House adds cash to 'clunkers' program; Senate vote needed

The Obama administration promised Friday that the financially strapped "cash for clunkers" program would be alive at least through the weekend, and the House of Representatives approved additional money for the program later in the day.

Senate action is expected next week.

"If you were planning on going to buy a car this weekend, using this program, this program continues to run," White House Press Secretary Robert Gibbs told reporters.

The House passed a bill 316-109 that would pour $2 billion from the economic stimulus program into the "cash-for-clunkers" initiative and give consumers more time to take advantage of trade-in rebates up to $4,500 for older cars.

President Obama said initially there had been skeptics about the car-purchase program, but that now "we're already seeing a dramatic increase in showroom traffic" across the country. He said the program "gives consumers a break" and helps to reduce pollution.

Before the vote, John McEleney, chairman of the National Automobile Dealers Association, said many dealers have been confused about whether the program will be extended and for how long. Many stopped offering the deals Thursday after word came out that the funds available for the refunds had been exhausted.

"We are hoping for some clarity from the White House and Congress before the day is over," McEleney said Friday.

Carmakers and dealers have booked expensive advertising to capitalize on buyers' interest in CARS, and now will be left promoting a tie-in with an uncertain government program — one that wasn't supposed to end until Nov. 1. "Disappointed," said Chrysler spokesman Scott Brown.

"It's too late to recall the ads," says Beau Boeckmann of Galpin Ford, the nation's largest Ford dealer, in Los Angeles. Galpin had done about 100 clunker deals and was hoping for more. " We had increased our ad budget to get the word out. We are very heavy on radio, newspaper and getting direct mail together," Boeckmann says.

"Now what do you tell people when they walk in" for a clunker deal? "It's tough."

Members of the Ohio and Michigan congressional delegations huddled on Capitol Hill to discuss ways to keep the popular program alive.

Sen. Carl Levin, D-Mich., said it wasn't clear when a Senate vote would be held.

Sen. Debbie Stabenow, D-Mich., said about 40,000 new vehicles had been purchased through the program but dealers estimate another 200,000 vehicles have been sold in transactions that have not yet been completed.

One participant in the Capitol Hill meeting said they were examining possible funding sources and whether there were any glitches in the computer system. The participant, who spoke on condition of anonymity because of the sensitivity of the talk, said they were also studying how many dealers had enrolled in the system.

Through Wednesday afternoon, more than 23,000 dealer franchises were participating, according to the National Highway Traffic Safety Administration.

The administration dispatched Brian Deese, a top adviser to the Treasury's auto task force, to the Hill meeting.

On Thursday, word that the program was suspended came from Bailey Wood, legislative director for the National Automobile Dealers Association (NADA), which had been called Thursday night by the National Highway Traffic Safety Administration, which administers the program. Rep. Candice Miller, R-Mich., confirmed the suspension as well, saying she had been told by congressional leaders.

But White House spokesman Robert Gibbs said later Thursday that the administration is "evaluating all options" and not suspending the program, causing confusion about its status.

Said Wood: "Obviously the program has been an immense success in stimulating automotive sales."

"The thing has exploded. It has exceeded everyone's expectations," said Miller, who was involved in writing the original legislation, known as CARS, for Car Allowance Rebate System. "Throughout our history, it has been auto sales that have pulled us out of recession. People are more likely to buy cars than houses. Not to be too Pollyannaish, but we're gettin' our mojo back. This could be the pivot" that begins an economic recovery.

The White House said Thursday night that "dealers and consumers should have confidence that all valid CARS transactions that have taken place to date will be honored."

As of late Thursday, the government had committed nearly all the program's $1 billion, according to calculations by NADA and various congressional offices. It's unclear whether and how the CARS program could be restarted.

"We're in a full-court press trying to get more cash for 'cash for clunkers'," Miller told USA TODAY Thursday night — pointing out she wanted $4 billion for the program, not the $1 billion that was appropriated.

CARS sponsor Sutton, who wanted $4 billion, got the news on the funding crisis from Transportation Secretary LaHood Thursday night, according to Sutton's chief of staff Nichole Francis Reynolds. Reynolds said, "The program's spent $150 million and has another $800 million to $850 million in (pending) obligations… This is one of those programs you can really see working." She says CARS has "overwhelming support" and Sutton was pressing to free more money to continue the program.

Wood said dealers were amazed at how many shoppers visited their showrooms this week. The program has been in effect since July 1, but the details were finalized only a week ago.

The $1 billion was to provide rebates of $3,500 or $4,500 for people who traded in older cars rated 18 miles per gallon or less for new ones rated 22 mpg or more. The old cars are scrapped.

Political controversy already has begun over the popular CARS program.

If more money is earmarked for the program, it should require the new cars to get better fuel economy than under the original program, say Sens. Dianne Feinstein, D-Calif., and Susan Collins, R-Maine, who both played a role in creating the program.

"We will insist than any extension of the program requires that the minimum fuel economy improvement for newly purchased vehicles be at least 2 miles per gallon higher than it is under the enacted Clunkers program. It is also important to include lower-income consumers who are disadvantaged under the current program. So, we would also include a voucher for the purchase of fuel-efficient used vehicles," they said in a joint statement late Thursday. "We believe that any extension of the 'Cash for Clunkers' program must go further in advancing the goals of better fuel efficiency and greater emissions reductions. We will not support any bill that does not meet these goals."

The program was so popular so fast that dealers overwhelmed the government website and were unable to get requests for the CARS rebates processed. "Every day we spent an hour, hour-and-a-half with the government trying to smooth the process," NADA's Wood said.

Some dealers had stepped back, worried the program would go broke before paying them. "If you don't have an absolute guarantee of payment, you could be left floating a lot of money" in anticipation of federal CARS reimbursements, says Peter Greiner, a Ford dealer in Casper, Wyo. "They made the right call," says Will Churchill, a Honda and General Motors dealer in Fort Worth. "The government doesn't have any idea how big this deal is."

CARS provided the rebates in the form of electronic funds transfers to dealers, to repay them for the clunker discount they gave buyers. Buyers never saw the cash and didn't have to deal with the federal website.

Rules governing the program totaled 135 pages. They required dealers to register, then to fill out electronic forms after each transaction. Dealers had to guarantee that they gave the customer the appropriate discount, that they wrecked the engine in the clunker so it never could be reused, and that the non-running junker went to a scrap dealer.

"They keep coming up with new forms to sign," says Churchill.

In the Queens borough of New York City, Paragon Honda already hauled away nearly 60 clunkers to a junkyard before it found the rules require them to be disabled on the auto lot. Now they have to be brought back, have their engines destroyed and hauled back.

"Killing cars is not something that I'm used to doing," says Brian Benstock, the dealership's general manager.

Contributing: Associated Press; USA TODAY reporter Sharon Silke Carty in Detroit