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AUTOMOBILES

Dealers get a rough ride in cash-for-clunkers program

Red tape and computer glitches mar the program, which ends today. In response to complaints, Transportation Department extends the deadline for dealers to apply for funds by 16 hours.

August 25, 2009|Jim Puzzanghera and Martin Zimmerman

AND MARTIN ZIMMERMAN, WASHINGTON AND LOS ANGELES — The $3-billion "cash for clunkers" program limped to a close for consumers Monday evening after packing an economic punch for the nation -- and a nightmare of red tape and computer glitches for dealerships that are owed millions of dollars by the government.

So pervasive were the problems that the Department of Transportation gave dealers extra time -- initially until 9 a.m. today -- to file their applications for reimbursement of discounts. Late Monday night the department said it would extend the deadline further because its website used for dealer reimbursements had been down most of the day.

In a brief note to dealers, the department said the website would not be fully functional before this morning.

"Dealers should be assured that they will be provided time to submit pending deals equivalent to the time that was lost this afternoon while the system was down," the department said.

Customer sales, however, ended at 5 p.m. Pacific time Monday, as scheduled.

Under the Car Allowance Rebate System program, customers turning in gas-guzzling clunkers for new, more fuel-efficient cars received discounts of $3,500 or $4,500. Dealers, in turn, have been submitting paperwork for reimbursements for those discounts.

Despite the problems, the Obama administration touted the economic effect of the cash-for-clunkers program. The White House Council of Economic Advisors estimated it would boost economic growth by 0.3% to 0.4% in the third quarter and had created or saved 21,000 jobs.

"This program has not only helped hundreds of thousands of consumers purchase new more fuel-efficient vehicles, but has provided a boost to our economy and is helping create or save jobs at dealers and automakers across the country," the White House said.

Bruce Hamlin, owner of Guaranty Chevrolet in Santa Ana, agreed that the program "absolutely has generated more business for us." Of 62 new cars sold since cash-for-clunkers kicked in a month ago, 43 were clunker deals.

But analysts and dealers generally agreed that the program, while providing a much-needed jolt for auto sales, has been fraught with administrative problems.

"They are making sales, but it is a program that has been very poorly executed," said Michelle Krebs, senior editor of AutoObserver.com. "There have been computer issues and paperwork issues from Day One -- just nightmarish."

The Transportation Department said it substantially increased its computer system's capacity as dealers submitted 625,000 rebate applications worth more than $2.5 billion in the last month. But the improved system wasn't enough to prevent a crash Monday as dealers rushed to push reimbursements through. The website, which has had problems throughout the program's short life, went down at 8:30 a.m.

The National Automobile Dealers Assn. had asked for an additional week to submit applications. Instead, the agency initially extended it by 16 hours, which satisfied some dealers.

"That's good news, because when we came in . . . we weren't able to get onto the government computer," Hamlin said. It wasn't until late Monday morning that his staff was able to log on to enter their final clunker transactions, he said.

Even so, many applications have not been processed and many dealers have not received payments. Sen. Barbara A. Mikulski (D-Md.) also had asked Transportation Secretary Ray LaHood for an additional week for dealers to file applications.

"The CARS program packed a bigger economic punch than anyone expected because dealers knew how to make the program work for consumers," she wrote in a letter to LaHood. "Now the Department of Transportation has to make the program work for the dealers who are relying on funds from CARS sales to pay their bills and support jobs in their communities."

Fritz Hitchcock, who owns three Toyota dealerships and two BMW stores in Southern California, said he sold about 450 vehicles under the program and is owed almost $1.9 million in reimbursements. He stopped doing clunker deals Thursday night and has turned in all of his paperwork but has yet to receive any checks from the government. "We've got to see some money in the next two weeks," he said. "We've got payrolls to meet."

Hamlin was a little more sanguine: "We would have liked for it to have been easier, but they were doing what they could to prevent fraud," he said.

The National Automobile Dealers Assn. said some large dealership groups are owed more than $3 million in reimbursements. The Transportation Department had no information on how much had been paid to dealers.

Hitchcock said his dealer group is financially strong enough to wait for the cash, but others say they have had to borrow money to pay operating expenses until they are repaid. In a nationwide survey of dealers conducted by Automotive News last week, 10% of the dealers said unpaid clunker rebates were a serious enough issue to put their businesses at risk.

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