'Cash for clunkers' program under review as area dealers wait

WASHINGTON -- The Obama administration said Thursday it was reviewing the wildly popular "cash for clunkers" program amid concerns the $1 billion budget for rebates for new auto purchases may have been exhausted in a week.

Transportation Department officials called lawmakers' offices earlier Thursday to alert them of plans to suspend the program as early as today. A White House official said later the program had not been suspended but that officials were assessing options.

"We are working tonight to assess the situation facing what is obviously an incredibly popular program," White House press secretary Robert Gibbs said of the Car Allowance Rebate System. "Auto dealers and consumers should have confidence that all valid CARS transactions that have taken place to date will be honored."

Transportation Department officials said they were working with Congress and aides to President Barack Obama to keep the program going.

The CARS program offers owners of old cars and trucks $3,500 or $4,500 toward new, more fuel-efficient vehicles.

Congress last month approved the program to boost auto sales and remove some inefficient cars and trucks from the roads. The program kicked off last Friday and was heavily publicized by car companies and auto dealers.

Through late Wednesday, 22,782 vehicles had been purchased through the program, with nearly $96 million spent. But dealers raised concerns about backlogs in the government's processing of deals.

Jim Mooradian, general manager of Courtesy Imports in Henderson, said government officials have been open about the possibility of suspending cash for clunkers, perhaps periodically, to ensure dealers didn't write more business than the government had rebates to dole out. After a week or so, if claims didn't outstrip rebates, the program would resume.

In the days cash for clunkers has operated, the program has been good for business, though its execution has been questionable, Mooradian said.

Fifteen customers have stopped by Mooradian's dealership to ask about the rebate. Eleven qualified for the program; the other four didn't land rebates, but they bought cars anyway, Mooradian said.

"It's been a plus, absolutely. It's been a step in the right direction for getting some people to move forward."

But Mooradian also called getting registered for the program a "nightmare," with systems crashing and dealers experiencing trouble submitting documents and questions. Nor are guidelines clear on when the federal rebate money will flow to dealers.

"At this point, if you start it three days ago and say it will be a three-month program, and within two days you panic and pull things offline, you will have dealers very hesitant to sign people up again," he said.

Still, Mooradian likes the principle behind the idea. Given Clark County's new 8.1 percent sales tax rate, cash for clunkers could mean serious revenue for empty government coffers, he said.

A survey of 2,000 dealers by the National Automobile Dealers Association found about 25,000 deals had not yet been approved by National Highway Transportation Safety Administration, or nearly 13 trades per store.

It raised concerns that, with about 23,000 dealers taking part in the program, auto dealers may have surpassed the 250,000 vehicle sales funded by the $1 billion program.

"There's a significant backlog of cash for clunkers deals that make us question how much funding is still available in the program," said Bailey Wood, a spokesman for the dealers association.

Alan Helfman, general manager of River Oaks Chrysler Jeep in Houston, worried that the government wouldn't pay for some clunker deals his dealership has signed because they aren't far enough along in the process.

His dealership has done paperwork on about 20 sales under the program, but in some cases the titles haven't been obtained yet or the vehicles aren't yet on his lot.

"There's no doubt I'm going to get hammered on a deal or two," Helfman said.

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.

So far, sales are running under an annual rate of 10 million light vehicles. As recently as 2007, automakers sold more than 16 million cars and light trucks in the United States.

Even before the suspension, some in Congress were seeking more money for the auto sales stimulus. Rep. Candice Miller, R-Mich., wrote a letter to House leaders requesting additional funding.

"This is simply the most stimulative $1 billion the federal government has spent during the entire economic downturn," Miller said Thursday. "The federal government must come up with more money, immediately, to keep this program going."

A spokesman for House Speaker Nancy Pelosi, D-Calif., said congressional sponsors would work with the administration "to quickly review the results of the initiative."

General Motors Co. spokesman Greg Martin said Thursday the automaker hopes "there's a will and way to keep the CARS program going a little bit longer."

Review-Journal writer Jennifer Robison contributed to this report.