Transportation Secretary Ray LaHood said Wednesday the department would announce within 48 hours how it intends to discontinue the program that offers car buyers rebates of $3,500 or $4,500 for trading in older vehicles for new, more fuel-efficient models. Department officials met with car dealer trade groups on Wednesday to discuss how the program will eventually end and respond to complaints over a backlog of rebate payments to dealers.It's probably a good idea too, since the government has been incapable of providing timely reimbursements to car dealers who have to front the rebates - $3,500 to $4,500 depending on what cars are turned in and the differential in gas mileage in the new vehicle.
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 incentives have generated more than 435,000 vehicle sales but dealers want a clear plan on when the rebates will no longer be available so they don't end up on the hook for any of the incentives.
"We want to make sure that dealers know when we're getting close" to running out of the money that was allocated for the program, LaHood told reporters. LaHood said he recognized that "dealers are frustrated. They're going to get their money."
On Thursday, General Motors Co. said it would begin providing cash advances to its dealers to help cover any cash shortfalls related to the program. The automaker said it will provide the advances for up to 30 days for dealers who have already completed a sale and they will be available as long as the program remains in effect.
Dealers across the country are struggling to deal with fronting the money - in some cases, dealers are owed millions of dollars and in the current credit-strapped markets.
That General Motors is fronting the money to dealers isn't a good sign either. It's not like the company is in great financial shape to begin with, having just emerged from its own bankruptcy. However, the alternative of watching its dealer network go under is an even worse situation. It's the best of a bad situation.
Instead of fronting the money, many dealers are simply quitting the program because they can't afford to incur additional costs. Half the dealers in Pennsylvania and New York have already quit the program and are no longer offering rebates under the program.
One dealer submitted 30 claims, and has been reimbursed for two. That means he's out more than $100,000 waiting for reimbursement, which means the dealer is limited in buying additional vehicles, parts, or paying salaries with that money. Other dealers are out even larger sums.
Maryland dealers estimate that $36 million in claims were submitted, but has been reimbursed for only 2% - $720,000.
As for those people who think that the dealers are complaining because they aren't getting reimbursed in a timely fashion, I'd suggest putting yourself in their shoes. How would you like being out tens of thousands of dollars or more, waiting for payment to come in at a time when you need every penny. You can't simply say that these dealers screwed up the paperwork, because the Department of Transportation has already admitted that they didn't have the manpower available to process the rebates. It goes to the incompetence of the Administration because they were the ones who were hoping for a spike in sales, and when that spike materialized, there was no plan in place. Only later did they realize they had to bring in additional people to process the claims. The cash for clunkers rebate site crashed repeated, and dealers threw their hand up in frustration.
Meanwhile, reports claiming that the cash for clunkers has brought increased demand and requires automakers to bring workers back on must be tempered with the fact that the automakers typically restart assembly lines after taking breaks during the summer because of slack demand. This year, the time that those lines were silenced was even longer because of the bankruptcies and lackluster demand that pushed inventories to record levels.
UPDATE:
Instapundit notes that the government promised FedEx, but they're delivering the US Postal Service. Indeed.
UPDATE:
The Administration is finally putting this clunker out to pasture Monday. I have no doubt that they consider it a smashing success - pointing to increased sales in July and August (and will fall silent when sales for the quarter and the rest of the year fall short because it shifted sales more than it created new sales). Also, there's no word on how quickly they hope to get all those car dealers reimbursed.
Notably, Transportation of Secretary Ray LaHood is blaming dealers for some of the delays as a result of incomplete paperwork.
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