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.

According To NBC, Green Cars Are Saving Michigan

Story from Business and Media Institute



We were told all throughout the 2008 presidential campaign and on up into the debate over the stimulus that the way out of the current economic malaise is through growing a green economy. “NBC Nightly News” is still on message.

On the May 6 broadcast of “Nightly News,” anchor Brian Williams explained that Ford Motor Company (NYSE:F) didn’t accept federal bailout money, but all the while it has been producing green cars – as if the two were related.

“We have a report tonight on the car industry,” Williams said. “The Ford Motor Company has its own challenges ahead, but they are rightfully proud of being the only one of the Detroit big three not to accept taxpayer bailout money. Ford announced today it's retooling a plant that made big gas guzzlers in order to produce smaller, greener cars. And this comes at a time that other automakers are cutting production and thousands of jobs.”

However, Ford’s success has little to do with the green cars, but instead its success with its restructuring plan, as a May 6 Reuters story pointed out.

“Ford Motor Co remains on track in its restructuring and has sufficient liquidity to fund the plan which includes conversion of plants and investment in future products, company executives said,” Soyoung Kim and Chelsea Emery wrote for Reuters. “Ford, the only U.S. automaker not operating under bailout funds, also has continued to consolidate its dealer network, but sees no need for the type of aggressive culling rivals GM and Chrysler plan, Chief Executive Alan Mulally told reporters.”

CNBC Detroit correspondent Phil LeBeau touted Ford’s new plant which will build these beloved green cars.

“Working on the principle that less may be more, Ford is spending a half billion dollars retooling a plant that once made gas-guzzling SUVs, turning it into one that will churn out green, fuel-efficient cars,” LeBeau said.

However, LeBeau saved the best for the end and noted this gamble on green was contingent on other factors, specifically the price of gas.

“But with the American demand for compact cars and the success of electric models, dependent on gas prices, analysts say Ford’s bet on going green and small is not a sure one,” LeBeau explained.

“Smaller cars have smaller price tags,” auto analyst Efraim Levy said. “So therefore, you have less room to make the profits and if the car’s not successful, the losses are even more painful.”

Still, the new Ford plant was greeted as a welcome sign for workers in a beleaguered local economy, but just a drop in the bucket when the plant has only 3,200 workers while unemployment rates are over 12 percent in Michigan.

“In Michigan, an automaker retooling and keeping jobs is long overdue good news,” LeBeau continued. “This decade, the state has lost 700,000 jobs, with unemployment spiking 5 percent in the last year to a national high of 12.6 percent. Facing those numbers, the 3,200 people who will work at Ford’s rebuilt plant are relieved.”