan Collins, a Maine Republican, said in a joint statement that “we will insist that any extension of the program requires that the minimum fuel economy improvement for newly purchased vehicles be at least two miles per gallon higher than it is under the enacted Clunkers program.” For cars, the current minimum improvement is five miles a gallon. And, they said, to help low-income car owners take part, they would include vouchers for fuel-efficient used vehicles.

But Representative Ed Markey of Massachusetts, one of the authors of the original bill, called for a simple extension. He declared Thursday night, “Cash for Clunkers may have run out of cash, but America’s consumers haven’t run out of clunkers.” He said it should be extended to cover 1 million vehicles, about four times the number covered so far.

Mr. Markey said so far participants in the program were getting a 69 percent improvement in fuel economy, with the trade-ins being mostly sport utility vehicles, trucks and vans with over 100,000 miles, being replaced with new passenger cars.
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Others were outright opposed; Representative Jeb Hensarling, a Texas Republican who sits on the House Budget Committee, called the program “another example of the government picking winners and losers.” The program, he said, “enshrines us as a bailout nation.”

In his district in East Texas, he said that Pilgrim’s Pride, a poultry producer, had recently filed for bankruptcy. “Where’s their ‘cash for cluckers’ program?” he asked.

Opposition to the original legislation calling for $4 billion in credits had prompted proponents to reduce the amount to $1 billion.

Meanwhile, some consumers were upset during the past week when mileage estimates were revised, disqualifying some who thought they were eligible. A Web site, NoCashForClunkers.com, has launched an online petition asking Congress to loosen the standards in any emergency legislation so more drivers can qualify.

The auto-rebate program, formally known as the Car Allowance Rebate System, was scheduled to be offered until Nov. 1, or as long as the money was available. But the program was so successful that it has exhausted all the money allocated within the first week. Dealers have submitted applications on behalf of consumers seeking rebates on about a quarter-million vehicles.

The National Automobile Dealers Association surveyed its members in recent days and warned the Transportation Department on Thursday that it had a very large backlog of applications, said Bailey Wood, a spokesman for the association.

Late in the day, the group said the Transportation Department had responded by telling it to stop taking applications at midnight. The government and the dealers were concerned that buyers would close trade-in deals to buy new cars assuming they had a big rebate coming only to discover later that money was not available.

The dealers’ group said late Thursday night that it had not heard about the White House policy reversing the decision. Mr. Wood said that his group would ask Congress and the White House to add money to the plan.

On Thursday evening, the government Web site describing the program, www.cars.gov, still showed a chart shaped like a fuel gauge that indicated $779 million was available for trade-ins of cars and light trucks. (By Friday morning, the chart had been removed from the site.) Earlier Thursday, the Transportation Department issued a news release that said that applications for fewer than 23,000 vehicles had been submitted as of Wednesday, with a rebate value of just under $100 million.

The Transportation Department had begun accepting applications for the rebates on Monday, when rules putting the program in place took effect. But car dealers had been accumulating the applications since July 1, when Congress put the law into effect.

The program had two goals: aiding the ailing car industry and improving fuel economy of the vehicles on the road.

Cars submitted under the program were to be junked. They had to be less than 25 years old and have a fuel economy, as rated by the window sticker, of 18 miles a gallon or less.

The size of the rebate depended on the fuel economy of the replacement vehicle. Consumers were also supposed to receive the scrap value of their trade-ins.

From the dealers’ point of view, the program was a resounding success.

“Two hundred and fifty thousand vehicles in four weeks?” Mr. Wood said. “One word comes out of my mouth: Wow.”

As word spread unofficially on Thursday night, car dealers were suddenly unsure of what to tell would-be buyers.

A Ford dealership in Paramus, N.J., did not know of the apparent suspension until a reporter called seeking comment.

Other dealers said they had no idea what the status of the program was, or whether the deals that they had already signed would be honored by the government. Some said they were notified by e-mail message by fellow dealers.

The dealers’ association, however, had been warning that the money would go quickly.

Under the program, a buyer who picked a car with a mileage improvement of more than four miles per gallon but less than 10 were eligible for $3,500; a buyer whose new vehicle was rated 10 miles per gallon or better than the old one was eligible for $4,500.

Until the cash-for-clunkers program began, the auto industry had been on track for annual sales of about 10 million units, down from the peak of about 16 million units a year.


Helene Cooper contributed reporting from Washington, and Micheline Maynard from Detroit.