Clunking right along

Dealers critical of government rebate program

The Cash for Clunkers government rebate program, which caused a frenzy of car sales and an equal frenzy of confusion, seems to be working - for now.

The rebate program has lured potential car buyers to dealerships with the promise of up to $4,500 to trade in vehicles getting 18 mpg or less to purchase new, more fuel-efficient models.

The main objective of the program, to get the automobile industry jump-started, has worked. Local dealers have reported nearly 100 clunkers traded in for newer vehicles. However, none reported that they have been reimbursed for the rebates they've given customers.

"It's been good for the automobile business," said Don Kaltschmidt, owner of Don K Chevrolet in Whitefish. "It's getting people shopping again and quite frankly, they weren't in here for a while."

The dealership has had 15 clunkers turned in.

Through early Thursday, nearly half of the $3 billion intended for the program had been spent, prompting sales of 339,000 new vehicles. Congress extended the program last week, adding $2 billion to the orginally slated $1 billion fund. Even that could be depleted by Labor Day.

Jason Hyndman of Eisinger Chevrolet and Cadillac in Kalispell said that the nuances of the program have tripped some people up.

"There are a lot of stipulations to the program - it's not as easy as bringing your car down and dropping it off," Hyndman said. "The biggest factor is if the car hasn't been insured for the last 12 months continually. But we're having faith in the program and we've going to continue using it. We're clunking along."

Eisinger Chevrolet and Eisinger Honda have had a combined 63 older cars traded in.

Steve Johnston, sales and new car manager at the Honda dealership said that the most popular fuel-efficient cars bought with clunker trade-in money are CRVs, a small sport utility vehicle, and the Fit.

Johnston has reservations about the program, however.

"It's producing business, but for employees it's a nightmare, getting everything in, submitting [the paperwork]," Johnston said.

Cars have been selling so quickly, too, that Johnston is worried about his depleted inventory.

"Everybody's running out of cars," he said. "When things were tough for a while, the manufacturers cut down the assembly plants."

General Motors Co. and Chrysler Group LLC shut down nearly all of their factories during their time under bankruptcy protection. Chrysler is now adding overtime at most of its plants to respond to expected demand for its 2010 models. Ford, meanwhile, is also working to raise production.

Foreign automakers with U.S. plants, such as Honda Motor Co., are taking similar steps. Honda spokesman David Lida said the company has seen a resurgence in demand for vehicles such as the Ridgeline truck, the Odyssey minivan and the Pilot SUV, along with the Civic sedan, all of which are built in the U.S.

Toyota Motor Corp. last month began increasing production of "core" models such as the Corolla sedan - the best-selling new model for traders of clunkers - the RAV4 crossover and the Tacoma truck at its U.S. plants. And Hyundai Motor Co. is recalling more than 3,000 employees at its plant in Montgomery, Ala.

Johnston is worried about overstock when the clunker program comes to a halt.

"Honda is different. We order two to three months ahead," Johnston said. "What happens when this program ends? Will we be stuck with a lot of cars?"

In the meantime, few dealers are offering additional rebates on vehicles beyond the clunker money because demand exceeds supply.

Tadd McDonald, the fleet manager of DePratu Ford, is concerned both about the rebate money the dealership hasn't received and also about the changes to the trade cycle the clunkers program has caused.

"If I were paid by the government right now, I'd be happy," he said. "We have 13 clunkers. That's $58,500 worth of my money I'm sitting on."

McDonald feels that the rebate program has revved up the economy for a short time, but is setting the automobile industry up for a tumble in the coming months. McDonald said DePratu has had its best six months in 10 years and worries about the sales lag he is certain is coming.

"I feel it's worked for the short term, but I'm really very nervous for the future," he said. "The program changed the trade cycles and pulled business ahead. It's pulling people out of the market that would have purchased cars in the next six months. We will hit a dry spell."

Dealerships aren't the only critics of the program. Mary McDonald of H2 Pure Power, a Kalispell company that sells hydrogen generator kits to supplement fuel, is urging people to 'save the clunkers." She said that the hydrogen generators work best with cars built before 1990, without computers in them, which can see 20-to 30-mpg gains.

"We feel a much better option for some people is not to go into debt to buy a new car," she said. "For less than a thousand dollars they could have a very fuel-efficient vehicle."

Kalispell Toyota and Glacier Subaru could not be reached for comment.

The Associated Press contributed to this report.

Reporter K.J. Hascall may be reached at 758-4439 or by e-mail at kjhascall@dailyinterlake.com