Government suspends 'cash for clunkers' program
By James R. Healey and Chris Woodyard, USA TODAY
The government is suspending the explosively popular 'cash for clunkers' program at midnight tonight fearing it would go broke before it could parcel out what it still owes dealers for a huge backlog of sales.

The pending suspension was confirmed by Bailey Wood, legislative director for the National Automobile Dealers Association (NADA), which had been called Thursday night by the National Highway Traffic Safety Administration, which administers the program. Rep. Candice Miller, R-Mich., confirmed as well, saying she had been told by congressional leaders.

"Obviously the program has been an immense success in stimulating automotive sales," Wood said.

"The thing has exploded. It has exceeded everyone's expectations," said Miller, who was involved in writing the original legislation, known as CARS, for Car Allowance Rebate System. "Throughout our history, it has been auto sales that have pulled us out of recession. People are more likely to buy cars than houses. Not to be too Pollyannaish, but we're gettin' our mojo back. This could be the pivot" that begins an economic recovery.

FIASCO: Suspension of 'cash for clunkers' program couldn't come at a worst time

As of late Thursday, the government had committed roughly $850 million of the program's $1 billion, according to calculations by NADA and various congressional offices. It's unclear whether and how the CARS program could be restarted.

"We're in a full-court press trying to get more cash for 'cash-for-clunkers'," Miller told USA TODAY Thursday night — pointing out she wanted $4 billion for the program, not the $1 billion that was appropriated.

Wood said dealers were amazed at how many shoppers visited their showrooms this week. The program has been in effect since July 1, but the details were finalized only a week ago.

The $1 billion was to provide rebates of $3,500 or $4,500 for people who traded in older cars rated 18 miles per gallon or less for new ones rated 22 mpg or more. The old cars are scrapped.

Dealers loved the extra sales, but some were already getting cold feet about the deals because of the difficulty in processing them.

One dealer was going to suspend anyway. Another says he's having to haul clunkers back to his lot that he already shipped to the junkyard just to disable them. Others say deals are being held up by red tape.

But rules governing the program totaled 135 pages. They required dealers to register and many started off the week just trying to get answers on a government-jammed website. The rules are "very confusing," says Pete Greiner, who has a Ford dealership that bears his name in Casper, Wyo. "The administration of the program is extremely tough."

Some dealers said demand has been so brisk, they feared the program could go broke in days or weeks.

One Honda and General Motors dealer in Fort Worth says he has 50 clunker deals that were being held up by paperwork. "We're going back to our second and third round with customers to have things signed," said Will Churchill, owner of Frank Kent Motor. "They keep coming up with new forms to sign," Churchill said.

Now the dealership is in a Catch-22 situation: he must destroy the engines of clunker trade-ins to be eligible for the program. But if the paperwork falls through, he could be stuck with junked, rather than still running, cars.

As a result, Churchill says he is thinking of holding up more clunker deals.

In the Queens borough of New York, Paragon Honda has its own problem. It already hauled away nearly 60 clunkers to a junkyard before it found the rules require them to be disabled on the auto lot. Now they have to be brought back, have their engines destroyed and hauled back.

"Killing cars is not something that I'm used to doing," says Brian Benstock, the dealership's general manager.