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Popular ‘Cash for Clunkers’ Program to End Monday

August 20, 2009 at 6:28 PM EST
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The government will end its popular "cash for clunker" incentive program on Monday, two months early, because of dwindling funds. David Shepardson, Washington bureau chief for the "Detroit News," speaks with Jim Lehrer about the program.
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JIM LEHRER: Next tonight, the U.S. Transportation Department announced this afternoon that the government will end its popular Cash for Clunkers program on Monday night. Congress approved extra money for the program just two weeks ago, but the program is expected to use up the $3 billion earmarked for it by early September.

For the latest developments, David Shepardson, who’s been covering this story for the Detroit News, he’s the Washington bureau chief.

David, welcome. What specifically prompted it today, right now, for them to suddenly decide to stop this?

DAVID SHEPARDSON, Washington bureau chief, Detroit News: Well, two things. I mean, first, as you pointed out, the first $1 billion that Congress approved basically ran out in the first four or five days, and there was some chaos, and, as you know, Congress ultimately agreed to put the $2 billion back in.

And so the goal here is an orderly wind-down. So far, they’ve gone through about $1.9 billion for 457,000 cars. That leaves about a billion. However, they think there’s another there’s another $400 million in cars that have been sold, but the dealers haven’t submitted those voucher requests to DOT, so that leaves about $600 million left.

They think this weekend will be very busy as people try to get in before the program ends. And if they’re going through about $100 million a day under the normal flow, with a sped-up flow, we should be, you know, $2 billion to $3 billion by roughly Monday.

A 'chaotic' program

JIM LEHRER: Now, the number of cars you mentioned, that's an even trade number, right? In other words, that means there were that many clunkers that were turned in and new cars were bought, right, at least on paper?

DAVID SHEPARDSON: Correct, where you had to have, you know, a car that got 18 miles per gallon or less. And to get the full $4,500 voucher, the new vehicle had to be 10 miles per gallon more fuel efficient.

JIM LEHRER: Now, you used the word "chaos," to say there was chaos. Describe what the chaos has been all about in this program.

DAVID SHEPARDSON: Well, so, Congress gave the administration 30 days to set this program up. But during that 30 days, the dealers started making, you know, deals ahead of time.

So when the program got off and running on July 24th, within less than a week, DOT was convinced that they were already through the $1 billion. So on the night of, I think, July 29th, the administration started calling members of Congress, saying, "We're out of money. We're shutting the program down."

Ultimately, that decision was reversed. The next day, the House passed $2 billion, and the Senate followed a week later. But during that brief timeframe, some dealers were staying open until 3 a.m. to get final deals done before the money ran out.

JIM LEHRER: Now, is that going to apply? This is Thursday night. We're talking about Monday night. Is that Eastern time, 8 o'clock Eastern time?

DAVID SHEPARDSON: Correct.

JIM LEHRER: OK. So if somebody can make a deal and get the paperwork, do they have to have the paperwork done by 8 o'clock Monday night in order for it to qualify?

DAVID SHEPARDSON: Exactly. The dealer has to have submitted the paperwork by 8 p.m. Monday or the deal will not qualify. However, a lot of, you know, the vouchers so far, there have been problems with the paperwork. Dealers will be able to resubmit deals that have already been done, but no new deals after 8 o'clock Eastern on Monday.

Defining Success

JIM LEHRER: Now, this program is widely labeled, quote, "the successful clunkers program, Cash for Clunkers program." What defines success here? And who defines it?

DAVID SHEPARDSON: I think it's retail sales, you know, stimulating the economy. Let's face it: There are a lot of people who are very nervous about making any big purchase. You know, they might be worried about their job or their hours being cut.

And, you know, last year, auto sales were down 18 percent, which was the lowest in 17 years. The first six months of this year, they were down 35 percent. So, you know, we'd seen a tremendous decline, you know, which pushed a lot of companies into really severe economic crisis.

So, you know, by any estimate, you know, in August, retail sales will be -- or, sorry, auto sales will be up 2 percent. That's the first time retail auto sales have been up since June 2007. So, you know, by any indication, this has had a big impact on auto sales and got a lot of people out.

JIM LEHRER: Now, what's the expectation now, that this momentum has now begun, the Cash for Clunkers program has got people buying cars again, and it's going to continue once even the program ends at 8 o'clock on Monday night?

DAVID SHEPARDSON: It's certainly got a lot of people into showrooms, and it got people talking about, you know, buying a car for the first time in a long time. And there were people who went into the showroom, found out their vehicle didn't qualify, and ended up buying something else.

But I think the jury is out as to whether this will lead to a return to auto sales where they've been historically, which was in the 14 million, 15 million, 16 million range, as opposed to last year, when we were about 14 million, and this year we were on pace for less than 10 million a year through the first half.

JIM LEHRER: I take it the folks that you cover, you and your newspaper cover regularly, of course, the auto industry and its many tentacles, including the dealers, have been happy about all of this, right? This is terrific for them?

DAVID SHEPARDSON: Sure, they've been happy about the fact that, you know, close to 500,000 cars have been sold, but clearly the dealers have had some issues with the fact that very little money has actually been paid out of that $1.9 billion, in terms of reimbursing them for the vouchers.

JIM LEHRER: And that's where part of the chaos is, too, right? But is that a government bureaucracy problem?

DAVID SHEPARDSON: Well, it's a number of things. It's the fact that -- the transportation secretary said they had an inadequate number of people initially to process these vouchers. There were only 230. By the end of this week, it will be over 1,100, almost a thousand more. They've offered overtime to people. So, clearly, they were caught off guard by how fast this program ramped up.

JIM LEHRER: Finally, the $4,500 question. What if there are still hundreds or thousands of people still waiting who want to do this at 8 o'clock Monday night? Is there any chance this could be extended, this could go on and on and on?

DAVID SHEPARDSON: Well, Congress would have to approve more money, but the administration has said they have no plans to ask for any more money. I mean, it was a big lift to get the Senate to go along. I mean, some senators wanted, you know, changes in the program.

So given all the things on Congress's plate, it's probably unlikely. So you'd better get into the dealership this weekend if you want to take advantage.

JIM LEHRER: Or forget it.

DAVID SHEPARDSON: Exactly.

JIM LEHRER: David, thank you very much.

DAVID SHEPARDSON: Thanks, Jim.