'Cash for clunkers' won't be running much longer, government says

The government will announce a plan as soon as today for winding down its popular but problem-plagued "cash for clunkers" program.

The announcement by Transportation Secretary Ray LaHood came as a New York dealership group said that hundreds of its members had stopped doing clunker transactions because of delays in getting reimbursed by the federal government.

Dealers worry that the $3-billion program will run out of money before they are reimbursed for discounts given to car buyers on clunker transactions. The National Automobile Dealers Assn. said "it is difficult, if not impossible, to accurately project the 'burn rate' of available funds" for the promotion, which provides discounts of $3,500 or $4,500 to consumers who trade in an older car for a more fuel-efficient new car.

That could leave dealers holding the bag, the group said, because the rules stipulate that the government doesn't have to pay dealers who submit claims for reimbursement after the clunkers program runs out of money.

LaHood said at a news conference Wednesday that a wind-down plan would be announced in the next couple of days.

"I know dealers are frustrated, but they're going to get paid," he said.

As of Wednesday morning, dealers had submitted 435,102 clunker transactions to the Transportation Department and requested $1.8 billion in reimbursements.

In California, which tops the list of states in terms of clunker transactions, most dealerships appear to be sticking with the program. The frenzy of buyer interest that greeted the program when it kicked off July 24 has dropped considerably, partly because of shortages of popular cars such as the Toyota Corolla, Honda Civic and Ford Focus.

"The gold rush is over," said Eric Choi, fleet manager at Hollywood Ford. "We're still getting some business from it, but like every other dealer, we're pretty much out of cars."

Fritz Hitchcock, who owns Toyota dealerships in City of Industry, Santa Barbara and Northridge, said his inventory had plummeted since the program began. His Santa Barbara dealership, for instance, normally has about 120 vehicles on the lot. Wednesday it had 12.

Hitchcock said he had submitted claims for about $1.3 million in clunker reimbursements but had yet to receive a dime from the government.

"I agree with the guy who said this is the most successful, worst-run program ever," he said.



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