Fallout: The Financial Crisis

Carmakers help dealers with ‘clunkers’

John Dimsdale Aug 20, 2009
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Fallout: The Financial Crisis

Carmakers help dealers with ‘clunkers’

John Dimsdale Aug 20, 2009
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TEXT OF STORY

Tess Vigeland: If you’ve got an old gas guzzler in the garage, listen up. The government’s Cash for Clunkers program will reportedly end Monday night. That means you have one more weekend to take advantage of the $4,500 rebate for trading up to a new set of wheels.

On top of that, some dealers are clunking out early because of a reported delay in reimbursements.

As Marketplace’s John Dimsdale reports from Washington, car companies themselves are coming to the dealers’ rescue.


JOHN DIMSDALE: The $3 billion Cash for Clunkers rebate has been very, very good for car dealers.

MIKE MARTIN: Of all the stimulus programs, it’s probably gotten the quickest, fastest reaction in the retail marketplace. We’re running almost two-fold what we would normally run during the month of August.

Mike Martin runs Chevrolet and Saturn dealerships in Manassas, Va. The problem is, he’s still waiting for the government to reimburse him for $300,000 in rebates that he’s given to his customers.

MARTIN: So out of over 70 vehicles, I’ve been paid on two.

The government is promising to speed it up. But some dealers have dropped out of the program claiming they can’t afford to give out any more rebates. To keep anxious dealers from bailing out, GM, Chrysler and Toyota will front them the reimbursements, until the government money comes through.

The cash advances are worth it to the car companies. To replace inventory, GM will build 60,000 more cars this year.

Carmakers would love for Congress to extend the rebates. But Jeff Schuster, a forecaster with J.D. Power, says that risks artificially overheating the market and setting it up for a slump when it’s over.

JEFF SHUSTER: I think there’s a lot said for keeping it a shorter-term program. Get the money through the economy and get people in more fuel-efficient vehicles. And then let’s market conditions take back over.

Due to the Cash for Clunkers rebates, J.D. Power has raised its forecast for domestic car sales this year by 300,000 to 10.3 million.

In Washington, I’m John Dimsdale for Marketplace.

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