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‘Clunkers’ driving sales

Posted: July 31, 2009 9:57 p.m.
Updated: August 1, 2009 4:55 a.m.

fThis 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.

“I’m getting an e-mail update (about the program’s status) every half hour,” said Cheri Fleming, Valencia Acura dealer principal. “That piece of it is a little frustrating from the dealer point of view.”

But she — along with other dealers nationwide — said she’s grateful the program seems to have reinvigorated the auto sales industry.

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.”

Like a car salesman beckoning from the lot, Levin said “people ought to get in and buy their cars” while the hot deals last.

The White House joined in the pitch, telling consumers the program is solid through “this weekend.” What will happen next is unclear 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 Friday how many cars had been sold under the program, but the number was far higher than anyone had expected. About 40,000 vehicle sales were completed through the program, but dealers estimated they were trying to complete transactions on an additional 200,000 vehicles, said Sen. Debbie Stabenow, D-Mich.

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 re-submitting data.

Federal officials said they have increased the capacity of the submission system and added staff to work hot lines and process voucher applications.

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.

At Valencia Acura, Fleming said auto sales are inching toward pre-recession levels.

“We’ve been having meetings trying to figure out, do we need to cut expenses and let people go?” she said. “It feels right now like, wow, we’re busy. We might be back in business.”

“Hopefully,” she added, “this momentum will continue.”

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.”

“The customers are excited about it,” said Bob Corson, director of sales for Frontier Toyota in Valencia. “The concept of getting rid of inefficient vehicles for efficient vehicles is great for the economy.”

Gus Rodriguez, 30, of San Fernando, was shopping for cars in the Valencia Auto Center on Friday.

He knew all about the program and said he was excited about it. But he lamented that he didn’t have a vehicle that would qualify as a “clunker” under the program’s rules.

“I wish I had a clunker,” he said, laughing. “You got a clunker? Because I could use $4,500.”



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