Environment Or Economy: 'Clunker' Data Show Nearly Equal MPG Swaps

from the Orange County Register

Billed as a way for the government to put more fuel-efficient vehicles on highways, the popular $3 billion Cash for Clunkers program mostly involved swaps of old Ford or Chevrolet pickups for new ones that got only marginally better gas mileage, according to an analysis of new federal data by The Associated Press.

The single most common swap - which occurred more than 8,200 times - involved Ford F150 pickup owners who took advantage of a government rebate to trade their old trucks for new Ford F150s. They were 17 times more likely to buy a new F150 than, say, a Toyota Prius. The fuel economy for the new trucks ranged from 15 mpg to 17 mpg based on engine size and other factors, an improvement of just 1 mpg to 3 mpg over the clunkers.

Owners of thousands more large, old Chevrolet and Dodge pickups bought new Silverado and Ram trucks, also with only barely improved mileage in the middle teens, according to AP's analysis of sales of $15.2 billion worth of vehicles at nearly 19,000 car dealerships in every state. Those deals helped the Ford F150 and Chevy Silverado - along with Ford's Escape midsize SUV - climb into the Top 10 most-popular vehicles purchased with the government rebates. The most common truck-for-truck and truck-for-SUV deals totaled at least $911 million.

In scores of deals, the government reported spending a total of $562,500 in rebates for new cars and trucks that got worse or the same mileage as the trade-ins - in apparent violation of the program's requirements. The government said it is investigating those reports and said in some cases they were probably entered incorrectly by dealers or based on outdated fuel economy figures.

The National Highway Traffic Safety Administration is still reviewing the reports, and any dealers that submitted invalid trade-ins will be directed to return the government rebate, spokesman Eric Bolton said.

The new data, obtained by the AP under the Freedom of Information Act, include details of 677,081 clunker trade-ins processed by the government through Oct. 16. More than 95,000 of the new vehicles purchased under the program - or about 1 in 7 - got less than 20 mpg, according to the data.

The new figures, requested four months ago by the AP, represent the first substantial outside accounting of the clunkers program, lauded by the White House and the Transportation Department for improving fuel economy, stimulating sales and taking the dirtiest vehicles off the road. The data show the average fuel economy was 15.8 mpg for the old vehicles and 24.9 for the new ones.

The overall mileage increases over the clunker fleet represent a decline of 1.87 million tons of carbon dioxide per year, based on families driving an average of 12,000 miles, a yearly savings equivalent to the amount of carbon dioxide spewed in the U.S. in just 2.5 hours.

But plenty of consumers bought relatively low-mileage trucks and SUVs with the help of government checks.

"If we're looking for the environmental story here, we're going to be disappointed," said Jeremy Anwyl, chief executive at Edmunds.com, an analyst firm. "It might have started out from the perspective of improving the environment, but it got detoured as a way to stimulate the economy."

Popular high-mileage commuter cars, including the Toyota Corolla, Honda Civic, Toyota Camry and Ford Focus, also were among the Top 10 most popular new vehicles bought under the four-week program, with 105,280 of those models sold for a total of about $2 billion.

Bolton, the NHTSA spokesman, said the program "proved to be a win for the economy and the environment" because it helped financially struggling dealerships and auto manufacturers, and because, under the program's rules, clunkers necessarily were replaced with vehicles that got better mileage.

Chris Moss of Smithtown, N.Y., traded in his 1992 white Ford F150 pickup - "it had 5 million miles on it and needed $50,000 in repairs, if you know what I mean" - for a new Chevrolet Malibu hybrid for his wife. When he drove his old truck to the dealership's back lot with the rest of the clunkers, "90 percent of what you saw were old 150s and Explorers," he said. Moss posted a video on YouTube of his old truck's final day, called "Rust In Peace."

The $3 billion program, known officially as the Car Allowance Rebate System, ran from July 27 to Aug. 25 and generally required that new vehicles get better mileage - at least 22 mpg for cars and either 15 mpg or 18 mpg for trucks, depending on class - and that trade-ins get no more than 18 mpg. The trade-ins were required to be destroyed in exchange for either $3,500 or $4,500 rebates.

Some deals raise eyebrows:

- In at least 145 cases, mostly involving trucks, the government reported consumers traded old vehicles that got better than or the same mileage as the new vehicle they purchased. The government said it was continuing to investigate. "It's possible some quirky deal slipped through the cracks," Anwyl said.

- In at least 15 deals in nine states, owners of large pickups cashed in old trucks for between $3,500 and $4,500 toward new Hummer H3 SUVs that got only 16 mpg.

- In at least 32 deals, drivers traded older vehicles for new large trucks - including versions of Toyota Tundras, GMC Sierras, Chevrolet Silverados, Dodge Rams and Ford F150 pickups - that got only 14 mpg.

