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Senate OKs more cash for 'clunkers'

The $2 billion should keep the auto rebate program rolling at least through Labor Day, the Obama administration says.

August 07, 2009|Jim Puzzanghera and Martin Zimmerman

WASHINGTON AND LOS ANGELES — "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."

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