Senate OKs more cash for 'clunkers'

"Cash for clunkers" will live on, but shoppers in the weeks ahead may have a hard time finding that fuel-efficient ride they've been craving since the program got underway.

The Senate voted 60 to 37 to approve $2 billion in additional funding Thursday, ending a weeklong scramble to keep the popular auto rebate initiative from running out of money. That could subsidize the purchase of half a million vehicles and provide a further boost to the sagging auto industry.

Heavy demand is already leading to scattered shortages of some hot-selling vehicles, such as the Toyota Prius, Ford Focus and Dodge Caliber. Chrysler Group and General Motors Co., which shut down many of their factories for several weeks this summer to save money and reduce inventories, have been particularly affected.

"Business had slowed so much that a lot of dealers had reduced their inventories because it was expensive to hold on to," said Jerry Key, general manager at Capistrano Ford. "But now that we've had this surge in business, there's going to be holes in the inventory."

The prospect of $3,500 to $4,500 in government cash to trade in a gas guzzler for a more fuel-efficient vehicle has had customers jamming showrooms in Southern California and nationwide since the program began July 24. Now, the Obama administration said, the money should last through Labor Day.

That has consumers cheering.

"This is the first piece of legislation Congress has hit out of the park in terms of something that can help the average person like us," said Evin Grant, a 32-year-old filmmaker who was doing a clunker deal at Toyota of Hollywood as the Senate vote was tallied.

"It's a triple threat: It helps out the economy, it helps consumers like us get into a vehicle we wanted but had no easy path to earlier, and it helps the environment by getting horrible gas guzzlers off the road," Grant said.

Senate supporters of the program beat back attempts, largely from Republicans, to make changes that would have effectively suspended it for a month if not killed it altogether.

"The reality is this is a program that has been working," said Sen. Debbie Stabenow (D-Mich.), who called cash for clunkers "the most effective stimulus we have passed this year."

President Obama, who had been hammering Congress for action, said the program "has been a proven success: The initial transactions are generating a more than 50% increase in fuel economy; they are generating $700 to $1000 in annual savings for consumers in reduced gas costs alone; and they are getting the oldest, dirtiest and most air-polluting trucks and SUVs off the road for good."

As of Thursday, more than 220,000 vehicles had been sold through the program, according to dealers. And with $923 million in rebate requests already in the pipeline, cash for clunkers had almost exhausted its initial $1 billion.

Chrysler said supplies of Calibers, Jeep Patriots and Compasses and its Dodge and Chrysler minivans are all drying up. The automaker had a meager seven-day supply of Patriots at the end of July.

At GM dealerships, Chevrolet Aveo and Cobalt small cars and the Chevy HHR crossover are going fast. Chevy Silverado and GMC Sierra pickups are also in short supply.

GM dealers had 466,000 vehicles on their lots at the end of July. That's barely a 70-day supply -- the lowest in decades.

Toyota, which has three of the program's five bestselling vehicles, has seen its supply of cars drop from 51 days at the end of June to 31 days at the end of July, according to Autodata Corp. Inventories of its hot-selling Corolla have been cut almost in half, and supplies of the Prius hybrid have dropped to 13 days.

At Capistrano Ford, cars such as the Focus and the Escape are in high demand, Key said. He ordered extra Focuses at the end of June, but the eight vehicles that arrived Thursday morning probably won't sit on the lot for long.

And there's no point in making trades with other dealers, because nearly every car lot expects a shortage of the popular models, Key said. "You'd just be trading one hot product for another hot product."

Many automakers, responding to signs that the market for new cars was beginning to stabilize, were already ramping up production. But they noted that plans typically are made a month in advance, and pumping out more cars to meet an unexpected surge in demand isn't easy.

It's not clear whether dealers will be allowed to issue "clunker IOUs" to customers who qualify to buy a certain model that is temporarily out of stock.

The Department of Transportation, which is overseeing the program, couldn't provide an immediate answer.

San Juan Capistrano dealer Key, for one, isn't taking any chances.

"We wouldn't be able to commit to the customer because by the time we could get a vehicle, the chances are that the funds would be depleted again," he said. "We can't afford to take that risk."

Tight inventories and the appeal of fat rebates are also giving dealers some unaccustomed pricing power. Auto website Edmunds.com said dealer discounts were at their lowest level since December -- an indication that buyers are negotiating less aggressively and dealers are taking advantage of the tilting balance of supply and demand.

There are signs that the initial frenzy that greeted the program is fading a bit.

"I'm not sure there are that many people who will qualify for cash for clunkers, or even want to qualify," said Aaron Bragman, an auto industry analyst with IHS Global Insight. "We're already seeing the pace of sales begin to slow down in Ohio and some of the states where the program has been really hot."

Analysts and the auto industry have been debating how much the program is actually helping the industry. Many of the cars would have been sold even without the clunker incentives, some analysts contend, and without a broader rebound in the U.S. economy, auto sales may slump to their formerly dismal levels when the program ends.

But after a year and a half of declining sales, that's a chance the auto industry is more than willing to take.

"The big plus of cash for clunkers is that even if they don't buy a car today, it's getting people to think about purchasing, and that's really the first step toward any sustainable rebound in the automotive industry," Chrysler spokeswoman Kathy Graham said.

--

jim.puzzanghera@latimes.com

martin.zimmerman@latimes.com

Times staff writer Tiffany Hsu contributed to this report.

Copyright © 2019, Los Angeles Times
EDITION: California | U.S. & World
55°