A Government Bonanza Run Like A Clunker

That sucking sound you may have just heard was the government’s billion dollar “cash for clunkers” slush fund drained in a week as consumers stampede new car malls for once-in-a-lifetime deals. The highly publicized stimulus program has caught the public’s imagination in a fad not seen since the land and gold rush days of the last 150 years.

The House acted quickly today in a 316-109 vote to plunk another $2 billion into the program. The Senate is expected to vote on the additional funding next week. The funds will be taken from the unspent portion of Congress’s $787 stimulus bill passed earlier this year.

The concept of the program worked far beyond the imagination of its originators as buyers flock to the dealers seeking up to $4,500 rebates by trading in their gas-guzzling old models for new more energy and environmentally efficient vehicles.

As with occasional government programs, the idea was brilliant. Its administering was overwhelmingly confusing and ill-prepared. And its unintended consequences a death threat to auto scrap dealers. Can’t win them all, as we said on our days in the newspaper sports department.

The biggest nightmare at the moment is dealers worrying if they ever will be reimbursed by the government despite clunker authorization by the National Highway Traffic Safety Administration. If each of the thousands of dealers in America sold 12 new cars on clunker trade-ins the program’s coffers would be dried up in days, not last into November as originally forecast by the politicians.

Greg Lewis, sales manager at Fitzgerald Auto Mall in Gaithersburg, Maryland, said Fitzgerald dealerships have suspended clunker sales — not only because of the funding issue but because of ongoing problems with processing transactions through the Web site of the National Highway Traffic Safety Administration.

Fitzgerald dealerships are on the hook for nearly $1 million worth of deals already made with buyers, Lewis said, and company officials believe it would be “a big gamble” to make new deals at this point, “It’s just constantly crashing,” Lewis said of the computerized system.

U.S. automakers sold 17 million vehicles before the economic meltdown last year and predicted sales of 10 million this year. The Car Allowance Rebate System (CARS) program indicates to many experts consumers were waiting in the wings for a better price.

One stipulation in CARS legislation is that scrap shops must destroy the engine and drive train in the clunker vehicle as part of an effort to remove gas guzzlers from the road. The used engines sell for about $700 to $800 compared to a replacement engine for $4,000 from the dealer manufacturer agency, according to Angela Ingram who owns with her husband B & A Auto Parts, in Staunton, Virginia.

Ingram says the consumer will have less used parts available. She’s not sure how the program will effect business in the long run. Ingram and her husband fear this program may put them out of business.

There is a subliminal cause and effect of CARS, some may call diabolical. It folds nicely into the Obama administration’s efforts on climate change and diminishing demands on fossil fuel products. With thousands of gas guzzlers off the roads and no replacement parts available, American consumers will have little choice but be forced into buying the higher mileage vehicles whether they like it or not — not withstanding they can afford them.

Author: JERRY K. REMMERS, TMV Columnist

Jerry Remmers worked 26 years in the newspaper business. His last 23 years was with the Evening Tribune in San Diego where assignments included reporter, assistant city editor, county and politics editor.

10 Comments

  1. If new car sales go up next quarter, what say you then?

  2. RemembrNovember wrote: “If new car sales go up next quarter, what say you then?”

    Well said RemembrNovember, I can't wait for the Joe Btfsplk look a likes (jwest, DLS, superdestroyer) to explain to us again how Obama's Stimulus Programs has no chance of succeeding and how the Democrats are (316-109 house vote, hum) driving (pun intended) the country to bankruptcy.

  3. Looking at the list of clunkers there's some decent cars on there. It's kind of a shame they will be destroyed.

    New car sales better go up after all this.

  4. The program requires the scrapping of your eligible trade-in vehicle, and that the dealer disclose to you an estimate of the scrap value of your trade-in. The scrap value, however minimal, will be in addition to the rebate, and not in place of the rebate.

    Henry
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    http://www.cashforclunkersfacts.info
    http://www.cashforclunkersfacts..info

  5. Gee, you open a free-money stand on the corner and pat yourself on the back when people start to line up?

    I think even a Democrat could succeed in this business.

    But, like all liberal programs, the proof is in the execution. Just as they would screw up healthcare, Democrats can’t manage a program for a few hundred thousand cars.

  6. Dealers are reporting that for every “clunker” sale they're making, they're selling more than one new car on conventional terms. The objective was to get people into the showroom. If you've looked at new cars, you know that discounts on the car plus whatever trade-in your old car brings probably equals more than $3500. So the conversation is apparently going, “Well, this car doesn't qualify for the cash-for-clunkers deal, but you'll be glad to know that I can take $2800 off the MSRP of that nice new H3 Hummer, and give you $1500 for your old car, so you'll actually save $4300 if you can buy today.”

