Friday, May 08, 2009

When the Wheels come Off

Where will the old cars and pick-up trucks go? The junk yard? A gift to Mexico? Housing for the homeless? Like formerly worthless carbon credits, suddenly the titles of old cars will have great value.

Senators Agree on ‘Cash for Clunkers’ Auto Plan

May 7 (Bloomberg) -- A group of U.S. senators agreed to a plan that would give consumers as much as $4,500 toward the purchase of a new, fuel-efficient car or truck, Senator Debbie Stabenow said.

The Senate proposal closely tracks a deal struck in the House earlier this week, said Stabenow, a Michigan Democrat. Congress needs to move quickly on the plan to respond to a drop in auto sales that has affected all automakers producing cars in the U.S., she said.

“Across the board, sales are down,” Stabenow said. “The house is on fire right now. We’re trying to put the fire out before it engulfs the entire house and the entire family.”

The goal of the plan is to stabilize sales at struggling automakers including General Motors Corp. and Chrysler LLC, which are surviving on taxpayer aid. Chrysler filed for bankruptcy on April 30, and GM faces a June 1 deadline imposed by the Obama administration for cutting costs and debt.

The Senate plan, like the measure members of a House panel agreed to on May 5, would provide rebates to consumers for any car that meets certain fuel-efficiency requirements.

Only vehicles getting 18 miles per gallon or less would quality for trade-in under the Senate plan. Buyers would get a voucher worth $3,500 for a new model with a 5 mpg improvement. Those buying a new car that gets at least 10 miles mpg more or a light truck with a 5 mpg improvement would get a $4,500 voucher.

Germany, Italy, France

The plan wouldn’t add to the federal deficit because it uses funds already set aside for stimulating the economy, said Senator Sam Brownback, a Kansas Republican. Preliminary estimates put the cost of the legislation at $3 billion to $4 billion, Stabenow said.

U.S. automakers including Ford Motor Co. are pushing Congress to approve such a measure after the success of a similar program in Germany. France and Italy also provide payments to scrap older vehicles.

Representative Betty Sutton, an Ohio Democrat who proposed a cash-for-clunkers legislation in March, has said the measure would improve the environment and may spur sales by more than the 21 percent increase witnessed in Germany in February.


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