Cash for Clunkers payments speed up

WASHINGTON -- The government has compensated dealers for 70 percent of the cars sold under the popular Cash for Clunkers program and they should be fully paid by the end of September, the transportation secretary said yesterday.

Secretary Ray LaHood told the National Automobile Dealers Association that 478,000 of the nearly 700,000 car vouchers have been paid, or about $2.4 billion.

An additional 87,470 applications have been approved and are awaiting payment from the $2.8 billion auto-stimulus plan.

"There can be no doubt that this program drummed up more business, for more people, in more places, at a time when we most needed the help," LaHood said.

Under the program, car buyers could qualify for incentives of up to $4,500 to trade in their old gas guzzler for a new vehicle. Vehicle sales helped push the nation's August retail sales up 2.7 percent, reversing deep declines.

Transportation officials said about 60,000 dealer applications worth about $250 million have been rejected. LaHood said the department was working with those dealers to ensure that they are compensated.

Dealers had complained about delays in getting reimbursed, and LaHood said he was grateful to dealers for "hanging in there and being patient."

Many dealers in Virginia say they have seen a marked improvement in the system, said Michael Allen, a spokesman for the Virginia Automobile Dealers Association, which has been monitoring the program.

"I have heard from quite a few of our dealers that the pace of reimbursements has sped up tremendously over the past week," Allen said. "Several have told us that they have now been reimbursed for all of their outstanding deals."

John McEleney, an Iowa dealer who serves as NADA's chairman, said the program was a "boon to consumers, to automobile dealers and to the workers who build cars and trucks."

LaHood told dealers the government was "stunned" by the initial success of the program when 250,000 vehicles were sold in the first four days, but the government responded with 5,000 workers to review applications.

Dealers have opposed the closure of thousands of General Motors and Chrysler dealerships as part of the Detroit automakers' bankruptcies.

On Capitol Hill, rural dealers told lawmakers during a House hearing that the decisions will cost thousands of jobs and tax dollars and hurt many communities that depend on the dealerships for new cars, service and warranties.

"Eliminating a GM dealership in this rural community would be like closing a school or post office," said Don Thomas, owner of Thomas Motors Inc. in Moberly, Mo., the only GM dealership within a seven-county area.

Staff writer Louis Llovio contributed to this report.