The new version of the bill is sponsored by Rep. Betty Sutton, D-Ohio, and co-sponsored by Representatives Bruce Braley (D-IA), John Dingell (D-MI), and Candice Miller (R-MI). CARS would offer between $3,000 and $7,500 to owners of vehicles at least 8 years old, in the form of vouchers to buy more fuel-efficient models. The maximum amount would be available to buyers of those vehicles with the best miles-per-gallon, or—in the case of electrics—miles-per-gallon equivalent ratings. The legislation also offers transit vouchers in exchange for older, higher-emission vehicles.
“This is a very comprehensive bill with multiple beneficial effects that I think will make it palatable to enough of the Congress that we can enact it,” Sutton said March 17. “It not only assists consumers who need a lot of help in this economic downturn, but it will stimulate our economy, reduces emissions, and reduces our dependency on foreign oil.”
The Detroit Three and the UAW support the bill but foreign automakers fault it for excluding non-North American models. Even those with absolute commitment to newer more fuel-efficient vehicles, such as automakers, environmental groups, and dealers hold different views on how such a plan should work. Auto body associations generally support the plan, SEMA and aftermarket suppliers do not, although most agree that the auto industry's troubles can be traced to the 40% year on year decline of auto sales, now about 10 million vehicles a year.
Seven prominent aftermarket associations have stated that there is no evidence that such legislation will boost car sales, and argued in a letter to Congress that "Cash for Clunkers programs threaten jobs in the automotive aftermarket since they remove the opportunity to repair and upgrade existing cars and raise the price of used cars and parts.”
However, more recent evidence supports the strategy, at least as far as reviving car sales goes. GM Chairman Rick Wagoner said that such plans could have a huge impact, citing ones in Germany and Brazil that boosted sales last month while the rest of the auto industry has struggled. A similar measure in Germany has spurred automotive sales, with the country showing a 21% rise in February, compared against the same month in 2008, according to Sutton. “We do see some well-thought-out programs, and it would be very helpful to do that in the United States,” Wagoner said.
China saw a 24% sales increase in February as government incentives there appear to be taking effect. India also had an increase in auto sales in February, indicating that large population emerging markets are recovering more quickly than expected.
CARS incentives would be limited to vehicles that cost less than $35,000, and it would require that the old trade-in vehicle be scrapped, not resold. The program would apply only to new vehicles built in North America, with cars having to hit at least 27 miles per gallon on the highway if built in the United States and 30 mpg if built in Canada or Mexico. Truck models would have to make 24 mpg on the highway.
In a boost to plug-in hybrids such as the Chevrolet Volt, the bill would offer a $7,500 voucher toward any U.S.-made vehicle that can achieve a 100 mpg (equivalent).
GM spokesman Kerry Christopher said the Sutton bill was a good starting point for a scrappage plan. Ford said in a statement that the bill was “a win-win-win for consumers, the environment and energy independence,” while Chrysler LLC said it was generally in favor of the idea.
UAW Legislative Director Alan Reuther said the plan “would help to stimulate auto sales, and thus would help support jobs for American workers in the auto industry.”
Auto backers in the Senate withdrew a similar measure from last month's economic stimulus bill. But since then, European car sales have been helped by a similar plan, and this time it could be different. The cost of the plan could be its downfall; the more people that take advantage of the plan, the more the government will have to spend. Between December 2007 and August 2008, Texans turned in 13,492 vehicles, costing the state $45 million. Texas has rules to ensure that only people who own cars can benefit from the program.
For more information on previous bills search www.autobodynews.com for “Cash for Clunkers.”