Car-crazy California led clunker sales with more than 76,000 trade-ins, followed by Texas with roughly 43,000 and New York with nearly 37,000. In California, the Honda Civic was the No. 1 new car and no pickups ranked higher than 18th. In New York, the Hyundai Elantra was No. 1.

The clunkers program was very good for Longo Toyota of El Monte, Calif., just east of Los Angeles, which sold more than twice as many vehicles under the program as any other dealership in the country, worth more than $30 million. That sole dealership was responsible for 1,432 sales worth nearly $6 million in clunkers rebates, mostly from its sales of 323 Toyota Camrys, 277 Corollas and 171 Priuses.

"We knew it was just a matter of when, not if, we were going to get paid, so we kept our foot on the gas," Longo president Tom Rudnai said.

Auto-Makers Want Europe To Continue 'Clunkers'

Story from the Wall Street Journal

Auto makers are pushing European governments to continue their "cash for clunkers" programs, fearing that the fragile industry may face a major slowdown if the rebate programs end.

The moves come as Germany and Britain are winding down their scrappage programs, which are aimed at getting buyers to turn in less-fuel-efficient vehicles and buy new cars with better mileage. Meanwhile, Ford Motor Co. and others say they are helping Russia get a scrappage program off the ground.

"We would like to continue the scrappage programs or we would like a more general winddown of the programs instead of letting them just come to a quick end," John Fleming, chief executive of Ford's European operations, said in an interview."

How long Europe continues the programs and any lasting effect from them could have implications for the U.S. The wildly successful U.S. "clunkers" program boosted sales to heights not seen in years. But the program's end last month also brought worries about how much U.S. sales would decline after the rebates expired.

"Everyone is bracing themselves for a major slowdown, potentially next year," said Mark Fulthorpe, the director of European vehicle forecasts for CSM Worldwide. Pete Kelly, senior director in Europe for J.D. Power & Associates Automotive Forecasting, predicted that the slowdown would begin this fall and extend into the 2010 first quarter.

Tuesday, data from the European Automobile Manufacturers' Association showed that European new-car registrations, a measure of sales, rose 2.8% from a year earlier in July and increased 3% in August. The growth varied from country to country because of variations in the implementation of the incentives.

Individual European countries have implemented a dozen separate scrappage programs, and a 13th, in Greece, will go on line soon.

Ford estimates that scrappage programs will support the sale of three million vehicles in Europe in 2009 and 2010 and are the key reason total industry sales in the 19 largest European markets will be as high as 15.5 million in 2009, only about 7% to 10% below 2008 levels.

"The market in Europe is still very weak," Ford Chief Financial Officer Lewis Booth said in an interview at the Frankfurt auto show. "We'd rather see the end of scrappage arrive as the economies in Europe begin to recover."

France has indicated that its scrapping program will continue next year, though at reduced rates, to avoid a sharp sales drop. Currently, the French government offers €1,000 ($1,457) for the purchase of a new car if the owner scraps one that is more than 10 years old. "The French government has said it will phase it out progressively," said Philippe Varin, chief executive of PSA Peugeot Citroën SA.

But car makers in Germany doubt the popular car-scrapping program there is likely to be picked up again anytime soon. The government pumped €5 billion into the plan, which ran out at the start of this month. Nearly two million German consumers participated in the program, which largely benefited mass-market auto makers like Volkswagen AG and Ford.

But skeptics say the program simply delayed a slump. Though car orders still being processed will fuel sales for a few more months, some analysts say German car sales next year could drop by one million cars from this year's expected 3.5 million.

"We said from the beginning it is not what we support," said BMW AG's finance chief, Friedrich Eichiner, of the way the short-term incentives were structured. "Others demanded it, and now they got it."

After Clunkers, Ford Sales Still A Bright Spot

Story from Detroit Free Press

Ford Motor Co. — whose 5% sales decline in September outperformed the industry’s 23% plummet — picked up 3 percentage points of market share last month, the 11th straight month Ford captured more showroom customers.

“This was an extremely volatile three-month period,” said Ken Czubay, Ford’s top U.S. sales chief. “It really put Ford to the test. We believe Ford passed.”

Ford was one of the few bright spots during September, as the expected hangover from the federal cash-for-clunkers sales boon, which depleted car and truck inventories nationwide, was far worse than many expected.

Several automakers reported an increase in shopping traffic during the last part of the month that gave them hope that a recovery, however slight, would be more evident in October. But that wasn’t very evident in the bottom line.

While Hyundai Motor Co. managed to post a standout 27% sales gain in September, sales were off for most major automakers last month. General Motors Co. was down 45%, while Chrysler Group LLC fell 42.1%.

September’s performance looked even worse considering that last September — when Lehman Brothers filed for bankruptcy and kicked off a global financial crisis — was the worst sales month in 15 years.

October, automakers said, would be the true bellwether for the state of the industry and the economic recovery.
Sept. sales are 2nd-worst month of 2009

“September was a pretty difficult month from Day One right on through to the end of the month,” said Mark LaNeve, vice president of U.S. sales for GM.

