Q&A: How the 'cash-for-clunker' plan would work
— -- House Democrats and the Obama administration have agreed on a compromise for a so-called cash-for-clunkers bill.
Similar to European programs, the legislation — also called "fleet modernization" or "scrappage" — would provide federal vouchers of up to $4,500 for people to trade in their vehicles for new ones that get better mileage.
The European programs are expected to result in 400,000 to 500,000 more new vehicle sales this year than otherwise would be the case. Backers say a U.S. version could add 1 million sales at a time Chrysler is in bankruptcy court and General Motors is fighting to stay out. Both are operating on government loans.
Talk of the vouchers has kept some would-be new car and truck buyers on the sidelines, waiting to see whether they'd qualify for government help. So, for the moment, the idea is hurting sales. Based on interviews with lobbyists and congressional offices, how it might work:
Q: What's the idea behind "cash-for-clunkers"?
A: Supporters say it would replace older vehicles with new ones that use less fuel, are safer and pollute less. And it would give the struggling auto industry a sales boost.
Q: What's the bill's status?
A: It's in a House committee and backed by the president. Senators from both parties are prepared to co-sponsor similar legislation as soon as this week.
Q: Sounds like a sure thing.
A: Not so. Environmental lobbyists, who don't think it boosts fuel economy enough, might derail it or get it changed enough in the Senate that a compromise would take awhile.
Q: Any groups trying to keep it from being derailed?
A: You bet. Car companies, autoworkers, component suppliers and car dealers, among them. The House bill "will help jump-start auto sales and the U.S. economy, while also providing environmental benefits and increasing energy security," says Ziad Ojakli, Ford Motor spokesman.
Q: What's the price tag?
A: About $4 billion. The money is currently proposed to come from Energy Department funding included in the already enacted $787 billion economic stimulus package.
