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Cash-for-clunkers deal to end Monday night, government says

Thu, 20 Aug 2009

The Obama administration plans to cut off dealer funding for the cash-for-clunkers program on Monday at 8 p.m. Eastern, after finding that the $3 billion fund is nearing depletion, Transportation Secretary Ray LaHood said.

"The overriding objective was to be conservative and to provide an adequate window for a soft landing," a senior administration official said in a conference call with reporters Thursday.

Neither official said how much money remains in the program, though a person knowledgeable about its funding said the amount is in the hundreds of millions of dollars.

LaHood expressed confidence that there would be enough to assure payments for all dealer applications submitted through Monday's expiration, even if there is a last-minute consumer rush.

"We expect there will be a flurry of activity over the weekend as the program comes to a close," said Jeremy Anwyl, CEO of the consumer Web site.

Though the government will not accept rebate applications after 8 p.m. Monday, dealers will still be able to resubmit rejected applications after the deadline, LaHood said.

457,476 applications

The Transportation Department said Thursday that dealers had submitted 457,476 transactions for $1.91 billion in rebates for voucher payments made to customers.

Of this amount, the government has approved $140 million in payments to dealers, the agency said in its first disclosure of rebate figures.

That means that about 7.3 percent of reimbursement claims have been paid to dealers.

"Decisive action must be taken in order to ensure that dealers are fairly reimbursed for sales they have made using program vouchers," said Rep. John Dingell, D-Mich.

Asked how long it would take to pay dealers, the administration official said it depends on the extent to which dealers submit valid applications and how quickly the government can process them.

The government's expected depletion of about $3 billion in just four weeks, from July 27 to Aug. 24, dramatizes the unexpected popularity of the program.

"It has been successful beyond anybody's imagination," President Barack Obama said in a radio interview Thursday.

When the president signed the legislation in June, the measure provided for just $1 billion with the expectation that it would last until Nov. 1.

Obama signed an additional $2 billion in funding early this month. At that time, LaHood predicted the money would last through Labor Day.

"With an average fuel economy increase of almost 10 mpg, the program has achieved its goals of stimulating the economy, enhancing energy security and reducing greenhouse gas emissions," said Dave McCurdy, CEO of the Alliance of Automobile Manufacturers, in a statement.

Advice to dealers

Administration officials Thursday offered advice to dealers for the days ahead.

"The Department of Transportation urges dealers to focus today on getting pending deals completed and submitted," the agency said in a statement. "Dealers should not make further sales without receiving all the necessary paperwork from their customers."

It also advised dealers "to submit complete applications, which will expedite payment."

The official, who declined to be identified, said there had been a number of cases in which dealers hadn't properly documented that customers had 12 months of continuous insurance on the trade-in . Dealers also had often failed to show that they were junking the title of the trade-in to prevent fraud, the official said.

By the end of this week, Transportation expects to triple to 1,100 the number of private and public employees processing dealer claims.

Dealer applications increased at a rate of $75 million a day between Aug. 5 and Aug. 18, federal data show.

That would suggest that about $375 million in additional claims will be filed by the close of the program without an unusual spike in activity, which would bring total dealer applications to about $2.3 billion.

That figure does not include the backlog of transactions that remain unclaimed by dealers.

Small backlog

An informal National Automobile Dealers Association survey found that this backlog is relatively small, Chairman John McEleney said.

The administration official declined to say whether the government would seek additional funding once Congress returns from recess after Labor Day.

He also wouldn't say what the administration would do if there's money left over.

Many dealers have complained that they're not getting paid on claims filed as far back as July 27, when the program kicked off in earnest.

Obama said Thursday that there have not been "extraordinary delays" in the processing of the claims and that the government has to be scrupulous in reviewing them to avoid fraud.

Said Obama: "This is actually a high-class problem to have--that we're selling too many cars too quickly, and there's some backlog in the application process."

Chrissie Thompson contributed to this report.


Michael Stanton, CEO of the Association of International Automobile Manufacturers:

"We thank members of Congress and appreciate the work of the Obama Administration and dedicated NHTSA staff for their support and management of the landmark 'cash for clunkers' program. This program succeeded beyond anyone's expectations, removing thousands of older, less fuel efficient vehicles from our nation's roads--replacing them with safer, cleaner, higher mileage new cars and trucks--and providing a much needed stimulus to our still struggling economy."

John McEleney, chairman of the National Automobile Dealers Association:

"Both consumers and dealers participating in the 'clunkers' program now have clarity. And now dealers around the country can begin implementing an orderly wind-down of the program, while managing their customers' expectations.

"With a date certain, NADA is strongly recommending that all dealers now focus their attention and efforts on submitting reimbursement claims prior to the looming deadline."

AAA, meanwhile, offered guidance as the program winds down.

"As with any vehicle purchase, consumers should do their research and educate themselves on all the options before making a decision," said John Nielsen, AAA director of approved auto repair and auto buying programs.

"For most Americans, their vehicle is the second largest investment they make. It's not something to be rushed into or taken lightly. But for those that take time to learn about all their options, including their eligibility for the CARS program, they can find the right vehicle to benefit them now and for years to come."

By Neil Rowland- Automotive News