U.S. will honor clunker rebates until Senate acts, DOT chief says

The Obama administration will fund the cash for clunkers program until the Senate decides whether to add $2 billion to the original $1 billion fund that is likely to be depleted this weekend, U.S. Transportation Secretary Ray LaHood said today.

He said the administration would honor dealer rebate applications filed at least through Tuesday, Aug. 4. If the Senate doesn't expand funding next week, the program will be suspended, LaHood said.

"We will continue the program until we see what the Senate does, and I believe the Senate will pass this," LaHood said in a C-SPAN interview.

The Senate is meeting this week before breaking for a month-long recess to consider the $2 billion funding approved by the House last week.

LaHood sought to address dealer concerns that the exhaustion of funds would leave them holding the bag on deals that had been completed with customers.

"Anything that's in the pipeline will be paid," he said.

LaHood did not say where the administration would get the money to fund any deals made this week if the Senate fails to provide new money and the program is suspended.

The National Automobile Dealers Association reacted warily.

"I take the secretary at his word, but we still urge dealers to use caution when doing cash-for-clunkers transactions," NADA spokesman Bailey Wood said today.

As of this weekend, about 250,000 vehicles will have been sold under the clunkers program since it began July 1, LaHood said. The government will have committed all $1 billion in the fund to repay dealers for $3,500-$4,500 credits given to consumers, he said.

The program was enacted to fuel slumping auto sales and increase the fuel economy of vehicles on the road.

He urged the Senate to pass the House bill without changes, so that the program continues as it has been through Nov. 1.

"Hey, the program's working," the Transportation secretary said.

One Republican senator, Jim DeMint of South Carolina, has urged a slowdown in congressional deliberations.

Sens. Dianne Feinstein, D-Calif., and Susan Collins, R-Maine, have together called for a tightening of fuel-economy standards in the program and an expansion of allowable purchases to include used cars.

LaHood said 62 percent of the trade-ins were trucks, and most of these customers were buying new cars with much better mileage.

"In a way I think we're meeting that metric that [Feinstein and Collins] would like," he said.

Any Senate changes in the House bill would have to be submitted again for a vote of the House, which is in recess until after Labor Day.

LaHood acknowledged delays in processing dealer rebate applications due to technical and bureaucratic problems.

He said his staff was meeting with Citigroup, the private contractor handling the dealer claims, in New Jersey today to try to make sure the contractor has enough employees to process the high volume of applications.

He predicted that the dealer filing backlog would be eased by the end of next week.

By Neil Roland- Automotive News