- The Washington Times - Friday, August 21, 2009

The government is hitting the brakes on the popular “cash for clunkers” program before there are too many clunkers and not enough cash.

The plan, which gives consumers rebates of up to $4,500 if they trade in gas guzzlers for more fuel-efficient vehicles, will end Monday at 8 p.m., Transportation Secretary Ray LaHood said Thursday.

“This program has been a lifeline to the automobile industry, jump-starting a major sector of the economy and putting people back to work,” he said. “Now we are working toward an orderly wind-down.”

More than 457,000 vehicles had been sold through the program as of Thursday, burning through $1.9 billion in rebates in less than a month. Less than 10 percent of those claims have been paid, and dealers are demanding faster payment and less uncertainty.

The administration is concerned that the plan’s $3 billion funding could be exhausted before officials are aware of it, potentially leaving dealers holding the bag or trying to claw back rebates from customers.

“There’s this fuzziness about how many deals are in the queue. They don’t know how many vouchers are waiting to be processed,” said Jeremy Anwyl, chief executive officer of auto information site Edmunds.com.

“Shutting down early is better than going to Congress for more money or telling consumers [who already made deals] they’re out of luck,” he said.

“We expect there will be a flurry of activity over the weekend,” Mr. Anwyl added.

John McEleney, chairman of the National Automobile Dealers Association (NADA), said the administration agreed to honor rebate applications that were submitted before the deadline but rejected for correctable errors.

“Both consumers and dealers participating in the ‘clunkers’ program now have clarity,” he said.

The extraordinary response to the program delighted government officials, dealers, automakers and the thousands of auto workers who returned to work to meet increased demand.

But it also created extraordinary headaches and snafus.

The program’s original $1 billion authorization was expected to last three months but threatened to expire in less than two weeks, unsettling officials and sparking debate in Congress about allotting more funds.

Supplies of the most popular low-emissions vehicles such as the Ford Focus and the Toyota Prius quickly dwindled just as the program began to spur broad consumer interest.

Dealers are still waiting for government reimbursement for the rebates they advanced to customers more than a month ago. Some Washington-area dealers say they are on the hook for $3 million. Under program rules, they were supposed to be paid within 10 days.

To date, the government has paid just $145 million in voucher claims, an administration official said Thursday.

Senate Majority Leader Harry Reid, Nevada Democrat, asked the Transportation Department to step on it.

The stalled payments are “placing a strain on dealers’ balance sheets that, if prolonged, could eventually offset some of the benefits of the program,” Mr. Reid said in a letter to Mr. LaHood.

Representatives of NADA met with Transportation Department officials yesterday to complain about the delays and asked that the program be wound down so dealers would know when to stop taking clunker trade-ins.

More than 1,000 workers now are processing rebate applications, Mr. LaHood said, compared with 200 when the program officially started July 24. Contractors have been brought in from Citigroup to help.

The Virginia Automobile Dealers Association said Thursday that a quarter of its members had quit the program because of paperwork hassles, lack of reimbursement and uncertainty about when program funds would be exhausted.

The group said nearly 15 percent of the deals submitted by members have been rejected and resubmitted.

The federal government has approved just 5 percent of the deals, and less than 3 percent of those have been reimbursed, the Virginia dealers group said.

The lasting impact of cash for clunkers remains to be seen. Some analysts say it will prove to be a flash in the pan, drawing sales to August that otherwise would have occurred in the fall or even next year.

“I’m not exactly sure how much we really accomplished but we’ll know for sure in the next couple of weeks,” Mr. Anwyl said.

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