No More Cash For Clunkers
JENNIFER LUDDEN, host:
I'm Jennifer Ludden, and this is TELL ME MORE from NPR News. Michel Martin is away this week.
Coming up, the first family settles in for a vacation on Martha's Vineyard, and we explore the past glory and current controversy surrounding the African-American community there.
But first, effected 8 p.m. today, the popular Cash for Clunkers program will be defunct. The idea was to boost auto sales and get gas guzzlers off the road. Hundreds of thousands of drivers traded in their old cars for vouchers worth up to $4,500.
The program had been expected to last until as late as November. But it's already run through the $3 billion Congress gave it. President Obama has called Cash for Clunkers a success beyond anyone's imagination. But not everyone agrees.
We decided to check in with Damon Lester, he's president of the National Association of Minority Automobile Dealers, and he's been getting an earful from his members about the program. Also joining us is Sarah Webster. She's the automotive editor for the Detroit Free Press, and she's been covering the program extensively. Welcome to you both.
Mr. DAMON LESTER (President, National Association of Minority Automobile Dealers): Thank you for having me.
Ms. SARAH WEBSTER (Editor, Detroit Free Press): Thank you.
LUDDEN: Damon, let me ask you first. When the government announced the end of the program last Thursday many dealers were bracing for a flood of people coming in over the weekend, last minute customers. Have you seen that?
Mr. LESTER: We saw quite a few additional traffic coming through, but a lot of the dealers were little suspect on taking additional customers as they haven't been paid yet.
LUDDEN: And they were worried that money would run out, right?
Mr. LESTER: Yes.
LUDDEN: Did you actually have some members who just closed up shop early on this program?
Mr. LESTER: Yeah, we have several members that are due reimbursements well over a million dollars that have stopped.
LUDDEN: So, were people coming - showing up, though, to be a last-minute customer and being turned away.
Mr. LESTER: Yes, they were being turned away.
LUDDEN: Did you have others, though, who are maybe doing long hours and open late to accommodate the crowd?
Mr. LESTER: Both ends of the spectrum. Basically, some of the dealers that still wanted to (unintelligible) and have the additional cash flow to withstand the timeframe for reimbursement have kept the doors open and are still taking customers.
LUDDEN: So, if they could - if they had the cash flow, they could do it, if not.
Mr. LESTER: Yes.
LUDDEN: Sarah, you're in the Detroit area, which has been awfully hard hit by the auto crisis. I just want to ask you a general question. First, would you deem this program to have been a success?
Ms. WEBSTER: Oh, I think it's been a wild success, and even the dealers who are very frustrated with the program I think would say that. They're just wishing it was executed better. In fact, some of the dealers who I talked to who were complaining about the program said, God, the next time the government does it I really hope they do it better which - I was like, well, why do you want them do it again, and they're very anxious.
I think the thing that's been most successful about this program is just that it stimulated the economy for so long, these dealers have been seeing little to no traffic through this recession. And so, all of a sudden you have a program that's actually getting people into their showrooms, and I think that when the August sales numbers come in in a few weeks, we're going to see that, you know, not only did we get, you know, a bunch of sales under the Cash for Clunkers program, but when you have so many people going into showrooms and even maybe people who were turned away for a Cash for Clunkers deal, they were cross-shopping. They were looking at all sorts of cars and trucks when they go in the showrooms. They're not like maybe sticking to their plan to get a vehicle under the program.
So, you're probably going to see a lot of vehicles that were purchased outside of the program even though people maybe went into the showroom looking to buy, you know, fuel efficient car and trade in a clunker. So, I think that it's going to be a very successful program. You know, unfortunately, I don't think anyone was prepared for how the great demand that would be stimulated by this program. And I think that's really a shortcoming. You know, maybe the government should have anticipated the best-case scenario which is, you know, hundreds of thousands of people are going to be going to showrooms to try to cash in on this.
LUDDEN: What about in the auto industry itself? I mean, have we seen laid off workers called in to produce more cars. What impact has there been there?
Ms. WEBSTER: Absolutely. You know, for example, we have a Ford Focus plant here right in Metro Detroit, and the Focus was one of the top selling vehicles under the program. And they've been running extra shifts at that factory. They've been calling workers back at a lot of factories to try to add more production into the system because inventories are incredibly low. You know, they haven't seen this for a while.
And to begin with, during the recession, production has been cut pretty dramatically so that the automakers wouldn't have a lot of excess inventory. The knew demand was going to be low for a period of time, so they had cut back production.
And so you had very little inventory headed into this program. So, this is just a severely aggravated situation. So, a lot of workers being called back to work, a lot of extras shifts, a lot of overtime, people are very happy about it.
LUDDEN: So, Damon, Sarah says wild success there. Is that what you are hearing from your dealers?
Mr. LESTER: Well, absolutely. The program definitely achieved its goal with driving traffic back into the showrooms, consumers were trading their old high-fuel economy vehicles and purchasing more fuel-efficient vehicles. So, in essence, the program worked. The issue was just, as Sarah mentioned, execution of the program definitely needed some drastic improvement.
LUDDEN: And give me a sense of that from the dealer's perspective. What was happening on their end?
Mr. LESTER: You know, a lot of the issues have to do with the administrative side of the paperwork that was involved. There's a average timeframe to complete the paperwork was of odd hour…
LUDDEN: A long time.
Mr. LESTER: …which takes a lot of time. And once they submit the paperwork over to NHTSA, the issue was…
LUDDEN: NHTSA being?
Mr. LESTER: National housing transportation…
LUDDEN: The government agency. Okay.
Mr. LESTER: The government agency, I'm sorry. And the issue has been - once a document has been submitted, if all the information was not completed, they had to be rejected. So there's a lot of timeframe with that as well as the system crashed on several occasions early on implementation of the program.
