Clunker program not out of gas yet

WASHINGTON — U.S. Transportation Department officials figured Thursday morning they had applications in hand for about one-tenth of the $1 billion Congress had set aside for "cash for clunkers" rebates to people who turn in old vehicles for new, more fuel-efficient ones.

By late Thursday afternoon, they ran to the White House to say they might have already committed the whole $1 billion, or more. This stimulus program had stimulated very heavy demand, which required a quick decision about what to do next.

Within 24 hours, the Obama administration changed its mind three times. At first, it said it would shut off the incentives by day's end. Then it let them continue through Friday then through Sunday.

"If you were planning on going to buy a car this weekend using this program, the program continues to run," said White House press secretary Robert Gibbs. "If you meet the requirements of the program, the certificates will be honored."

Also Friday, the House voted to add $2 billion, soothing fears of some car dealers, who would be on the hook for any money they promised to customers as a rebate. But the Senate might not follow suit. Some senators said Friday the speed at which the money flew out the door was a sign the government's deal was too good, and perhaps should be modified.

A question remains: What was behind the apparent last-minute run on the clunker fund?

The answer appears to be a bad mix of paperwork and balky computers.

It was unclear how many cars had been sold under the program by Friday, but the number was far higher than expected.

About 40,000 vehicle sales were completed through the program, but dealers estimated they were trying to complete transactions on an additional 200,000 vehicles, said Sen. Debbie Stabenow, D-Mich.

Out of cash

Passed by Congress to help the flagging U.S. auto industry, the program — formally the Car Allowance Rebate System, or CARS — gives vouchers worth up to $4,500 to consumers who trade in gas-guzzling cars for new, more fuel-efficient models. The effort was scheduled to run until Nov. 1, or until money ran out.

A backlog had been building for weeks. Dealers could begin offering the rebate at the beginning of July, and many began doing so. But it was not until a week ago that they could begin filing for reimbursement, leaving them on the hook for the rebates until they get the federal money.

That's when they ran into difficulties with a federal Web site ill-equipped to handle the volume of claims and the multiple documents each submission requires.

Some dealers said the process took many hours and resulted in repeated rejections that had to be resubmitted.

Delayed paperwork

Dealers therefore kept putting off the laborious task of applying for the rebates of $3,500 or $4,500, which requires entering the 17-character identification number of each vehicle to be scrapped, scanning images of proof of insurance and filling out other paperwork.

The computer system was overloaded, according to the dealers. They said they would finish one page in the application, hit enter and nothing would happen. Eventually a message would appear notifying the dealer the page had "timed out."

Tom Frew, the business manager at Galpin Motors in Los Angeles, said he needed 35 attempts to register just one of the 11 vehicles the day that the program opened because of problems with the government Web site.

Friday, he spent an hour processing one rebate application, he said.

"It's probably anywhere from 30- to 60-second delays between mouse clicks," he said. Each application can have up to 11 attachments.

Handling customers

Sitting in front of a computer is not the top priority for him or most of the company's employees. His job is to "aggressively go out and handle all the customers that are flocking to the showrooms," he said.

Other dealers complained about rejections. At Walser Toyota in Bloomington, Minn., General Manager Charlie Swenson said that of 150 applications his salespeople sent in Monday, only 30 received responses, and all of those were rejections.

A Transportation Department official said the agency had already run two instruction classes over the Internet on filling out applications, and was planning a third.

A computer contractor, Oracle, has enhanced the capacity of the government Web site.

"Cash for clunkers" is an unusual government program, because dealers sell the cars and wait for repayment from the government.

Dealers said failure to be reimbursed would be a nightmare.

At Galpin Motors, Beau Boeckmann, vice president, said that if the government failed to reimburse, his company would try to "unwind" the sale, get the slightly used car back and try to sell it again.

Boeckmann said he was relieved the program would run at least through the weekend; his company was already locked into print and broadcast ads featuring the rebates.

House acts fast

Despite the glitches, the House voted 316-109 on Friday to shift $2 billion from the Energy Department's loan fund into the clunker program.

Democrats were joined by all the Republicans in the Michigan delegation, and half of those in Ohio.

In the Washington delegation, Democrat Brian Baird joined Republicans Doc Hastings and Cathy McMorris Rodgers in voting against the measure, while Republican Dave Reichert joined Democrats in voting for it.

Congress will seek to replenish the energy program later.

The Senate will take up the matter next week. A spirited debate is likely, as some senators have said they will use the opportunity to push for tougher fuel-efficiency requirements.

If the Senate does not go along with the House version, the House might have to work on a compromise.

President Obama seemed to favor a straightforward extension.

"We're already seeing a dramatic increase in showroom traffic," he said after the House vote, adding that the program helps to reduce air pollution while helping vehicle buyers.

White House spokesman Gibbs declined to say how long the program could continue without an infusion of funds.

Material from The Associated Press and Thomas Voting Reports is included in this report.