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'Clunker' program temporarily halted


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POSTED: Friday, July 31, 2009

Talk about a clunker of a deal: The U.S. government's $1 billion “;cash for clunkers”; program came to a screeching halt in Hawaii yesterday afternoon over government and industry concerns it was running on empty.

However, the White House said late yesterday that the program was not suspended.

Earlier in the day, national news reports said the program was about to be suspended. The reports cited U.S Transportation Department and auto industry concerns about the wildly popular program exhausting budgeted funds.

The Hawaii Automobile Dealers Association received an e-mail from the National Automobile Dealers Association at about 2 p.m. confirming the reports, and the dispatch was immediately forwarded to member dealers, where in-progress cash-for-clunkers deals were stopped.

“;They're done; they're not going to do any more,”; said HADA Executive Director Dave Rolf.

But then came word from the White House, yesterday evening, that the program was merely under review.

“;We are working tonight to assess the situation facing what is obviously an incredibly popular program,”; White House press secretary Robert Gibbs said of the Car Allowance Rebate System. “;Auto dealers and consumers should have confidence that all valid CARS transactions that have taken place to date will be honored.”;

Gibbs said the administration was “;evaluating all options”; to keep the program funded.

NADA surveyed 2,000 dealers and found that about 25,000 deals awaiting reimbursement approval were backlogged in the CARS program system, administered by the National Highway Traffic Safety Administration—nearly 13 sales per dealership.

Considering the 23,000 dealers participating, NADA feared sales may already have surpassed the 250,000 deals the program was projected to generate.

Sales that don't get approved could send dealers into debt on the deals, one Ala Moana car salesman said.

“;This could bankrupt dealers,”; said Bill van den Hurk, owner of Aloha Auto Group Ltd., which has Kia dealerships on each island.

Van den Hurk said he believes the program overburdened the dealers and exposed them to too much financial risk.

One undisputed success of the program is that it drove customers into showrooms, said Nick Cutter, owner of seven Oahu dealerships.

“;The consumer response was great,”; he said, “;but the burden on the dealer is quite large.”;

His team expected that completing the paperwork, online processing and clunker disposal process to take three days to a week for each vehicle.

Cutter did not have the number of his dealerships' deals awaiting authorization, but said, “;At this point I'm hoping it's zero.”;

BALANCE REMAINING FOR 'CLUNKERS'

» $779M: Estimated funds remaining for all vehicles except for CAT3 Trucks.

» $75M: Estimated funds remaining for CAT3 Trucks.

* This balance reflects only requests for reimbursement that dealers have entered in the CARS program as of this date.

 


Bloomberg News and The Associated Press contributed to this report.