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Cash-for-clunkers program to be suspended, sources say

WASHINGTON — Four days after it launched, the popular cash-for-clunkers program has burned through its $950 million budget, sending the Obama administration scrambling to find additional money and avoid a shutdown of the program.

Administration officials told Congress on Thursday evening that the plan would be suspended, triggering confusion and anger among thousands of dealers and car buyers across the country. Many dealers rushed to submit paperwork on pending trades, amid TV ads from automakers touting the program.

But a White House official denied late Thursday that the program was suspended and said all valid deals would be honored. Officials at both ends of Pennsylvania Avenue were seeking ways to send additional money to the program.

Calls to suspend the plan came after auto dealers warned the government that it was in danger of losing count of how many trades had been made. Since the program was to run as long as there was money left in the $950 million pool, dealers have been concerned the fund could run dry before they were reimbursed for all their deals — which require them to junk the clunker.

The plan offering owners of old cars and trucks $3,500 or $4,500 toward a new, more-efficient vehicle has proven wildly popular, with 22,782 trades certified by federal officials since Monday. But the National Highway Traffic Safety Administration told dealers Wednesday that a vast majority of transactions submitted were being rejected for incomplete or illegible paperwork.

A survey of 2,000 dealers by the National Automobile Dealers Association, the results of which were obtained by McClatchy Newspapers, found about 25,000 deals not yet approved by NHTSA, or about 13 trades per store. With 23,005 dealers asking to be part of the program, auto dealers may have already arranged the sale of more than the 250,000 vehicles that federal officials expected the plan to generate.

Bill Golling, owner of Golling Chrysler-Jeep-Dodge in Bloomfield Hills, Mich., said his dealership had sold 80 vehicles already under the program. "It's working so well, I've got people mad at me because I can't take care of them," he said.

NHTSA spokesman Rae Tyson said earlier Thursday that the government had been concerned about how many deals had been made.

"We need to make sure that there's enough money in the system to cover the transactions that have already occurred," he said. "We certainly don't want dealers to get stuck."

The plan was officially launched Monday, but Congress allowed dealers to start taking trades after July 1. NHTSA requires dealers to get several pieces of information from buyers, including proof of insurance and registration, and disable clunkers by destroying their engines before applying for reimbursement.

Ken Czubay, Ford Motor Co.'s vice president of U.S. sales and marketing, said many Ford dealers are worried that they will be out thousands of dollars per car if they sell a vehicle to the consumer, disable the engine, and find out later the funding has been exhausted.

"I think it was a well-intended program . . . and frankly the program at this very early stage has to be viewed as a huge success," Czubay said.

Several Michigan lawmakers have vowed to press for more money for the program, which had originally been set for $4 billion. But Sen. Dianne Feinstein, D-Calif., has said she would block additional money unless the program was changed to boost the gains in fuel economy between old and new models.

Cash-for-clunkers program to be suspended, sources say 07/30/09 [Last modified: Friday, July 31, 2009 6:36am]
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