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.