By on May 5, 2009

In a follow up to E. Niedermeyer’s previous post, details have emerged about the scheme to give rebates to buyers who trade “clunkers” for new, fuel-efficient vehicles. FT.com (Financial Times) reports that the program will cost taxpayers about $4 billion and will spur, according Brian Johnson, an analyst at Barclays Capital, the sale of 3 million units in the “near term” (whatever that means). With the US’ SAAR projected at approximately 9 million, this is a very optimistic prediction.

Critics are calling foul re: the scheme’s new-cars-only requirement. Used-car dealers and parts distributors “contend that the legislation will distort the market by pushing up prices of older used cars while depressing trade-in values for newer ones,” reports FT. Critics contend that people who would have purchased a used vehicle will opt for a new one instead.

Sure to be controversial is the clause that domestic and foreign vehicles will be eligible. “Foreign carmakers and their dealers lobbied hard against the original proposals, claiming they would be difficult to implement and ignored the contribution of companies such as Toyota, Honda and Nissan to the US economy,” writes FT. Why shouldn’t they be included seeing as many Americans are employed by Toyondasan? As long as the pie is being served, they ought to be allotted a slice.

Aye, but there’s the rub. The scrappage scheme is a provision to be added to the hotly (so to speak) contested climate change bill that is currently (and has been for weeks) stuck in the House of Representatives Energy and Environment Subcommittee. Energy and Commerce Chairman, Henry Waxman (D-CA), wants to fast track the bill to get it out of committee by the Memorial Day recess. ”I’m still holding firm on my deadline to get a bill out of committee by the end of May and I believe that will probably require us to go right to the full committee and bypass the subcommittee,” Waxman told reporters. According to Politico.com, “Negotiations over the bill have been slowed by a dozen Democrats who want to cushion regional interests like steel factories, oil refiners, and coal plants from major price increases.” Waxman made his remarks just hours after Democrats on the committee met with President Obama at the White House.

The Hill reports, “The timeframe could be difficult, given Capitol Hill’s busy agenda and a lack of consensus on the varying proposals in the energy plan. Rep. Chris Van Hollen (D-MD) has said the House should proceed cautiously on climate change. In an interview last month with The Hill, Assistant to the Speaker Van Hollen suggested a vote might not take place this year.”

By then it may be too late for the scheme to make a difference.

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23 Comments on “Update: Details of US Car Scrappage Scheme Emerge...”


  • avatar
    toxicroach

    If this passes, I will figure out some way to get the Dodge Dakota that rots in my mother in laws drive way helping get me a new car.

    That will reduce emissions right?

  • avatar
    Steven Lang

    As much as it would benefit my business, I would think that this would be the last nail in the coffin of the American economy.

    We’re going to be spending money we don’t have, to get rid of vehicles that are rarely driven, in exchange for new vehicles that by and large should have never been produced.

    These new vehicles will have higher monthly costs for their owners. We’ll also be pulling away future sales in order to placate today’s production numbers. This rampant overproduction is what got us into trouble in the first place.

    If we really want to just get rid of the cars… we should do the following.

    1) Allow Chrysler to liquidate a major portion of their inventory WITHOUT taxpayer subsidies

    2) Set up the groundwork for federal laws that would expedite the liquidation and closing down of a manufacturers products and assets.

    3) Let the free market take it’s course.

    Ten years of pulling forward car sales through creative financing is what brought us to this point. We shouldn’t be adding to it and we shouldn’t make taxpayers foot the bill for this stupid behavior.

    But then again, what the hell do I know. I’m just a fiscal conservative.

  • avatar
    50merc

    “Negotiations over the bill have been slowed by a dozen Democrats who want to cushion regional interests like steel factories, oil refiners, and coal plants from major price increases.”

    Oh, those darn regional interests! All good red, white and blue-blooded Americans should tell the Regional Interests we citizens are receptive to–indeed, eager for–major price increases. Nobody uses steel, oil or coal, anyway.

