"Cash for Clunkers" Gains Traction

"Cash for Clunkers" is a term that's been bandied about a whole lot lately, in the automotive world and in halls of Washington, D.C. I'm sure you've heard of the program; it's been introduced in several European countries to great effect. Seeing this success has prompted the U.S government to consider a "Cash for Clunkers" program of our own.

It's an idea that has merit, and is gaining serious traction. Embattled Governor Jennifer Granholm of Michigan has voiced support for the program, saying to the Detroit Free Press: “There has to be a strong statement of support to buy American, buy the cars that we are producing in this country.”

Her support of the plan includes the incentives applying only to U.S made vehicles, obviously something that the foreign manufacturers are opposed to. That has been a big point of contention in any final bill, just as U.S steel was in the Economic Recovery Act. The bill being considered in the House is Rep. Betty Sutton's H.R 1550, named Customer Assistance to Recycle and Save (CARS) Act. Hers would cover all vehicles made in North America.

The bill has met with bipartisan support, even from the President in his automotive press conference. Here's what he had to say:

"Several members of Congress have proposed an even more ambitious incentive program to increase car sales while modernizing our auto fleet. Such fleet modernization programs, which provide a generous credit to consumers who turn in old, less fuel efficient cars and purchase cleaner cars have been successful in boosting auto sales in a number of European countries. I want to work with Congress to identify parts of the Recovery Act that could be trimmed to fund such a program, and make it retroactive starting today"

Britain is currently considering similar legislation and the program has had measured, proven effects in Germany, France and Italy. I believe a few other European have similar programs as well. That success has prompted program extensions.

Germany's reported new car registrations up 40% percent, France at 8.1 percent and Italy 1 percent, far better then the double digit sales declines we're currently experiencing in the U.S. Italy also reports that orders are up 38 percent. That's a key number. Unlike in the U.S, most European customers order their new vehicle rather then driving them off the lot immediately.

It not like it hasn't had any opposition though. The Automotive Aftermarket Industry Association (AAIA) and the SEMA Action Network (SAN) has been very vocal about their displeasure with the plan, with SAN head Steve McDonald working to defeat the proposals and urging members to call their legislators. They in part have helped keep the idea from making it's way into the original language of the Recovery Act.

Basically, they conclude that the act would 1. Fill landfills, 2. Destroy vehicles that collectors love (and our "national heritage"), 3. Reduce cars available for people of low-income and 4. 4. Hurt independent repair shops that depend on them to restore, repair and accessorize.

The problem with that reasoning is: do you really think anyone in their right mind will go take a classic vehicle that has worth to get traded in? No. People will trade their old, used vehicles that don't have much . It'll get them taken off the road in place of newer, more efficient ones.

People that don't have a qualifying vehicle to might even buy vehicles from independent sellers to trade, further stimulating the economy. I think the bill will only have positive effects. People with classic vehicles will still treat them well and get them fixed, repaired, restored, etc.

 The major automakers are in full support of it, and some estimate that it could generate 2.5 million in new sales. That would be a huge boost to the struggling industry, helping to bring the annualized sales rate to around 12 million vehicles.

I'm in favor of it; I think it will help keep the automakers going and people employed while helping to modernize our national fleet with more fuel-efficient vehicles. Could this be just what the ailing industry needs to help soldier on during this difficult time?