Clunkers cash flowing slowly

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The federal government says it has paid back about 40 percent of the money it owes to car dealers who participated in the Cash for Clunkers program.

But dealers across the nation are disputing that claim, saying that less than 20 percent of the money they put up to make the sales under the program has been reimbursed to them. Dealers in Pittsburgh say reimbursements have been sporadic here, too.

"I did read something within the last 24 hours that the percentage of claims paid was very, very low, at most in the teens," said Tom Libby, independent auto analyst.

Officials at the American International Automobile Dealers Association said yesterday that the government has paid $1.22 billion for 289,000 vouchers. In total, 690,000 requests for voucher repayments worth $2.88 billion were submitted.

Transportation Secretary Ray LaHood said all dealers should be reimbursed by Sept. 30.

"Dealers started issuing $3,500 and $4,500 vouchers to customers on July 24. Here it is Sept. 10, and many of them are still waiting to be reimbursed by the government. We appreciate the government's efforts to speed reimbursements, but the process is still too slow," said dealers association president Cody Lusk.

"Cash flow is absolutely critical to small businesses. The impact of this kind of backlog quickly trickles down, impacting employee salaries and inventory."

Some Pittsburgh car dealers said they already have received a significant portion of the reimbursements.

"We're actually doing pretty good. We've gotten back most of our money," said Keith Accettulla, general manager at Day Ford in Monroeville. "Our money's been coming in pretty well. I'm surprised."

"They're coming through just fine, with several coming through each day, and we're getting paid," said Eric Weingrad, new car sales manager at Pittsburgh East Nissan in Monroeville. "We're doing just fine."

But at Baierl Honda in Wexford, "We're now up to about 30 percent right now. They still owe us about 70 percent of our money. It's a slow process," said Raul Arias, general manager of the dealership.

Part of the problem is that "any little thing can cause them to reject the request to be paid, and you have to start out all over again. If they can't read a number on a driver's license, they send it back and they get another 10 days to wait. You just have to be patient and be a solid enough dealer to withstand it," Mr. Arias said.

Still the Cash for Clunkers program was such a success that the number of new cars and trucks on dealers' lots has diminished dramatically.

"That's what happens when you sell 90 days worth of cars and trucks in 30 days," Mr. Accettulla laughed. "We've got about 50 cars and trucks on the lot right now, and it will probably be about 45 to 60 days before we fully recover."

At a time when in past years, dealers would be struggling to get old models out before new ones come in, 2009 models are almost nonexistent on dealer lots.

Because new cars are in short supply, "the focus is on the used cars," Mr. Arias said. "None of the cars that came in as clunkers could be kept, so used car prices went up. Everything's shifting to used cars at almost all the dealers. It will take at least a couple of months before our inventory will be back to normal."

"We know we aren't going to sell as many as we did in July and August during the Cash for Clunkers program, after all, there's $4,500 that's no longer on the table. Still, we're doing pretty good," said Mr. Weingrad.

"The first three or four days after the program ended, it was, 'Wow, where did everybody go?' Now we have people buying a car out of necessity, not because of the program," said Mr. Arias. He usually has about 300 vehicles in stock, but now he's down to about 120.

Auto industry analysts are unsure what impact the Cash for Clunkers program will have on sales in the fall.

"This was not a traditional, normal incentives program. So it's not clear that the [drop in sales] will be as big as usual since it was so unique," Mr. Libby said. "Some of the buyers may have been people who would not have bought a car anyway. So if there's a substantial portion of customers that were not pulled ahead because of the program, the sales drop may be less than what would normally occur."

He also isn't sure that small, economical cars will continue to sell well now that the clunker program is over. "Now that it's over with, and gas prices have been pretty steady, I don't see a huge swing to small cars," Mr. Libby said.

But the program did improve what had been expected to be a 9 million unit sales year for the industry to between 10 million or 10.5 million sales year, analysts say.

Meanwhile, General Motors Co. is trying to keep sales climbing through a new marketing campaign called "May the Best Car Win." Under the program, the company will allow customers who purchase a new vehicle between Monday and Nov. 30 to return it for a refund within 31 to 60 days from the date of purchase if they're not satisfied.

Don Hammonds can be reached at 412-263-1538 or .


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