  • avatar
    indi500fan

    Can anyone explain the details here?
    Is this as simple as turning that $200 beater on the corner into a $5000 new car chit?
    Do I need to scoop up that beater before the general populace figures that out?

  • avatar
    Demetri

    As soon as I see the details on this, I’m hitting up craigslist.

  • avatar
    Strippo

    We’re going to be spending money we don’t have, to get rid of vehicles that are rarely driven, in exchange for new vehicles that by and large should have never been produced.

    Translation: “It’s 106 miles to Chicago. We’ve got a full tank of gas, half a pack of cigarettes; it’s dark, and we’re wearing sunglasses.”

    Hit it.

  • avatar
    Jeff Puthuff

    From Eddie’s post: “The amount of the voucher will range from $3,500 to $4,500, depending upon the fuel efficiency of the new vehicle.”

    So, the higher the efficiency numbers, the higher the rebate. And a “clunker” is loosely defined as 18 mpg and lower (I’ve looked but haven’t found if that’s city, hwy, or combined). So all you Gallardo owners, get ready to trade!

  • avatar
    golden2husky

    Maybe now would be the perfect time to buy up as many POS guzzlers that I can find. Buy for 400, sell to eager would be new car buyers for 1800…oohh capitalism is so much fun!!

  • avatar
    BDB

    As soon as I see the details on this, I’m hitting up craigslist.

    I had the same exact thought. There’s a potential to make a killing for people who pick up on this quickly.

  • avatar
    Redbarchetta

    Does any one know which of the 3 clunker Bills they are talking about in this. There are 2 in the House stuck in Committee and one in the Senate in the same situation. OR could it be a little bit of all 3 they are tacking onto the stupid climate bill.

    When I skimmed them over they were all pretty close. They all had the bit about cars older than 2001 and had to be registered for at least 120 days prior to trade in. The parts that were sketchy was the language about mileage of the new car(I think they were all hwy miles), one was higher and tiered different than the other; part content and maximum age of the “clunker”. They way they are written you wont be able to get really anything for a true clunker just relatively newer more efficient cars. I think trucks were also treated different with a lower mileage requirement.

    I’m with Mr. Lang on this one this is just a way for them to try and spur new car sales during the slump and all they are goingot do is pull new car sales forward and make the problem worse with trashing out money in the process. If you really look at the way the stupid pols have written it it isn’t goingot get the people with the most polluting cars to trade them in just the people sitting on an 8-10 year old car who are waiting to make a new car purchase.

    The real problem is gross overcapacity and they are doing there best keep the overcapacity train going as long as possible. The crash this creates is not going to be pretty and it’s going to help kneecap any kind of economic recovery.

  • avatar
    BDB

    If you really look at the way the stupid pols have written it it isn’t goingot get the people with the most polluting cars to trade them in just the people sitting on an 8-10 year old car who are waiting to make a new car purchase.

    Newer cars are almost always more environmentally friendly than older cars, though.

  • avatar
    Redbarchetta

    golden2husky and BDB I would suggest you go and read H.R. 520, H.R. 1550, H.R. 1606 and S. 247. I guess they snuck a 4th one in there. Your little plan might not work the way they have it spelled out. I really think the only things that are going to change are the age and mileage of the clunker, and the stipulations on what you can buy to get the max benefit.

  • avatar
    Redbarchetta

    Newer cars are almost always more environmentally friendly than older cars, though.

    That is exactly my point they are getting the newer ones off the road and leaving out the real polluters that are out there, because you probably wont get a dime for them.

    I keep thinking that the ones who are really going to profit from this are the dealers, 4 squares anyone.

  • avatar
    BDB

    Redbarchetta–

    It’s true even for an eight year old Camry vs. a new Camry, though. Even if less so than a 1972 Caprice vs. a new Camry.

