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'Cash for Clunkers' Program Runs Out of Gas

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Fox News: The government plans to suspend its popular "cash for clunkers" program amid concerns it could quickly use up the $1 billion in rebates for new car purchases, congressional officials said Thursday.

woman holding cash
The Transportation Department called lawmakers' offices to alert them to the decision to suspend the program at midnight Thursday. The program offers owners of old cars and trucks $3,500 or $4,500 toward a new, more fuel-efficient vehicle.

The congressional officials spoke on condition of anonymity because they were not authorized to speak publicly.

A White House official said later that officials were assessing the situation facing the popular program but auto dealers and consumers should have confidence that transactions under the program that already have taken place would be honored.

Rae Tyson, a spokesman for the National Highway Traffic Safety Administration, which administers the program, declined comment.

Congress last month approved the Car Allowance Rebate System program, known as CARS, to boost auto sales and remove some inefficient cars and trucks from the roads. The program kicked off last Friday and was heavily publicized by car companies and auto dealers.

Through late Wednesday, 22,782 vehicles had been purchased through the program and nearly $96 million had been spent. But dealers raised concerns about large backlogs in the processing of the deals in the government system, prompting the suspension.

A survey of 2,000 dealers by the National Automobile Dealers Association found about 25,000 deals had not yet been approved by NHTSA, or nearly 13 trades per store. It raised concerns that with about 23,000 dealers taking part in the program, auto dealers may already have surpassed the 250,000 vehicle sales funded by the $1 billion program.

"There's a significant backlog of 'cash for clunkers' deals that make us question how much funding is still available in the program," said Bailey Wood, a spokesman for the dealers association.

The clunkers program was set up to boost U.S. auto sales and help struggling automakers through the worst sales slump in more than a quarter-century. Sales for the first half of the year were down 35 percent from the same period in 2008, and analysts are predicting only a modest recovery during the second half of the year.

So far this year, sales are running under an annual rate of 10 million light vehicles, but as recently as 2007, automakers sold more than 16 million cars and light trucks in the United States.

Even before the suspension, some in Congress were seeking more money for the auto sales stimulus. Rep. Candice Miller, R-Mich., wrote in a letter to House leaders on Wednesday requesting additional funding for the program.

"This is simply the most stimulative $1 billion the federal government has spent during the entire economic downturn," Miller said Thursday. "The federal government must come up with more money, immediately, to keep this program going."

Brendan Daly, a spokesman for House Speaker Nancy Pelosi, D-Calif., said they would work with "the congressional sponsors and the administration to quickly review the results of the initiative."

General Motors Co. spokesman Greg Martin said Thursday the automaker hopes "there's a will and way to keep the CARS program going a little bit longer."

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