If you have any intention of taking advantage of Cash for Clunkers, better get a move on. The program is in its final days, scheduled to end Monday at 8 p.m. Time to get that gas-guzzler in gear and on its way to your local dealer.
After riding a rollercoaster on this program -- first it was going to flop, then it took off, then the bureaucrats couldn’t accommodate demand and got behind on the paperwork, then it ran out of money, then they refunded it, then the bureaucrats got behind again, then it ran it ran out of money again -- maybe it’s time for some reflection.
Cash for Clunkers was good for the industry, and it got people not only buying cars again, but thinking green. Most of the bestselling cars in the program were small and fuel efficient — and four of them (Fords Escape and Focus, Dodge Caliber and Chevy Cobalt) were even American. Auto dealers pushed through at least $1.9 billion in deals, sold more than 457,000 cars.
The program requires that the engines in all clunkers be DESTROYED, and this video documents the process: Car lovers and small children should avert their eyes:
Sure, the program is a mess. Only 40 percent of the transactions have been processed, and some dealers pulled out earlier this week (hundreds in New York alone) because they didn’t have any more cash to advance while waiting to be reimbursed.
Another caveat: The program could have blowback. We may see months of auto industry famine after the feast of Cash for Clunkers. According to Joseph D. Blackburn, James A. Speyer Professor of Production Management at the Vanderbilt Owen Graduate School of Management, we might see what he calls “the bullwhip effect.” He describes it as “false euphoria” — the automakers are pushing up production volumes (GM by 20 percent in the third and fourth quarters) in anticipation of demand that might not materialize.
Blackburn thinks a lot of clunker deals may have been “forward buying” — people going ahead with purchases they might have made next month. “It’s dangerous,” he said. “If the automakers overact on volume, it could be feast and famine. It’s pretty expensive for everybody in the supply chain.”
On the other hand, economic recovery could return auto sales to a more normal level. Automakers, used to 16 million sales a year, will have to contend with less than 10 million in 2009 — and that’s with Cash for Clunkers.
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