Cash-for-clunkers hits bump, keeps rolling

Confusion surrounded the cash-for-clunkers car rebate program Friday, a day after reports emerged that the program is running out of money, leaving thousands of rebates in limbo.

In Washington, the House approved a measure to extend the program, and the Obama administration urged car buyers to keep shopping today, but at least one large Twin Cities group of car dealerships said that it wouldn't deliver vehicles sold today until it's certain that the program will continue.

The big question for people who already traded in their clunkers for new cars: If their deals aren't approved, will they have to take back their old cars, or cough up their rebates and keep the new ones? And what happens if the old car is already on the scrap heap?

And for dealers: Will the government reimburse them for the rebates they already passed on to the consumers?

"The most confusing thing is that this has been on, then off, then on again in the last 24 hours," said Paul Walser of Walser Automotive Group, which has 10 dealerships in the Twin Cities.

The scene at Inver Grove Heights auto dealers varied from dealership to dealership. Some were full of customers who rushed in to take advantage of the program before the rumored cutoff. Other showrooms were slow, as if confused car buyers seeking clarity were staying away.

At Inver Grove Toyota on Friday afternoon, rusty trucks and well-worn minivans were parked outside the showroom. One of those vehicles was "Big Red," Marcus and Melissa Wetterlund's 1992 Dodge Dakota pickup. Both of their vehicles have logged more than 200,000 miles, and the Forest Lake couple has been thinking about buying a new car before starting a family.

With or without the program, Susan Blesi of Oakdale said that it's time to buy a new car. "It's a nicer incentive, because you can go maybe up a notch," Blesi said as she prepared to test drive a Hyundai Santa Fe. And she's not worried that the program will run out of cash. "They'll find some more," she said.

The House acts quickly

The House hastened Friday to refuel the program, voting to pump in $2 billion to prop up the trade-in deals that have all but overwhelmed suddenly booming car dealers and exhausted the $1 billion the government had set aside. The Senate has yet to act, but the White House said that weekend deals would count, no matter what.

House members approved the measure 316-109 within hours of learning from Transportation Secretary Ray LaHood that the program was running out of money. The Senate is expected to take up the measure next week, but the White House wouldn't make any promises for deals beyond the weekend.

White House press secretary Robert Gibbs sought to assure consumers that the program would be alive at least a couple of days longer. "If you were planning on going to buy a car this weekend using this program, this program continues to run," he said.

Walser said his dealership has sold about 700 cars through the program, but that not one rebate had been approved by the government as of late Friday afternoon. With clunkers starting to fill the lots, Walser dealerships have started disabling the engines with a sand/chemical combination that seizes up the engine. Walser said the program requires that the cars be incapacitated right away and scrapped.

The program offers owners of old cars and trucks $3,500 or $4,500 toward new, more efficient vehicles. The goal was to eliminate 250,000 cars, but it's clear that demand has wildly exceeded those expectations.

With so many rebate requests still hanging out there, consumers will be in a bind if their deals don't go through, because many signed reimbursement agreements that said they would have to pay the dealerships the rebates in cash or return the new vehicles. The Walser agreement also says: "You understand that your trade-in vehicle will be destroyed and cannot be returned to you."

Asked what happens then, Walser said, everyone is in a bad spot. "We're really hoping that that doesn't happen," he said. "We'd have to take them on a case-by-case basis."

Walser dealerships were proceeding with "business as usual" Friday.

Paul Rubin, who owns White Bear Lake Pontiac/GMC/Buick and Belle Plaine Chevrolet/Buick, said that his dealerships have sold about 30 cars through the program but that he hasn't heard yet if they've been approved.

He's being cautious, allowing only about half of the buyers to take their cars home with them.

"It's fun to sell a lot of cars, but in a short period of time you could be upside-down in cash," he said. "Some dealers don't have a problem with that and some do."

Working all night

Walser described the program as a "very cumbersome process," saying that employees have worked through the night to handle the paperwork and input it into the computer so that requests can be sent to the National Highway Traffic Safety Administration, which is running the program.

"I'm going on the basis that the government is not going to intentionally screw people."

The Associated Press contributed to this report. sziegler@startribune.com • 612-673-1707 kmcguire@startribune.com • 612-673-7293