‘Cash for clunkers’ considered

WASHINGTON – The road to recovery for U.S. automakers could be jammed with hundreds of thousands of gas-guzzling used cars, which President Barack Obama hopes will be traded in for more fuel-efficient vehicles – with the lure of government money.

So-called cash-for-clunkers programs have worked well in Germany and France this year to spur new car sales. But the initiatives have not fared so well in Southern California, where the aim in recent years has been focused on reducing smog. Roadblocks to a national plan abound, including a potentially huge cost.

The idea of stimulating new car sales by coaxing old cars into the scrap yard is gaining bipartisan speed in Washington amid federal efforts to reshape the U.S. auto industry.

“The simple reality is, we have got to get American consumers to buy automobiles,” said Rep. Candice Miller, R-Mich.

She is among 19 lawmakers co-sponsoring a bill by Rep. Betty Sutton, D-Ohio, that would offer $3,000 to $5,000 to owners who scrap an old car and buy a new one. Sen. Dianne Feinstein, D-Calif., is leading a bipartisan group pushing similar legislation in the Senate.

Either plan would cost $1 billion to $2 billion a year, or more, depending on who’s eligible and how many people take advantage.

Supporters said the legislation would help save automakers and the environment, with both bills forcing the older cars to be scrapped.

U.S. car companies strongly support the idea, with a General Motors executive last week saying it could increase new car sales by 1 million to 3 million vehicles annually. That would be a huge boost for an industry on pace to sell fewer than 10 million vehicles in the United States this year.

But some major barriers would have to be overcome.

Obama said the money would have to be carved from existing programs in the $787 billion economic-stimulus legislation passed in February, a potentially difficult task. Supporters said there might be as much as $3 billion in stimulus money not yet allocated. Alternatively, the program could be funded with about $1.8 billion in stimulus money that has been rejected by the governors of some states.

The Senate and House bills have a major difference: the House would limit the incentive to new cars built in North America, with more money for those built in the United States; the Senate has presented no such restriction, and Feinstein said she would oppose one.

“It has to be across the board,” she said. “It’s the fair way to do it.”

Auto parts manufacturers and retailers have strongly opposed requirements that trade-ins be scrapped, arguing that the result would be more-expensive parts and used vehicles.

But the automakers are excited at the prospect of federal money to stimulate new car sales.

“We think it’s an important element to get the customer back,” said Jim Farley, Ford Motor Co.’s head of marketing and communications. He predicted the stimulus could lead to an additional 500,000 to 1 million sales a year.

Mike DiGiovanni, GM’s lead sales analyst, was more optimistic, saying the most conservative versions of the plans “could be worth at least a million more sales to the U.S. industry.”

The House bill offers graduated incentives to people who scrap cars or trucks that are at least eight years old. They would receive $3,000 cash vouchers for new trucks that get at least 24 miles per gallon and were assembled in North America. New cars that get at least 30 mpg and were assembled in the United States would qualify for $5,000. The new cars would have to cost less than $35,000.

Feinstein’s bill requires that the used car being traded in get less than 18 mpg. Cash vouchers would range from $1,500 to $4,500, depending on the age of the trade-in and on whether the owner buys a new or used car. The new vehicle must cost less than $45,000 and must exceed federal mileage standards by at least 25 percent.