NEW YORK – This was one government stimulus plan that yielded quick results. Maybe too quick.
Far more drivers signed up for the "cash for clunkers" program than anyone thought, overwhelming showrooms, blowing through the initial $1 billion set aside by Congress and leaving dealers panicked over when or if the government would make good on the hefty rebates.
Confusion reigned, even as dollars flowed into dealerships starved for business for months.
The government Web site set up to process rebates of up to $4,500 per new car could not keep up with demand. Washington scrambled to come up with more cash and sent mixed signals about how the program would unfold.
"A borderline train wreck," said Charlie Swenson, general manager at Walser Toyota in Bloomington, Minn. In Glen Burnie, Md., Bob Bell, who owns Ford, Kia and Hyundai dealerships, said his employees were overwhelmed filing for reimbursement from the government's clunky system.
He compared the program to a military operation: "It is a disaster," Bell said. "We met our objective, but the losses were terrible."
The House voted Friday to replenish the program with $2 billion, setting up likely Senate action next week. Sen. Carl Levin, D-Mich., said the administration assured lawmakers that "deals will be honored until otherwise noted by the White House." But he suggested that "people ought to get in and buy their cars."
The White House told consumers the program continues uninterrupted "this weekend," leaving unclear what happens after that, until more money is approved for it.
The Car Allowance Rebate System offers owners of old cars and trucks $3,500 or $4,500 toward a new, more fuel-efficient vehicle, in exchange for scrapping their old vehicle. Congress last month approved the plan to boost auto sales and remove some inefficient cars and trucks from the roads.
It was unclear how many cars had been sold under the program on Friday, but the number was far higher than anyone had expected. About 40,000 vehicle sales were done through the program but dealers estimated they were trying to complete transactions on an additional 200,000 vehicles, said Sen. Debbie Stabenow, D-Mich.
"I think the general public right now is looking for a bargain in any way to spend their money," said Kitty Van Bortel, who owns Ford and Subaru dealerships in Victor, N.Y., "and this was perceived as an incredible bargain and people took advantage of it."
The backlog had been building for weeks. Auto dealers could begin offering the rebate at the beginning of the month, and many began doing so over the July 4 weekend. But it was not until a week ago that dealers could begin filing for reimbursement, leaving them on the hook for as much as $4,500 per car until they get the federal money.
That's when they ran into difficulties with a federal Web site ill equipped to handle the volume of claims and the multiple documents each submission requires. Some dealers said the process took upward of an hour for each transaction, caused repeated rejections and consumed many hours submitting and resubmitting data.
At Walser Toyota in Bloomington, customers began lining up on Monday before doors opened at 7:30 a.m.. Swenson said. By that afternoon, his dealership had done 150 trade-ins under the program. His salesmen worked overnight to scan and submit forms.
But of the 150, he said, only 30 received responses and all of those were rejections.
Dennis and Marcia Strom hurried into that dealership Friday, fearing the rebates might not last, and filled out paperwork for a new car.
"I might have waited until the truck died," Dennis Strom said of his 14-year-old Dodge Dakota. "It's a good vehicle that suits our needs. But it's not worth $3,500."
About 100 people were looking to sign deals there but were holding off because of uncertainty over the rebates.
It took three hours Thursday for employees at one of Sam Pack's Dallas-area Ford dealerships to submit just eight documents. Pack said he feared that many deals made under the program wouldn't be properly reimbursed.
"The details of processing this is beyond what anybody would think is reasonable," he said.
Federal officials said they have increased the capacity of the submission system and added staff to work hot lines and process voucher applications.
In Victor, Van Bortel considered pulling the plug on rebates at the Ford and Subaru dealerships she owns, even though her ads promoting the rebates were locked in for the weekend.
"Honestly, in all my years in the car business, I have never seen such a mess," she said.
Still, it was a mess created by too much action, instead of not enough.
Officials hoped that when the dust cleared from the confusion, the program would be a tonic for the beleaguered auto industry and a benefit for the environment, with many inefficient cars taken off the road.
President Barack Obama said the program has "succeeded well beyond our expectations" and praised the House for moving quickly to establish new financing.
"This is a test drive," Rep. Steve Israel, D-N.Y., said of the program, "and people bought it big time."
Bell, in Glen Burnie, said the rebates have "pulled forward a tremendous market."
"It's wonderful to sell them," he said. "But if you have to pay off a vehicle immediately, you're going to have a severe cash flow deficit."
Dealers are used to working with similar incentive programs offered by auto manufacturers, said John McEleney, chairman of the National Automobile Dealers Association. But the rules are much less stringent under those programs, and automakers generally don't require nearly as much documentation, he said.
His group surveyed dealer franchises using the program and realized the money for it might be getting short. One survey finding: Consumers were opting to use the higher $4,500 rebate over the $3,500 amount by a margin of 2-to-1, eating through the money faster.
"It has been very problematic," McEleney said. "I don't believe that anyone anticipated the volume would be this great."
courtesy of Associated Press and
By DAN STRUMPF
Any government program has the opportunity for serious fraud and in that this program has proven TOO successful scares us a bit BUT it is a move in a direction that has been sorely needed for years and that is moving up the mpg of the nation's auto fleet. Sales starved auto-makers and auto-sellers at this point will rally behind anything that sells cars and this program will help in a small way approach what the Obama administration wants the CAFE standards to be:
"If Obama’s upgraded CAFE standards (Corporate Average Fuel Economy) are adopted as expected, the required fleet car average for fuel efficiency would be 35.5 miles per gallon by 2016. Currently, the CAFE standard is 27.5 mpg for cars and 24 mpg for light trucks. Obama’s national CAFE standards - would begin with 2012 model cars.
An unnamed government official commented that “the projected oil savings of this program over the life of this program is 1.8 billion barrels of oil.” Furthermore, the official claims that under President Obama’s proposal, “tailpipe emissions would fall by more than 30 percent.”
(courtesy of Tuesday, May 19th, 2009 by Steven Tarlow)