WASHINGTON — Finally, a bailout for truly needy Americans: the owners of gas-guzzling, rust-bucket, heap-of-junk, rattletrap pieces of — well, let’s just say jalopies.
A concept embraced by President Obama on Monday as part his effort to save General Motors and Chrysler from collapse would provide cash to buyers of new fuel-efficient cars — if they traded in a clunker.
Similar incentive programs overseas have lifted automobile sales despite the awful economy. In Germany, an offer of about $3,290 for trade-ins helped to increase February car sales there by 21.5 percent from a year earlier, a 10-year high, according to the German Association of the Automotive Industry.
In the United States, the economic stimulus bill adopted in February provides a tax incentive for the purchase of new cars this year, but Mr. Obama said Monday that he supported lawmakers who wanted to take more aggressive steps, offering not just a rebate on the sales tax, but a large cash incentive for trade-ins.
A bill in the House, sponsored by Representative Betty Sutton of Ohio, would do just that, offering incentives to owners who replace cars built before the 2001 model year.
Ms. Sutton’s measure would give those trading in an old car a $4,000 voucher that could be used to buy a new car that was assembled in the United States and has a fuel efficiency rating of 27 miles per gallon. A car assembled elsewhere in North America would have to get 30 miles per gallon to qualify for the $4,000. And cars that are both assembled in the United States and rated at 30 miles per gallon would fetch a $5,000 voucher.
Officials said the program could cost $2 billion or more depending on how long it operated. Ms. Sutton said the most important thing was to get the program started quickly. “The urgency for its initiation is extraordinary,” she said.
A similar bill in the Senate would provide slightly less generous subsidies, and is aimed more at protecting the environment than spurring car sales.
The Senate measure would offer up to $4,500 for the trade-in of gas guzzlers up to seven years old, $3,000 for cars that are eight to 10 years old and $2,500 for cars older than that. The Senate bill is not limited to cars assembled in North America.
“Such fleet modernization programs, which provide a generous credit to consumers who turn in old, less fuel-efficient cars and purchase cleaner cars, have been successful in boosting auto sales in a number of European countries,” Mr. Obama said. “I want to work with Congress to identify parts of the Recovery Act that could be trimmed to fund such a program and make it retroactive starting today.”
But Mr. Obama called for using money already allocated in the $787 billion economic recovery legislation, meaning that other programs would have to be cut to provide the new vouchers to car buyers, a process that could face political opposition.
Limiting the program to cars built or assembled in North America could also draw protests from trading partners, who may contend that the rules violate international trade agreements. Nearly a dozen European countries have adopted programs offering cash to drivers who trade old cars for more energy-efficient models. Those programs are not limited to vehicles manufactured in Europe or any specific country.
American auto dealerships, which have been going out of business steadily in the last six months, were generally supportive of the trade-in incentives.
“The Germans started this a few months ago, and it did help stimulate their auto business,” noted Annette Sykora, a past chairwoman of the National Automobile Dealers Association and owner of two dealerships outside Lubbock, Tex.
Ms. Sykora added, however, “The No. 1 thing dealers need is a freeing up of credit, and I didn’t see that in the announcement today.”
Differing variants of “cash for clunkers” programs have been tested in California, Colorado, Delaware, Illinois, Texas, Virginia and a handful of Canadian provinces, and are now being implemented in Texas and California.
In California, a statewide program has been in effect for about a decade, and it is about to be expanded. Drivers whose vehicle fails a smog check are entitled to have their car scrapped and are paid $1,000 in return. The payment is increased to $1,500 for low-income drivers. About 20,000 vehicles are taken off the road every year through this program, according to the California New Car Dealers Association.
The state is preparing a new version of the program to begin in January, with the goal of scrapping an additional 60,000 vehicles a year. The new program will not require that a vehicle fail a smog test, and it will include vouchers to buy new vehicles paid for by new car registration fees.
The Texas program, which has been in effect for about a year, gives low-income drivers vouchers of up to $3,500 to trade in cars that meet various conditions including a failed emissions test or have been on the road for over a decade. The program serves only parts of the state, including the Austin, Dallas-Fort Worth and Houston metropolitan areas.
David M. Herszenhorn reported from Washington and Clifford Krauss from Houston. Nelson D. Schwartz contributed from Paris.http://www.nytimes.com/2009/03/31/b...?_r=1&th&emc=th