‘Clunkers’ to Close After Fueling Sales, Dealer Anger (Update1)
By Angela Greiling Keane
Aug. 21 (Bloomberg) -- The U.S. “cash for clunkers” trade-in program will stop accepting applications on Aug. 24, bringing to a close an effort that helped revive auto sales and drew the ire of dealers for slow repayments.
The clunkers plan, which offers auto buyers
discounts of as much as $4,500 to trade in older cars and trucks for new, more fuel-efficient vehicles, has recorded more than 457,000 dealer transactions worth $1.9 billion in rebates, the Transportation Department said in a statement yesterday.
The deadline will give car dealers and buyers time to complete purchases and apply for rebates from the remainder of the $3 billion provided by Congress, the department said. Dealers have complained of difficulty running their businesses while awaiting program payments, and the agency said it’s adding workers to help process claims faster.
“Obviously there was a lot more latent demand than many thought,” said
Michael Robinet, an analyst at CSM Worldwide Inc. in Northville, Michigan.
“That bodes well for the market. But we are past the honeymoon now and we have to see what the market looks like in the post-clunker environment.”
Applications for rebates won’t be accepted after 8 p.m. New York time on Aug. 24, the agency said.
The Transportation Department said it has handled 167,000, or 37 percent, of the 457,476 dealer requests submitted. The agency didn’t say how many of the processed transactions have been paid out and how many were rejected or sent back for further information.
Some $145 million, or less than 8 percent, has been paid out so far to dealers, a senior administration official said on a call with reporters yesterday.
Wind-Down Plan
Officials from the National Automobile Dealers Association trade group met two days ago with the Transportation Department to discuss concerns that payment delays add to the burden on retailers of trying to recover from a sales slump. The association also urged the agency to outline a plan to wind down the effort so retailers know when to stop accepting trade-ins.
Representative
Joe Sestak, a Pennsylvania Democrat, said last week the effort had paid retailers for only 2 percent of their claims.
The program is formally known as the Car Allowance Rebate System, or CARS.
Senate Majority Leader
Harry Reid, a Nevada Democrat, asked Transportation Secretary
Ray LaHood in a letter yesterday to speed up payments, saying “dealers have been forced to effectively finance the CARS vouchers for buyers until the dealers are reimbursed by the federal government, placing a strain on dealers’ balance sheets that, if prolonged, could eventually offset some of the benefits of the program.”
Training Workers
More than 1,000 people are processing the applications, LaHood said two days ago. That compares with fewer than 200 when the program began. The agency is training more of its staff and is using Citigroup Inc. contractors to handle the paperwork. being delayed because the offer has been so popular.
“It has been successful beyond anybody’s imagination,” President
Barack Obama said during an interview with Philadelphia radio talk-show host
Michael Smerconish yesterday. “We’re now slightly victims of success.”
General Motors Co. and Chrysler Group LLC said they plan to provide cash advances to dealers awaiting government rebates as the initiative spurs auto demand.
The advances will be made for qualifying new-vehicles sales already exchanged under clunkers through the life of the program, GM said.
‘Flurry of Activity’
The government’s initiative may give GM its best sales this year in August. The industry’s new-vehicle retail sales in the U.S. will top 1 million in August for the first time in the past 12 months, J.D. Power & Associates forecast.
Ford Motor Co. is increasing the availability of credit for dealers’ used-vehicle financing to provide cash flow relief to dealers awaiting ‘clunker’ payments from the government, said
Meredith Libbey, a spokeswoman for the automaker’s loan unit.
“Given that the funding could run out at any time, the government is erring on the side of caution so neither consumers nor dealers are left holding the bag,” said
Jeremy Anwyl, chief executive officer of research firm Edmunds.com in Santa Monica, California.
“We expect there will be a flurry of activity over the weekend as the program comes to a close.”