  • avatar
    Demetri

    Redbarchetta, It looks like HR 1606 basically just gives you a $5000 voucher for any new car. As for the clunkers, if all you have to do is register it for 4 months, that still seems pretty easy to take advantage of, assuming that this program will last for that long.

  • avatar
    Steven Lang

    This is all crap.

    If we want to seriously improve our energy independence, we would go headlong into all the natural forms of energy (solar, wind, hydro, etc.) and make a serious attempt at simplifying our nuclear energy policies.

    Cars, on the other hand, should only be subsidized if there is a true technology behind it that can improve fuel economy in the long run. I am personally against all subsidies. But if you truly wanted to improve fuel economy across the board, the focus would be exclusively on new vehicles that are at the top 20% of fuel economy in the given segment.

    Give folks a substantial automatic tax credit for that, and you would see a lot more competition between the automakers for making more fuel efficient vehicles. I still wouldn’t be in favor of doing this. But if you really wanted to improve fuel economy, that’s a credible way of getting it done. At the innovation side of the equation. THAT creates jobs and greater energy independence.

    The current legislation is little more than half-assed, bogus, and completely focused on pulling whatever demand there is in an extremely overextended marketplace.

  • avatar
    Redbarchetta

    BDB Your right and I’m not arguing that. My point is this program doesn’t even address that 1972 Caprice instead if focuses on cars where the percentage gained is small. It’s yours and my money, well mostly our kids and grand kids, but wouldn’t you like to maximise your benefit for those dollars instead of using it really as a way to encourage new car sales.

  • avatar
    reclusive_in_nature

    Here’s a good question. What’s going to stop the dealers from marking the price up $5000 (or whatever the rebate amount will be)?

  • avatar
    Demetri

    This is what you can get a voucher for with the house bill:

    (A) $4,000 for a–

    (i) passenger automobile assembled in the United States with a minimum highway label fuel economy value of 27 miles per gallon;

    (ii) passenger automobile assembled in North America with a minimum highway label fuel economy value of 30 miles per gallon; or

    (iii) nonpassenger automobile assembled in the United States with a minimum highway label fuel economy value of 24 miles per gallon;

    (B) $5,000 for a–

    (i) passenger automobile assembled in the United States with a minimum highway label fuel economy value of 30 miles per gallon; or

    (ii) work truck assembled in the United States registered by the dealer as a registered work truck; or

    (C) $3,000 for a nonpassenger automobile assembled in North America with a minimum highway value of 24 miles per gallon.

    The Honda Civic Si I’m looking at just misses out with these stipulations. Built in Canada, and 29 mpg. If it was built in the US or if it got 1 more mpg it would be in. You would be able to get an Altima Coupe with the V6 and a manual transmission though, which I guess could be cool.

  • avatar
    Fred D.

    The “cash for clunkers” legislation, as it stands now, requires the clunker to have a combined mpg rating of less than 18 mpg. The $800 ’96 Mercury Grand Marquis I bought for my daughter to learn to drive on gets a combined 18 mpg, according to the new EPA fuel economy ratings. Looks like I lost the lottery….

  • avatar
    TEXN3

    This may be just right when we need a second vehicle, and the 760 dies.

  • avatar
    wsn

    I have a suspicion that Obama is really a spy hired by big oil companies. His fake green policies are really intended to mess up with conserving energy.

    Just look at this proposal:

    1) More energy is wasted by producing cars that no would buy without taxpayer compensation.

    2) The policy makes inefficient used cars worth more than efficient ones.

    I consider myself a tree-hugger and I am disgusted by all these fake green policies.

    If you want green, simply slap a $3/gallon tax on gasoline.

    If you want green and want to stimulate the economy, simply slap a $3/gallon tax on gasoline and reduce payroll tax by the same amount.

  • avatar
    GS650G

    So are they any passenger automobiles assembled within the US that get over 30 MPG? Well maybe there are but probably not made by UAW members.

    In the final version of the bill only Obama Motors cars will be eligible. Mark my words.

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