'Cash For Clunkers' losers and winners

Logo of the Cash For Clunkers Program

TEXT OF STORY

KAI RYSSDAL: Now that it's through Congress, a $106 billion spending bill to pay for Iraq and Afghanistan through the end of the fiscal year is headed to the White House. The president is expected to sign it. Washington being Washington though, war spending's not the only thing that's in the package.

Among many other things, it also contains what has become known as the "Cash For Clunkers" plan. Up to $4,500 to get people to trade in their old gas-guzzlers for newer models that get better mileage. It should be a boost to struggling car dealers and anybody who wants a new compact or hybrid, I suppose. But what about what you might call --- "the clunker economy" -- businesses that depend on those old cars? Marketplace's Mitchell Hartman reports.


MITCHELL HARTMAN: Many charities count on donated cars as a steady revenue stream. I asked Stacy Palmer of the Chronicle of Philanthropy what happens if a quarter-million clunkers get traded in, instead?

Stacy PALMER: It definitely will be more difficult.

Though in fact Palmer says the flow of cars was running dry before "Cash For Clunkers" came along.

PALMER: Charities have already seen a drop-off in the number of cars being donated in the recession. People are still looking for ways for getting some kind of cash rather than the value of the charitable deduction.

So if charities won't benefit from this, maybe junkyards will. Michael Wilson stops me right there.

MICHAEL WILSON: We refer to it as the "j word."

Wilson's head of the Automotive Recyclers Association -- that's what auto salvagers like to be called these days. He says sure, his members will have plenty of old cars to strip down and sell. But...

WILSON: You've got vehicles that are out there in the marketplace already. When you get a mad rush of upwards of 150,000 vehicles over a couple-month period, you may already have that inventory on your shelves.

In other words, they may already have enough car parts on hand. So a lot of these vehicles may end up crushed for scrap metal. But there's a glut of that right now as well.

WILSON:The market really dropped off last October. They were getting about $300 a ton, and it's dropped back down to about $120.

So that means wreckers and scrap metal processors aren't likely to make off like bandits either.

Perhaps the biggest beneficiaries will be car makers and car dealers, which is the whole point of the exercise to begin with.

I'm Mitchell Hartman for Marketplace.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.

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