LUDDEN: And that I believe is the National Highway Traffic and Safety Administration. Sarah, has there been any effort there on the government's part to deal with these hiccups?
Ms. WEBSTER: I think that they're trying as best they can. You know, I heard recently that they had hired, the number of people that they had hired was about in the 1,000 or so range. And, you know, the people I talk to said that, you know, incredibly - that shows a lack of understanding about how many dealers there are in this country and, you know, how many shoppers something like this would have generated.
You know, in fairness to the government incentives, we've had almost, you know, 10 straight years of wild incentives in the auto industry, you know, discounts of up to seven and $10,000 on SUVs and pick ups and so forth. So, I think that many people thought that the market was, you know, pretty resistant to incentives.
So, I think people, even the automakers that I've talked to, they're sort of surprised that this program has worked so well because it wasn't really that uncommon to have a $5,000 rebate on a car or truck in the past. So, the fact the government offers it and people rush in the showrooms is, you know, little bit unexpected to be quite honest.
LUDDEN: If you are just joining us, I'm Jennifer Ludden and this is TELL ME MORE fro NPR News. At 8 o' clock tonight, the popular and controversial Cash for Clunkers program will end. Was it as successful as the U.S. government says? We're checking in with Damon Lester from National Association of Minority Automobile Dealers and Sarah Webster, automotive editor for the Detroit Free Press.
Damon, you had said that, you know, some dealerships - even though they weren't getting the reimbursements from the government in a timely fashion - were able to keep bringing in more customers and kind of float themselves through this period. But others didn't have the cash flow and had to shut down early. Is there - can you give us a breakdown, a sense of is it big dealerships versus small or is it geographical?
Mr. LESTER: A lot of the larger dealerships have stopped participating in the program. Largely because the amount of receivable that's due back to them from the government, which on an average those larger dealership range over a million dollars. The smaller ones are still taking customers.
LUDDEN: I'm curious. Who are the customers? I mean, have you been seeing people who thought wow I get this $4,500 bucks now, I guess I can spend the other 15,000 for a car or are these people who are just - that car's on it's last leg and, man, they were going to have to do something soon anyway. And they just kind of speeded it up and now there's going to be a big dry spell, what do you think?
Mr. LESTER: We've been told is that the consumers that have been coming in their showrooms are the families that have three or four cars, maybe a daughter or son is on their college. And they're trading in that older vehicle, and they're actually purchasing a newer vehicle for their sibling. So that's what we'll see, And a lot of it has been cash transactions.
LUDDEN: So this is a car they would not have bought otherwise?
Mr. LESTER: Yes.
LUDDEN: Sarah, is that what you're hearing?
Ms. WEBSTER: Yeah. And if you take a look at the top 10 vehicles traded in, you know, you see a lot of pick up trucks like the F150 and, you know, SUVs, Grand Cherokee, Explorer, you know, some minivans. I think that, you know, this is just a good opportunity for people who maybe had, you know, an extra pick up that they don't use that often to trade it in and get some more useful product in their driveway. So, I think that it's been a wide range of customers though.
And, you know, back to your question about the size of dealerships that had slowed down on the program. You know, we've talked to tons of dealerships of all sizes and even some small dealerships are carrying receivables of say 600, 700,000 on their books right now. You know, that's a lot of money for a dealership to take out of their system, so to speak.
So I think that even though a lot of dealers had been turning people away for Cash for Clunkers, I think they're still happy to see that traffic walk in the door because, as Damon can tell you, a good dealer can sell somebody something else. So if you come in looking for a, say, a Ford Focus, you know, they might be able to sell a Ford Edge Crossover or something like that. So, I think that there are still really happy for the traffic even though, you know, some of them have started to back out of the program.
LUDDEN: So, Damon, you're not expecting a big dry period now that it's going to continue to what it was or do you think there might be a continued boom like Sarah is suggesting. Maybe people started to get the idea in their head and maybe they'll still come in and get something.
Mr. LESTER: One of the successes of the program is that it has boosted consumer confidence to go back in the showrooms. As last year, as seen with the turmoil within the industry that we've been in a such low period for so long that this program has shown that it's so much pent up demand that we hope that post this program that people will continue to go in the showrooms.
LUDDEN: Sarah, what about among the various car companies, which cars got bought more, who are the winners and losers there?
Ms. WEBSTER: Well, if you at the list of top 10 vehicles traded in, it's all domestics. It's GM, Ford and Chrysler products. And if you look at what was purchased only 41 percent of the market share under the program went to the GM, Ford and Chrysler. So, you know, they sort of come out on the losing side. That said, I think that, you know, the companies were very happy to see, you know, GM, Chrysler just came through bankruptcy, for goodness sake. I mean, they did not think things were going to go this smoothly. That's why they resisted going into bankruptcy for so long.
So I think that the fact that people are still buying their products, I think that, you know, this gives little more confidence to them that they're going to be able to work through this and, you know, be able to generate customers again. So I think that even though their, you know, market share is fairly low, coming out of this program that they're still very happy about it. And Ford, in particular, did a bit better than the others. They had two products that were in the top 10 vehicles…
Ms. WEBSTER: …purchased under program. That was a Ford Focus compact car and the Ford Escape, which is a small SUV type product.
LUDDEN: All right. All right. Sarah Webster is the automotive editor for the Detroit Free Press and joined us from Radio Broadcast Services in Royal Oak, Michigan. Damon Lester is president of the National Association of Minority Automobile Dealers and joined us here in Washington, D.C. Thanks to both of you.
Ms. WEBSTER: Thank you.
Mr. LESTER: Thank you.