'Cash for clunkers' push running out of gas?

The "cash for clunkers" bill may be creating some June Gloom for the U.S. auto market.

The controversial legislation, which would provide cash incentives of up to $4,500 to Americans who trade in older vehicles for newer, more fuel-efficient models, is currently stalled in the Senate. With that kind of cash hanging in the balance, potential car buyers may be putting off purchasing decisions — at a time when the auto industry is desperately trying to achieve a sustainable turnaround in sales.

"The longer this bill, which is so important to the U.S. economy, remains stuck in Congress, the greater the pressures placed on all aspects of the U.S. automotive industry -- from suppliers to manufacturers to dealers," said John Krafcik, head of South Korean automaker Hyundai’s North American operations, which are based in Fountain Valley.

According to a survey Hyundai released this week, 11% of consumers are currently holding out on buying a new vehicle until they see whether the legislation passes. Across all brands, that equates to about 100,000 vehicles in the U.S. market, based on the annual sales rate of almost 10 million vehicles that automakers achieved in May.

Dealers and auto companies worry that customer hesitation over the cash for clunkers legislation could blunt the modest pickup in sales activity they registered in May compared with the previous month.

The legislation is a bit complicated. Here’s how we described it in a Times op-ed piece last month:

If the gas mileage of any 2009 model passenger car you buy is just 4 miles per gallon better than the one you are now driving, you could pick up $3,500 from taxpayers as part of the deal.

And if your new vehicle produces more significant improvements in fuel economy over your old vehicle's — 5 miles per gallon more for trucks and 10 miles per gallon more for cars — you could get $4,500.

Environmentalists grouse that the incentive program, which would last a year and could cost the U.S. Treasury as much as $4 billion, is little more than another bailout for the auto industry -- which has already received tens of billions of dollars in taxpayer funds. The fact that one of its co-sponsors, Democratic Sen. Debbie Stabenow, hails from Michigan has done nothing to allay those suspicions.

The legislation has a patina of "green" about it, but it would allow buyers of gas-guzzling pickup trucks and SUVs — the very vehicles that U.S. automakers rely on for their biggest profits — to reap sizable cash rewards for very modest improvements in fuel economy.

"You could buy a 15 mpg truck that is only 1 mpg better than the one you are replacing and get $3,500," Therese Langer of the American Council for an Energy-Efficient Economy told the San Francisco Chronicle this week.

Sen. Dianne Feinstein, the San Francisco Democrat, introduced a bill with tougher fuel economy requirements, but industry pressure appears to have pushed her legislation to the sidelines.

Used-car dealers, meanwhile, are upset because the legislation doesn’t cover, well, used cars. Groups representing car repair outfits and companies that make replacement parts are opposed as well. Cars traded in under the program have to be scrapped, a requirement that would "unnecessarily crush perfectly good cars," according to the Diamond Bar-based Specialty Equipment Market Assn. (that’s SEMA, for all you tuners out there).

Similar bills have been passed in Germany, France and China and are credited with boosting auto sales in those countries. And Ford said today that Britain’s scrappage plan "has already started to have a positive effect" on sales there.

Stabenow’s office didn’t return calls today seeking comment on the bill’s future. The auto industry hopes that the bill can still be salvaged, especially given the Obama administration’s backing for some form of scrappage bill.

-- Martin Zimmerman

Photos: Sen. Debbie Stabenow, top, and Sen. Dianne Feinstein. Credits: Associated Press.

Comments

[tim]

lets get this thing passed already...the economy needs anything to jumpstart it autos are hurting bad lets do msomething and to people like feinstein how a bout working on the arabs as hard as you are working to oppose this bill...I'd like mto know whAT SHE DRIVES..........NOT A YUGO

[Bubba]

We are WAITING 2 TRADE, pass the bill already.
This bill will help new car sales and the manufacturing industry (JOBS). Our daughter drives an older SUV (15 mpg) and I would very much like to trade it for a newer more fuel efficient vehicle. But when you go to trade as you well know you don’t get much for your trade with having an older car, making it discouraging to want to buy a new car. Bill H.R.1550 will help balance that out. Giving the new car buyer a $5000 dollar voucher to trade in his older car to buy a new more fuel efficient vehicle. I do know people are WAITING for this to pass and by WAITING it only hurts car sales even more. That’s why its so important to get this passed as soon as possible. It worked in Europe to stimulate the economy it will work here too. Please support H.R.1550 and H.R.1606 The House got it right, now if only the Senate will get it together. The President’s for it and the American people are too. This needs to be done a.s.a.p.

[Bubba]

Its ok to give billions to bailout various banks, insurance companies, car companies, etc. It's about time someone helped out Mom and Dad to buy a new car. If the Senate has it there way and medals with the House bill I might as well go ahead and trade now because I’m not going to get much more with there version of the bill.

[MA in waiting]

I have been waiting to buy my Ford Escape for a month now. Have the financing, have the 1995 Chevy Lumina, just waiting on the boys and girls in Washington to throw me a bone and pass this bill!!

[karenc]

This bill would put every charity car donation program in the nation out of business since the amount of the voucher would be much greater than the tax deduction. The solution is to simply allow the charity to issue the voucher in lieu of the tax deduction. The charity would then junk the car in accordance with the bill. This way, everyone wins, the car dealer, car maker, car buyer and the charity.

