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US$2 billion ‘clunker’ extension cleared

REBATES: The ‘cash for clunker’ rebate program, which gives US$4,500 to car owners to trade in their old autos, was such a success that officials are now racing to keep up


As another worker, left, uses a torch to remove parts from a clunker, Chip Maggio uses an excavator to crush a Cash For Clunkers car at his Hackensack Auto Wreckers and Repair on Wednesday in Hackensack, New Jersey. Maggio said that one dealership that he dealt with has already had 40 clunkers brought to it.


The US Senate approved and sent to the White House on Thursday a US$2 billion extension of the “cash for clunkers” auto sales incentive program.

The measure, approved by 60 to 37, extends the successful program that has raised sales in the US auto industry.

US President Barack Obama was expected to sign it quickly.

The initial US$1 billion of funding approved in June for “clunker” business has generated more than US$920 million in rebates and sold more than 220,000 cars.

Supported by the incentive program, US auto sales overall were down about 12 percent last month from a year earlier, but it was their best performance this year.

The program offers consumers a federally backed rebate of up to US$4,500 if they trade in old vehicles for new, more fuel efficient ones. Supporters of the extension defeated several Republican amendments aimed at derailing the plan in the Senate.


Richard Shelby, the top Republican on the Senate Banking Committee, said the program “has squeezed months of normal activity” into a short period of time.

“When the backlog is met, interest in the program will fade, and the facade of economic benefit will disappear,” Shelby said.

Obama said in a statement after the Senate vote, however, that the economy “will continue to get a much-needed boost” from the program.

Major automakers said in a letter to senators that the current US$1 billion program had helped their companies, suppliers, scrap yards, steel producers and other small businesses.

“There is no question that ‘cash for clunkers’ has succeeded,” said Dave McCurdy, chief executive of the Alliance of Automobile Manufacturers, the chief trade group for General Motors Co, Chrysler LLC, Ford Motor Co, Toyota Motor Corp and other big carmakers.

Domestic and overseas manufacturers have so far split the “clunker” market. More fuel efficient passenger cars have outsold sport utilities, pickups and vans.

The administration, stunned by the swift success of the initiative and stung by a series of administrative glitches in trying to process rebates, had warned that the “clunker” measure would be suspended if more money was not approved by week’s end.

The House of Representatives passed the US$2 billion extension on July 31. The Senate took a week to affirm that action.

The outcome reflected the national reach of the auto industry and related businesses, and the persuasiveness of dealers who employ thousands and contribute generously to political campaigns.


Bailey Wood, director of legislative affairs for the National Automobile Dealers Association, said future demand was an open question, but added that showroom traffic remained strong and non “clunker” sales were up as well.

Barclays Capital analyst Brian Johnson expects the “clunker”-related lift in the industry’s annual sales rate and production in the second-half of the year to continue. Detroit and overseas automakers that make some of their vehicles in the US have been quiet on production increases.

Economists see the “clunker” program boosting third-quarter growth and several firms including Goldman Sachs have recently raised their GDP forecasts.

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