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US promises to speed up ‘clunker’ payments

By Ken Thomas and Dan Strumpf
Associated Press / August 20, 2009

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WASHINGTON - Transportation Secretary Ray LaHood assured car dealers yesterday that they will be reimbursed for the money they have fronted to customers buying vehicles under the cash for clunkers program.

LaHood was responding to complaints about a backlog of rebate payments. Dealers must cover customer rebates and wait for reimbursement from the government. Some have said their requests have not been approved, leading to a cash crunch. That’s key because dealers typically borrow money to put new cars on their lots and must repay lenders within a few days of a sale.

“I know dealers are frustrated. They’re going to get their money,’’ LaHood told reporters.

A growing number of dealers have ceased offering the program. A group representing New York City-area dealerships said hundreds of its members have withdrawn, citing the reimbursement delays.

Other dealership groups say their members have stopped extending new clunkers deals out of fear they will be repaid late, or not at all. The program has been a huge hit, yet a major administrative headache for the struggling auto industry.

Through early yesterday, auto dealers had made deals worth $1.81 billion and were on pace to exhaust the program’s $3 billion in funds in early September. The program offers car buyers rebates of $3,500 or $4,500 for trading in older vehicles for new, more fuel-efficient models. It has generated more than 435,000 sales.

LaHood said the Obama administration would soon announce how much longer the car incentive program will last.

The Greater New York Automobile Dealers Association said about half its 425 members have left the program because they cannot afford to offer more rebates. They’re also worried about getting repaid.

The government “needs to move the system forward, and they need to start paying these dealers,’’ said Mark Schienberg, the group’s president. “This is a cash-dependent business.’’

Schienberg said the group’s dealers have been repaid for only about 2 percent of the clunkers deals they’ve made.

Melanie Bible, spokeswoman for the Pennsylvania Automotive Association, said about half of that state’s 950 dealerships have stopped cutting cash for clunkers deals. She said the figure is anecdotal, since no formal survey has been conducted.

Ted Smith, president of the Florida Automobile Dealers Association, said it’s unclear how many dealers are no longer participating in the program, but many continue to have problems getting reimbursed.

The financial arms of several automakers have begun offering help to cash-strapped dealerships, in some cases by floating loans to help cover clunker-related shortfalls. Toyota Financial Services is offering loans to dealers for up to 60 days.

The financial-services arms of Honda Motor Co., Nissan Motor Co., Ford Motor Co., and other automakers are offering similar programs.

The government’s online reimbursement system was flooded with requests shortly after the program began in late July, overwhelming the computer system and the staff. That led to big delays for dealers trying to file the required paperwork.

LaHood said some of the paperwork has been incomplete or inaccurate, leading to delays. But he acknowledged the Transportation Department did not have enough people to process the paperwork but was ramping up its staff. Earlier this week, the DOT said it was tripling its workforce to handle the rebates and expected to have 1,100 workers dealing with paperwork by week’s end.