- The Washington Times - Saturday, August 1, 2009

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.

Michael Allen, spokesman for the Virginia Auto Dealers Association, said he had talked to one car dealer who “had gotten pretty proficient” at submitting the information for one of his transactions.

“He had gotten the process down to 40 minutes to enter one deal,” Mr. Allen said.

Many dealerships have had to bring employees in as early as 5:30 a.m. or keep them until late at night to enter in the information when fewer people are using the system.

“We’ve been impressed by the concept of the plan,” Mr. Allen said. “You just hope they can iron out these kinks and get the process streamlined.”

A White House official, speaking on the condition of anonymity, blamed “improper or incomplete entering of data” for many of the delays, but said the government is taking steps to increase the system’s capabilities.

“We plan to triple the number of people processing voucher applications and quadruple the number of people handling the hot line; the computer system has bumped up its capacity and [the National Highway Traffic Safety Administration] is holding its third Web seminar to walk people through the process of entering data early next week,” the official said.

On Thursday, news reports said NHTSA was going to suspend the program for lack of funds, panicking dealers who suddenly feared they might not be paid back.

The White House on Friday morning contradicted NHTSA, reassuring car buyers they can continue to take advantage of the program and dealers that they can extend the offer to consumers and still expect to be reimbursed the $3,500 to $4,500 per vehicle.

“Dealers can be confident that the money is there to reimburse them,” said White House press secretary Robert Gibbs. “We feel confident that there is enough money.”

The $2 billion funding boost - money that is being shifted from the $787 billion economic stimulus plan - was approved 316-109 in the House, with 239 Democrats and 77 Republicans supporting it and 14 Democrats and 95 Republicans opposed.

Rep. Jeb Hensarling, Texas Republican, said “cash for clunkers” was a lighthearted name for a serious mistake.

“This is not a humorous affair,” he said. “Its not humorous because this is an extension of a program that has the government picking winners and losers. … This is one more step in enshrining us as a bailout nation.”

Also criticizing the House vote was the Renewable Fuels Association. The $2 billion to fund the clunkers’ program was taken from funds that were supposed to go to the Energy Department’s fund for innovative energy projects.

“One of the advantages of the ‘cash-for-clunkers’ program is putting more fuel-efficient cars on the road,” said Bob Dinneen, president and CEO of the renewable fuels trade group.

“However, those new cars should also be running on renewable fuels like ethanol in order to benefit both the changing climate and the domestic economy. For the U.S. long-term auto and fuel needs, it seems counterproductive to limit the renewable fuels industry,” Mr. Dinneen said.

One large Texas car dealer, who requested anonymity because he said he feared retaliation from the administration, said that after selling 40 cars under the program in three days, he stopped doing transactions several days ago.

This decision was prompted in part when he saw the results of a survey of 2,000 dealers by the National Automobile Dealers Association. NADA found that about 25,000 deals had yet to be approved by the government.

“We are still taking information and titles from customers. We’re not processing the transactions because we’re not sure if we’re going to get paid,” the Texas car dealer said. “I would want to see something in writing that says we are guaranteed to get paid.”

Without final congressional action, dealers are left depending on the White House’s verbal reassurance the program will be solvent.

One Maryland dealer, who did not want talk on the record, said that the state association was advising not to make deals under the government program beyond Saturday.

Amanda DeBard contributed to this article.

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