House triples 'clunker' cash, despite flaws

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By Jon Ward

Car dealerships across the country said the "cash-for-clunkers" program has been wildly popular but poorly managed, even as lawmakers rushed Friday to pump in $2 billion more to triple the size of the program.

With unexpectedly high demand threatening to drain the Car Allowance Rebate System months ahead of schedule, the House voted to approve the emergency cash infusion, passing it on a strong bipartisan vote on the last day before members left for a month-long break. The Senate is expected to take up the bill next week.

The White House portrayed the need for action as evidence the program, which began only last week and which pays owners to trade in old gas guzzlers for new fuel-efficient cars, has been a success.

"I'm happy to report that it has succeeded well beyond our expectations and all expectations, and we're already seeing a dramatic increase in showroom traffic at local car dealers," President Obama said. "It's working so well that there are legitimate concerns that the funds in this program might soon be exhausted."

But car dealerships said that the surge of interest has exposed a flawed payment structure and a computer system unable to process the amount of claims. The program requires dealers to extend money up front to consumers and then hope the government pays the dealers back.

Many dealers have yet to submit most of the claims for reimbursement but have already handed out thousands to hundreds of thousands of dollars.

"The problems we've been dealing with the last day has very little to do with them running out of money. The problem is they don't have any idea how many deals are in the pipeline because my dealers can't even get into the system to submit the deals," said Peter Kitzmiller, president of the Maryland Auto Dealers Association.

Since the program began, dealers have had a crush of buyers wanting to take advantage of the $3,500 to $4,500 in government funds available in return for the trade-in of an old vehicle, which can be used toward the purchase of a new, more-fuel-efficient vehicle.

The dealers say that to obtain reimbursement the government is requiring as many as 20 documents to be submitted electronically on a system that is constantly crashing and that kicks them off midway through a data entry process that can last 40 minutes or longer.

"What's happening is that you're a third of the way through and the system kicks you off," said Mr. Kitzmiller, who estimated that less than 5 percent of the transactions done under the government program at the more than 35 participating Maryland dealerships have been sent to Washington for approval.