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Published: Monday August 3, 2009 MYT 7:54:00 AM
Updated: Monday August 3, 2009 MYT 8:13:42 AM

Cash rebates for trading old cars for new in US to stop unless Senate acts


WASHINGTON: The United States started a money for trading old cars for new, similar to the one in Malaysia, but did not expect it to be so popular.

Now the US$1bil set aside for it has dried up and the Obama administration says i will suspend the "cash for clunkers" program unless the Senate provides US$2 billion more for the popular car incentive plan, Transportation Secretary Ray LaHood said Sunday.

He said he expects the current $1 billion fund to be exhausted by the end of this weekend.

The House approved an additional $2 billion on Friday and the administration is pressing the Senate to go along before its summer vacation begins at week's end.

"If we don't get the $2 billion from the Senate ... we would have to suspend the program next week," LaHood said in an interview with C-SPAN's "Newsmakers" show.

He said the administration "will continue the program until we see what the Senate does and I believe the Senate will pass this."

At least one Republican senator questioned the need to speed the money.

"This is crazy to try to rush this thing through again while they're trying to rush through health care, and they want to get on to cap and trade electricity tax," said Sen. Jim DeMint.

"We've got to slow this thing down."

Former Federal Reserve Chairman Alan Greenspan said car and truck building had begun to rebound even before the program got under way.

But, he added, "there is no doubt that that very extraordinary response is a very important indicator that the state of confidence in the economy is beginning to pick up."

If the incentive program had gone into place six months ago, he said, "it would have probably been a dud."

Obama officials scrambled last week to add money to the Car Allowance Rebate System (CARS), which is designed to get old, polluting vehicles off the road and scrapped while helping car dealers emerge from the recession.

The $1 billion has led to the sale of 250,000 new vehicles.

Owners of gas-guzzlers can receive rebates of $3,500 or $4,500 toward the purchase of a new fuel-efficient car.

LaHood said 62 percent of the traded-in vehicles were trucks and "these people are buying cars that get much better gas mileage."

The program helped lift Ford Motor Co. to its first monthly sales increase in two years, the company's top sales analyst said Sunday.

July sales results mark the first year-over-year gain for Ford since November 2007 and apparently the first uptick by any of the six biggest carmakers since last August, George Pipas said.

He declined to disclose a specific total before sales results are officially reported Monday.

"We were having a good month - and Ford's been having some good months lately - but the (clunkers) program really put us over the top for sure," Pipas said.

The Senate narrowly approved the initial money in June. But some lawmakers who voted for the plan, including Sens.

Dianne Feinstein, a Democrat, and Susan Collins, a Republican, have said the additional dollars should push consumers to buy more fuel-efficient vehicles and allow people to buy fuel-efficient used vehicles.

Democratic Sen. Jeff Bingaman has said he was concerned with the way the House paid for the extension, shifting $2 billion from a renewable energy loan program.

DeMint questioned the government's role in providing incentives for auto sales.

"My children and grandchildren are going to have to pay for these cars, and we're helping auto dealers while there are thousands of other small businesses that aren't getting the help," he said.

LaHood said dealers will be reimbursed for deals in the pipeline and that the government will make a "good-faith effort" for transactions beginning Monday.

Dealers have complained of computer problems and difficulties processing their transactions. LaHood said the program's Web site - http://www.cars.gov/ - received 2 million hits and the department faced "some bureaucratic problems" in getting the dealer paperwork processed.

But LaHood said the department was working to fix the computer glitches facing dealers, an unexpected consequence to a program that took off despite sluggish car sales this year.

"We knew it was going to be very popular. We didn't know it was going to be as wildly popular as it was," LaHood said.

DeMint appeared on "Fox News Sunday," while Greenspan was on ABC's "This Week." - AP


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