  7. Jerry, I got onto this site earlier hoping someone had started a thread about this Cash for Clunkers program, because it merits news and attention and an additional remark or two I could make, then let others respond or contribute something of their own.

    1. There's no doubt that there is a lot of public interest in participating in this program. Of course, what would it be like if dealers did these incentives on their own and if auto prices were lower in general than they have been for a number of years.

    2. There is no government “magic” at work here, despite what some Dems may rush to claim; in fact, there is evidence that the feds (aided by a liberal media, complicit as usual with libs and Dems in Washington) may be hyping the “success” figures to date.

    3. Dealers have been concerned about the paperwork requirements as well as reliability of payment from the federal government. At least one dealer was in the news for withholding distribution of vehicles to its customers until it was reasonably guaranteed payment from the federal government (keeping its “promise”).

    4. Some have already noted that the destruction of the older vehicles is counterproductive, as the engines and power trains have significant value and the loss of these can hurt the parts industry.

    5. The fuel efficiency requirements involved in this program are a ridiculous impediment to it as well as the source and object of additional idiocy from the Democrats (including Dem fake Republicans like Olympia Snowe as well as loonies like the California crowd, who openly express an insistence on tougher fuel efficiency requirements). The main interest and should-be promotion objective is to get people to buy new vehicles of all kinds, to support the automobile _business_ without regard to stupid liberal politics. The fuel efficiency conditions in this program have been the central defect from the start with this program.

    6. Many people nevertheless anticipate higher fuel efficiency requirements, because they believe this program has been a success (this is true at least insofar as public interest in replacing older vehicles is concerned; the program has exposed or revealed this interest in addition to their willingness to take other people's money), and so the feds can be “choosy” in the future and raise their (all-too-likely-to-be-ridiculous) fuel efficiency demands. The figure of 22 MPG is currently associated with the program; in order not only to be realistic but to intelligently address what is truly the “real world” benchmark for the transition point from lower to higher fuel efficiency, the figure should be raised, if it is to be raised, to (and only to) 23.5 MPG. (This is the world standard as well as acknowledged as the threshold of good or at least not-poor efficiency, hence should be the value used in any newer, “tougher” exchange program — it is 10.0 km per liter, for those outside the USA who are curious.)

  8. “The objective was to get people into the showroom.”

    Yes, it was, at least to normal people. Only the _diseased_ saw it as, and _especially_ as, a social engineering experiment to induce people to switch to vehicles with higher fuel efficiency, instead. (The fuel-efficiency ridiculousness of some in Washington, particularly those who were upset that the fuel efficiency requirements were not stringent or demanding enough, is disgusting as well as diseased.)

    23.5 MPG is the standard value to use when gauging fuel economy, good versus poor, as well as the benchmark to use when going beyond what the feds are doing now with this exchange program, to do what some of us have long feared the worst in Washington, implement not only arbitrary taxes on the weight of vehicles, or engine displacement or output, but implement a “fee-bate” program of taxes on politically incorrect (less efficient) vehicles that are given as subsidies to purchases of politically correct (more efficient) vehicles. There is a real-world test of those seeking such lunacy that involves the figure of 23.5 MPG, the real-world standard for fuel efficiency and gauging it. Such activist fools would typically demand an efficiency of new or future motor vehicles far in excess, even multiples of, this normal figure.

  9. “Just as they would screw up healthcare, Democrats can’t manage a program for a few hundred thousand cars.”

    At least cars are simpler and there's less for them to screw up, though you know that the success (both real and claimed-but-only-imagined-or-made-up) of this program will encourage the Dems (reeling from the failure of their overreach in health care, after rushing stupidly with other bad legislation earlier) to screw this program up more.

    Look first and foremost for them to misread not only the public intrest, but also their ability to be “choosier” about fuel efficiency in the future with this program. That's likely where they'll fail first.

    (I wonder if more intelligent Dems won't try being fancier in other, related ways, like inversely paying customers to switch vehicles based on the new vehicle's weight or more intelligently, GVWR. The lower the weight [GWVR], the greater the payment. It's the “-bate” [subsidy] half of a fee-bate scheme…)

  10. “New car sales better go up after all this.”

    1. Will new car sales _remain_ up after this?

    2. Or will there be a move by some libs and Dems never to be an “after this” but to keep this program going, as well as introduce other, similar programs for other kinds of reasons, to affect auto sales?

    3. And what if this is extended to other parts of the private sector and people's lives? (Will that be the “lesson” the Dems and their supporters “learn” from the example of this program, to date?)

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