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White House reviewing 'cash for clunkers' program

world Updated: Jul 31, 2009 18:17 IST

AP
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The White House says it is reviewing what has turned out to be a wildly popular "cash for clunkers" program amid concerns the $1 billion budget for rebates for new auto purchases may have been exhausted in only a week.

Transportation Department officials called lawmakers' offices earlier Thursday to alert them of plans to suspend the program as early as Friday. But a White House official said later the program had not been suspended and officials there were assessing their options.

"We are working tonight to assess the situation facing what is obviously an incredibly popular program," White House press secretary Robert Gibbs said on Thursday 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.

A Transportation Department official said the department was working with Congress and the White House to keep the program going. The administration officials spoke on condition of anonymity because they were not authorized to speak publicly about the discussions. The CARS program offers owners of old cars and trucks $3,500 or $4,500 toward a new, more fuel-efficient vehicle. Congress last month approved the program to boost auto sales and remove some inefficient cars and trucks from the roads. The program kicked off last Friday and was heavily publicized by car companies and auto dealers

Through late Wednesday, 22,782 vehicles had been purchased through the program and nearly $96 million had been spent. But dealers raised concerns about large backlogs in the processing of the deals in the government system, prompting talk of a possible suspension.

A survey of 2,000 dealers by the National Automobile Dealers Association found about 25,000 deals had not yet been approved by NHTSA, or nearly 13 trades per store. It raised concerns that with about 23,000 dealers taking part in the program, auto dealers may already have surpassed the 250,000 vehicle sales funded by the $1 billion program.

"There's a significant backlog of 'cash for clunkers' deals that make us question how much funding is still available in the program," said Bailey Wood, a spokesman for the dealers association.

The clunkers program was set up to boost U.S. auto sales and help struggling automakers through the worst sales slump in more than a quarter-century. Sales for the first half of the year were down 35 percent from the same period in 2008, and analysts are predicting only a modest recovery during the second half of the year. So far this year, sales are running under an annual rate of 10 million light vehicles, but as recently as 2007, automakers sold more than 16 million cars and light trucks in the United States. General Motors Co. spokesman Greg Martin said Thursday the automaker hopes "there's a will and way to keep the CARS program going a little bit longer."