Cash-for-clunkers program is apparently on empty

Minnesota auto dealers reacted with incredulity and anger Thursday night after getting word that the U.S. government apparently slammed the brakes on its popular cash-for-clunkers program, which offered rebates for purchases of new, energy-efficient cars.

The White House said Thursday it was reviewing the program amid concerns the $1 billion budget for rebates for new auto purchases may have been exhausted in only a week.

Transportation Department officials had called lawmakers' offices earlier Thursday to alert them of plans to suspend the program as early as today. But a White House official said later the program had not been suspended and officials there were assessing their 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 (CARS). "Auto dealers and consumers should have confidence that all valid CARS transactions that have taken place to date will be honored."

Gibbs said the administration was "evaluating all options" to keep the program funded.

Initial word that the program was being halted just four days after it began was met with incredulity and anger by Minnesota car dealers, who said they stand to lose millions of dollars from a plan that had already subjected them to arduous paperwork.

"This is a really, really bad outcome," Paul Walser of Walser Automotive Group said Thursday night, reacting initially to word that the program had been halted. He estimated that his group has made 700 trades, and said it had not heard back from the federal government about any reimbursements.

"Imagine you're a customer and you believe that you're buying a car with government assistance, and now you find this out?" he said. "All these customers are in these cars, and if the government simply suspends it and rejects all applications that have not been formally approved, you're gonna have thousands of upset customers."

The apparent decision to suspend the plan came after dealers warned the government Thursday that they were in danger of losing track of how many trades had been made, the Detroit Free Press reported.

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

Scott Lambert, executive vice president of the Minnesota Auto Dealers Association, said Minnesota dealers have $10 million at risk. He said that a survey he completed at 1 p.m. Thursday found that no Minnesota dealers' submissions had been approved.

"This whole thing is a pile of junk," he said. "The program is a clunker."

Lambert said the program's 138 pages of rules, combined with a federal online system that continuously freezes up when dealers try to enter their submissions, leave him baffled as to how the money allocated for the program could already be drained. As of Thursday morning, the cash for clunkers website listed $858 million left for redemption, he said.

"Where did the money go?" he said. "This is outrageous. This is as big a mess as I can imagine."

'This is gonna cost jobs'

A Transportation Department official said the department was working with Congress and the White House to keep the program going. The administration officials spoke on condition of anonymity because they were not authorized to speak publicly about the discussions.

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, nearly $96 million had been spent in the program. But dealers raised concerns about large backlogs in the processing of the deals.

A survey of 2,000 dealers by the National Automobile Dealers Association found about 25,000 deals had not yet been approved by NHTSA, or nearly 13 trades per store. It raised concerns that with about 23,000 dealers taking part in the program, auto dealers may already have surpassed the 250,000 vehicle sales funded by the $1 billion program.

Since the program was to run as long as there was money left in the $950 million pool, dealers had been concerned the fund could run dry before they were reimbursed for all their deals. They are required to junk the clunkers.

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

"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."

Michigan lawmakers planned to meet today to discuss the program.

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

The plan officially began Monday, but Congress allowed dealers to start taking trades after July 1. The administration 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.

Walser said it's imperative that Congress provide more funding for cash for clunkers or find another appropriate conclusion before dealers and consumers are hung out to dry.

Lambert lauded the theory behind the program, but called it "horribly administered," a problem he said will have dire consequences for all involved.

"It's a wild success from the consumer standpoint, but if the dealers don't get reimbursed, it's an absolute failure," he said. "This is gonna cost jobs. And this was supposed to be a stimulus program."

Abby Simons • 612-673-4921 This article includes reporting from the McClatchy News Service and the Associated Press.