"Cash for Clunkers" -- Success or Bandaid?

No matter what you call it "Cash for Clunkers" or "CARS," there are two undeniable truths about the program: 1. it will cost about $3 billion; 2. it will end up taking about half-a-million clunkers off the road (to date).

This is all that we know about the program. It's that plain and simple!! Lahood Friday and Saturday was all over television and newspaper reports touting the success of the program, claiming to the Detroit News, that it had revived an "important segment of the economy" and that it has put people back to work.

In a way, both claims were true as the "CARS" program drew down on key Ford Motor inventories of its popular subcompact Focus and compact SUV Escape to the point that it had to schedule an increase of about 30 percent in production (MotorNews.com). Further, General Motors saw demand for its Chevrolet Cruze and other lines made at its Orion, MI line increasing so that it brought back 1,350 laid off autoworkers and increased production through November. The plant had been scheduled for a September shutdown, GM said, so that it could begin a change over to its new B-platform on which the Chevrolet Volt was to have been based, but now the shutdown has been moved out two months.

GM officials were naturally delighted with the call back and touted the effect of the callback and "CARS" program on the industry in general, notign that not only would the increase in output result in more money for the recalled workers, but it was likely that paychecks for other workers would be affected as overtime rates increased.

They told CNN that the "uptick" in sales was welcomed and showed the industry was beginning its long-awaited turnaround.

All of this has been great spin because no one knows what the ultimate results of this program will be for the industry. In terms of hard numbers, MotorNews.Com and the Detroit News, speculated that through the start of the weekend 457,457 "clunkers" had been taken off the road and that about $1.9 billion of the $3 billion allocated by the House and Senate had been allocated for clunker vouchers. MSNBC speculated that administrative costs, so far, had been in the vicinity of $100 million.

Dealers have had to bear the costs of this program, not consumers, as they have had to submit their paperwork to the National Highway Traffic Safety Admininstration (NHTSA), the agency administrative charged with overseeing "CARS."

That the program was overwhelming to NHTSA has been evident from the beginning. Even with the program running through its first $1 billion in about a week, you could hear dealer complaints. One MA dealer complained of slow pay and another dealership official, who requested anonymity, noted that it was the office staff's job to chase after the paperwork and from the tone of the conversation the office staff was finding this rather an onerous task.

Another MA dealer complained, after the first weekend of the program, that he was going to drop out of the program. The reason was that vouchers weren't being paid quickly enough and that dealers were left with the bag. The Mass. State Auto Dealers Assn. noted the same thing, although it did acknowledge the program was proving successful for consumers.

One tactic some MA dealers were using was holding onto the vehicle until the voucher had been returned from NHTSA with funding. That, of course, probably prompted a revolution on the part of buyers who had to wait for their vehicles, instead of taking them off the dealership lot right away, which is actually a customer's right if it's a simple plate transfer and the funding is arranged promptly.

Other MA dealers were threatening to pull out of the program at the end of July, unless they were paid more promptly.

NJ was more forthcoming in why dealers were being paid slowly. The vouchers that were being submitted to the NHTSA were not completed correctly correctly from the beginning. One NJ dealer, who had written 16 "clunker" deals one Saturday, found four of five of the vouchers returned. This left him on the hook for about $60,000 the director of the NJ association said at the time.

Dealers across the country reported similar slowdowns MSNBC noted and were pulling out of the program.

And, those who were correctly filling out the vouchers or "correctly crossing the the t's and crossing the i's," said an AAA national spokesman, were waiting far too long for their return. The director of the NJ dealer association told the Newark Star-Ledger that only about three percent of the money owed his dealers had been repaid through last week.

Realizing it had been caught flat-footed, but not admitting it, apparently, NHTSA suddenly tripled the number of processors last week, to handle the number of vouchers this immensely popular program had generated.

Indeed, to make sure that all of the vouchers were going to be covered, dealers have until 8 p.m. tonight (Monday) to write any last-minute voucher dealers. Through Friday, it was estimated about $1.9 billion of the $3 billion allocated totally had been accounted for. That's why the agency is shutting down the program now.

This program has not been without its supporters or detractors. Supporters point to the increased in production, the recall of workers and the clearing of standing inventory. Detractors, including dealers who were pulling out of the program, pointed out that the slowness of the program left dealers on the hook for millions.

All of these questions will have been answered by tomorrow night when the program ends and when the dust settles it is likely that: 1. 600,000 to 1 million "clunkers" have been taken off the road; 2. the industry has been given a temporary shot in the arm, and 3. dealers will finally get their money.

The only thing that Washington should worry about is this: once they have created this type of program, when will consumers expect it again?