The sales rate in September declined to 9.22 million — the lowest rate since February, according to Autodata Corp. The selling rate is what the sales would total for the year if demand remained constant, adjusted for seasonal factors.

Automakers said sales of new cars and trucks dropped severely in early September after federal funding for the government’s cash-for clunkers program expired.

The buying spree that the program created began in late July and continued through late August. It was so successful that it depleted inventory at dealerships across the country and pulled ahead some buyers who normally would have waited until fall.

That left dealerships with a 29-day supply of cars and trucks at the end of August — the lowest since at least 1975, according to WardsAuto.com.

GM’s pain was spread across the board. Sales of its top-selling Chevrolet Silverado pickup dropped 61.5%. Its key post-bankruptcy brands all disappointed. Sales fell 53% for GMC, 41% for Chevy and 33% for Buick. Only Cadillac beat the industry, with a 9% decline.

GM’s soon-to-be-castoff Saturn brand posted an 84% plummet.

“I’d say September underperformed expectations,” LaNeve said.
Automakers: We still see recovery

While LaNeve characterized the pace of sales throughout September as lousy, both Ford and Toyota Motor Corp. said the pace of sales increased during the month and all three said they expect the sales rate to rise this year.

"We definitely see the economy improving,” said Mike DiGiovanni, GM’s executive director of global market and industry analysis. “It’s going to be a bumpy road, but we are on the way to a recovery.”

Toyota, a major beneficiary of this summer’s cash-for-clunkers program, saw its September sales fall 13%.

“The truth is, we could have sold more cars if we had them” in September, said Don Esmond, senior vice president of Toyota’s U.S. division. “We saw a positive improvement week after week in showroom traffic.”

Chrysler said it struggled with inventory issues in September both because of cash-for-clunkers and because it stopped production entirely from May 1 through June 28 while it went through bankruptcy reorganization.

Bill Golling, who owns a Chrysler-Jeep-Dodge dealership in Bloomfield Hills, said he had a lot of minivans in September, but very few small cars, which hampered sales.

“The inventory situation should be better as October goes along,” Golling said.

Rolling Out 'Cash for Clunkers'

Car Dealers Set Up Hotlines, Web Sites but Fret That Strict Rules Will Hurt Trade-Ins

By The Wall Street Journal

Auto dealers are starting to ramp up advertising built around the government's "cash for clunkers" program, even as they are growing more concerned that the incentives won't provide enough of a spark to revive U.S. auto sales.

Restrictions on eligibility combined with delays in launching the program -- which promises rebates as high as $4,500 -- have quashed hopes that the U.S. will see the same sort of car-shopping craze experienced by countries such as Germany and Brazil that implemented similar plans.

Cash-for-clunkers, formally known as the Car Allowance Rebate System, will provide about $1 billion in federal funds as incentive money. Eligible owners of gas guzzlers will receive a credit if they turn them in and buy or lease a new, more fuel-efficient vehicle.

The program was approved June 1, but final details on eligibility have yet to be released. That information is expected "on or around" July 24, according to the program's Web site, www.cars.gov.

Dealers are gearing up with online and newspaper ads inviting potential buyers to stop by and see if they are eligible. Some dealers have set up special Web sites. But the lag between passage of the measure by Congress last month and implementation has cooled consumer sentiment, dealers across the country say.

Preliminary rules saying clunkers must be less than 25 years old and get 18 miles per gallon or less in combined city/highway mileage also have hurt.

"We like the idea behind the program; however, the eligibility could be a little too strict and may keep some of my people away," said Alan Helfman, vice president of Houston's River Oaks Chrysler-Jeep.

The program might boost sales by 175,000 vehicles in 2009, said IHS Global Insight analyst Rebecca Lindland. That isn't much help given the hole the industry is in. U.S. auto sales ran at an annualized rate of 9.69 million vehicles in the first six months of the year, down from 13.69 million in the same months of 2008.

"And these will be sales that are pulled ahead and not new demand," Ms. Lindland said. "We don't see that many people willing to trade in to take on new debt."

Ford Motor Co. and General Motors Co. have rolled out Web sites dedicated to answering questions. Ford has also established a 1-800 hotline. "We have seen 300,000 people go to the Ford.com site to check their eligibility," said Jim Farley, Ford's marketing chief. "We are seeing customers at least coming in and talking to dealers about it."

Hyundai Motor Corp. dealers are already starting to offer discounts based on the expected rebates, funded by loans from Hyundai that cover the difference until the program officially starts.

The National Automobile Dealers Association is encouraging dealers not to make any offers until the final details of the program are known so they don't put their own money at risk.

The clunkers program will run through Nov. 1 or until the funds are exhausted. A similar program in Germany drew more than one million applications for vouchers. That program, at $6.5 billion, is larger than the U.S. version.