LaHood: Car dealers will get their money from clunkers plan

WASHINGTON -- Transportation Secretary Ray LaHood assured car dealers Wednesday that they will be reimbursed for the money they have fronted to customers buying cars under the cash for clunkers program, responding to complaints over a backlog of rebate payments.

Dealers must pay the rebates out of pocket and wait for reimbursement from the federal government. Some car dealers have said their reimbursement requests have not been approved, leading to a cash crunch at their businesses. Dealers typically borrow money to put new cars on their lots and must repay lenders within a few days of a sale.

"I know dealers are frustrated. They're going to get their money," LaHood told reporters.

LaHood's assurances came as a growing number of dealers ceased offering the program. A group representing New York metro dealerships said Wednesday that that hundreds of its members have withdrawn from cash for clunkers, citing delays in getting reimbursed.

Through early Wednesday, auto dealers have made deals worth $1.81 billion and are on pace to exhaust the program's $3 billion in funds in early September. The program offers car buyers rebates of $3,500 or $4,500 for trading in older vehicles for new, more fuel-efficient models and has generated more than 435,000 vehicle sales.

LaHood said the Obama administration would soon announce how much longer the car incentive program will last.

The Greater New York Automobile Dealers Association, which represents dealerships in the New York metro area, said about half its 425 members have left the program because they cannot afford to offer more rebates. They're also worried about getting repaid, the group said.

"(The government) needs to move the system forward and they need to start paying these dealers," said Mark Schienberg, the group's president. "This is a cash-dependent business."

Schienberg said the group's dealers have been repaid for only about 2% of the clunkers deals they've made so far.

The online reimbursement system was flooded with reimbursement requests shortly after the program began in late July, overwhelming the computer system and staff set up to process the deals. That led to big delays for dealers trying to file the paperwork they needed to get paid back for the rebates.

LaHood said some of the submitted paperwork has been incomplete or inaccurate, leading to delays. He acknowledged the Transportation Department did not have enough people to process the paperwork but that DOT was ramping up staff.

DOT said earlier this week it was tripling its work force to handle the rebates and expected to have 1,100 workers dealing with the paperwork by the end of the week.

"This is a wildly popular program. It's been a lifeline to the automobile industry in America — it's helped put people back to work," LaHood said.

But Schienberg said dealers have had their rebate applications rejected for often trivial reasons, like misspelled words in paperwork. Often, dealers aren't even told what the mistake was when an application is rejected, he said.

"They're spending hours and hours and days trying to get their transactions filed and approved by the federal government," Schienberg said. "Administratively it's become so burdensome."

The Toyota Corolla, the Honda Civic and the Ford Focus were the top-selling vehicles as of late last week. The Ford Explorer, the Ford F-150 pickup and the Jeep Grand Cherokee were the most popular trade-ins under Cash for Clunkers.

Dan Strumpf reported from New York