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Cash for clunkers overseer backs new ‘lifeline’ for dealers, automakers

3 min read

A federal program to issue rebates to U.S. consumers toward the purchase of a new vehicle could provide a much-needed jolt to the auto industry that’s seen plants idled and showrooms emptied by the coronavirus, according to the Obama administration official who oversaw the program known as cash for clunkers.

Ray LaHood oversaw the program officially named Cars Allowance Rebate System as Transportation Secretary in 2009. In an interview, he backed a Ford Motor Co. executive’s suggestion that a sequel to the program could be helpful if the industry, lawmakers and the Trump administration agree that auto demand needs a boost once the virus begins to abate.

“It was a lifeline to the car dealers whose showrooms were looking pretty bleak without any customers, and I think if you talk to anybody in the automobile industry it was the beginning of the lifeline for the automobile industry from the Obama administration,” LaHood said Thursday. “If they can model something differently to suit the current-day situation, I’m for that.”

Automakers, suppliers and dealers have grown increasingly nervous about their near-term prospects as the virus has ground the industry to a halt and spurred discussion about possible need for government support.

New vehicles sold at the slowest pace in a decade in March as government directives closed broad swaths of the economy to thwart the spread of the virus. Nearly every U.S. auto factory has been idled and executives will be hard pressed to restart them until consumers begin to buy cars again.
U.S. auto sales rate slows to 2010 levels

AutoNation Inc, the largest U.S. dealership chain, said Friday that new- and used-car sales plunged 50 percent in the last two weeks of March and prompted the company to put 7,000 employees on unpaid leave. The retailer slashed executive pay, halving compensation for its chairman and chief executive officer. It also froze hiring and will cut advertising and other capital expenditures.

Ford has begun internal deliberations about potential forms of government stimulus, including a clunkers-style program that the industry may need, and those talks are expected to soon involve the federal government, Mark LaNeve, the automaker’s U.S. sales chief, said Thursday.

“We think some level of stimulus somewhere on the other side of this would help not only the auto industry and our dealers, which are a huge part of our overall economy, but will help the customers as well,” LaNeve said by phone. “We’re in discussions about what would be the most appropriate.”

The 2009 program gave consumers a federal rebate of up to $4,500 toward trading in an older, less fuel-efficient car. Nearly 700,000 older, gas-guzzling vehicles were traded in under the program. LaHood said the program not only provided a much-needed boost to the auto industry but put cleaner cars and light trucks on the road and scrapped gas guzzlers.

Consumers quickly exhausted the initial $1 billion in funds allocated by Congress, which provided $2 billion more. That $3 billion triggered more than $13 billion in auto purchases in just a few months, Morgan Stanley analyst Adam Jonas wrote in a March 13 report in which he called such a rebate program a potentially powerful tool to stimulate the sector.

So far though, policymakers haven’t openly discussed specific forms of industry aid. Automakers have so far urged lawmakers and the Trump administration to pursue broad means of economic support, stopping short of calling for aid specific to the auto sector.

Rep. Debbie Dingell, D-Mich., whose district is home to Ford’s headquarters, said a vehicle scrappage or purchase incentive has been discussed as a possible form of relief for the industry, but consensus hasn’t been reached yet in Washington.

“It’s out there as an idea along with many other ideas,” Dingell said. “We’re working with the entire ecosystem of automakers, workers, their unions, suppliers, dealers and consumers.” 

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