[Joel Beren]

Cash for clunkers is a bad idea all the way around. Why subsidize auto sales any more than the billions we've already put out? Most consumers still would not be able to afford a new car (particularly with the new credit requirements) and a million decent used cars (which those very same "non-qualifiers" would probably have bought as their wealthier neighbords qualify for federal hand-outs will be scrapped prematurely for no reason.

[Michael - Matthews NC]

I'm waiting on the bill. I have a 93 Suburban (14mpg avg) to trade on a compact car (Focus, Corolla, . . . ) at 30mpg.
I was laid off - now consulting for a small company and need a high mpg car for business.

[Johnerad]

They need to include leasing a new vehicle in this Bill.
I'm a disabled Veteran living on entitlements. I can't afford
to purchase a new car, but I can afford the full coverage
insurance you would have to have on a leased vehicle.
I would gladly turn in my 1993 Dodge for a paid 2-year lease of a Ford, GM, or Chrysler sub-compact, getting 30 MPG.
I would save a bunch of money on gas and help clean
up the environment. The only way people will downsize
is if they are made an offer to good to pass up.
I could see millions of cars flying out of the showrooms.
Buy or Lease !!!!
Just do it.

[chance]

Really bad idea...statics from Germany look great up front...later on down the road things get worse...environmentally and economically....

more jobs will be lost, higher rated loan defaults, and who hauls the trash...most municipalities will foot the bill...so your taxes will go up...Obama...this not the change I wanted...you can keep promises....I will keep my clunker...btw...can I have my vote back

[Diane]

This bill will help so many people and businesses. How can it take so long? Pass it!!!! Please.

[Martin Zimmerman]

To answer one of the questions raised in one of the comments, the "cash for clunkers" bill passed by the House this week, which contains provisions similar to the Senate bill I wrote about last week, does cover vehicles that are leased as well as purchased.
-- Martin Zimmerman

[Royce]

I was in the showrooms in January, looking at a truck to replace my 1990 Ford F150. I didn't buy because of the uncertainty of the ecomony & my job. Well, I lost my job in February. Now, I am starting my own business & need a reliable truck. My truck still starts & runs, but the paint is peeling (my neighbors are getting of seeing it) & it leaks oil. I have to add a quart every time I drive, which a good amount lands on my driveway. I get only about 10 mpg. My exhaust pipe is busted. It will cost over $2000 to fix it. Even though it gets bad gas mileage, pollutes more, looks ugly, the bottom line is that it's paid for & it only costs me a quart of oil to drive. I suffer with the poor mileage with the hope of things improving with the economy. I would much rather get a new truck & be a better citizen. The $4500 voucher is the DECIDING factor for me of whether to buy. I have several friends with very similar situations & waiting for the this bill to pass. I had a few GM shares, which are worthless now. It's time that the government help us, the citizens more directly. Take a look around & see how many clunkers are out there on the street. It's better for the environment, reduces our oil consumption, raises safety and helps the industry & peripheral businesses. WAKE UP Senate. This is small potatoes to everything else that's been done & benefits your constituents directly.

[John Cox]

Most of us could use a little assistance. If you really want to help the American public and the economy, get rid of all the restrictions. Offer anyone who trades in a vehicle whether used or new a $500. voucher for each mile of improvement over their old vehicle to a max of $5000. This would encourage the person who wants to take advantage of the program by buying a vehicle that offers an improvement of 10 miles a gallon. It would discourage people from trading to only get a 1-2 miles improvement.

[Susan]

If the goals of this bill is to stimulate auto sales, why are older CARS that get in the 20's MPG range excluded? An earlier discussion (I had seen an article in USAToday) was that cars older than a certain year (I believe it said 1998) would bring the owner the $3,500 if he/she increases the average gas mileage by 4 MGP. In the current iteration of the House/Senate bill with the emphasis on existing low MPG, an Hummer owner that gets 14 MPG can get the $3,500 to buy a new Hummer that has 18 MGP! How about Congress helping more owners of older cars - like me who is nursing my '93 Dodge Shadow to continue to run? The mileage website says it gets 25 MPG, I get around 20 MPG in actual driving, and I would buy a 30+ MPG efficient car.

[Jaxonllc]

I don't qualify because my car already gets good gas mileage. My dad swears by the car buying process here: http://excarsalesman.typepad.com/ It is kind of similar.

I haven't tried it yet, but I might because it looks good.

I have a feeling dealers are going to automatically increase prices because of the increased demand (artificial) for lower MPG cars. So the thousands of savings from this bill for consumers is not entirely accurate. The demand will increase prices and you'll get a voucher from increased prices. I'm certain some markets you'll come out even as if they never offered this voucher. It is poorly written legislation.

[arizona bankruptcy attorney]

Is now really the time for Ms. Feinstein to be introducing tougher requirements for the auto industry?? I think it takes a crazy person to introduce legislation like this when the industry is reeling. Dumb.

[Janet]

This program not only has run out of gas because someone is siphoning it.

It is not the consumer the benefits. While good intentions may win some, it is what is really happening with this program that is troubling. There are scams and more. See, http://butasforme.com/2009/07/17/cash-for-clunkers-the-ultimate-bait-and-switch-marketing-tool