Congress To Vote On 'Cash For Clunkers' Plan

Under a House proposal, consumers could receive rebates of up to $4,500 for turning in their gas-guzzling cars and trucks for more fuel-efficient vehicle.

WASHINGTON (AP) -- With auto sales in the doldrums, the House was considering a plan Tuesday to provide vouchers of up to $4,500 for consumers who turn in their gas-guzzling cars and trucks for more fuel-efficient vehicles.

The House proposal, set for a floor vote Tuesday, was aimed at stimulating car sales during a bleak period for the auto industry and increasing the nation's fleet of cars that get more miles to the gallon.

General Motors Corp. and Chrysler LLC have received billions of dollars in government aid and the entire auto industry has watched car sales plummet during the past year. In May, overall sales were 34 percent lower than a year ago.

"Our industry has been stuck in neutral and really has not started to move," said Larry Kull, president of Marlton, N.J.-based Burns Kull Automotive Group, which includes General Motors, Honda and Toyota dealerships.

President Barack Obama has urged Congress to approve consumer incentives for new car purchases as part of the government's efforts to reorganize General Motors and Chrysler through the bankruptcy courts.

The vehicle scrappage bill has been under negotiations for months as lawmakers try to find a solution that boosts car sales while providing some environmental benefits. Proponents have pointed to similar programs in Europe that have enhanced auto sales.

Separately, House and Senate appropriators were discussing providing $1 billion to a supplemental war funding bill for the "cash for clunkers" program, which aims to generate about 1 million new auto sales. Since the yearlong vehicle program is expected to cost $4 billion, lawmakers would attempt to find the additional money later this year.

Under the House bill, car owners could get a voucher worth $3,500 if they traded in a vehicle getting 18 miles per gallon or less for one getting at least 22 miles per gallon. The value of the voucher would grow to $4,500 if the mileage of the new car is 10 mpg higher than the old vehicle. The miles per gallon figures are listed on the window sticker.

Owners of sport utility vehicles, pickup trucks or minivans that get 18 mpg or less could receive a voucher for $3,500 if their new truck or SUV is at least 2 mpg higher than their old vehicle. The voucher would increase to $4,500 if the mileage of the new truck or SUV is at least 5 mpg higher than the older vehicle. Consumers could also receive vouchers for leased vehicles.

Rep. Betty Sutton, D-Ohio, the bill's chief sponsor, said the bill showed that "the multiple goals of helping consumers purchase more fuel efficient vehicles, improving our environment and boosting auto sales can be achieved." Sen. Debbie Stabenow, D-Mich., has backed a similar version in the Senate, which has the support of automakers and their unions.

The bill would direct dealers to ensure that the older vehicles are crushed or shredded to get the clunkers off the road. It was intended to help replace older vehicles -- built in model year 1984 or later -- and would not make financial sense for consumers owning an older car with a trade-in value greater than $3,500 or $4,500.

Analysts said the bill, which has not yet been considered by the Senate, would encourage car shoppers but would not be a panacea for carmakers. The U.S. industry is expected to generate about 9.5 million vehicles sales in 2009, compared to more than 13 million in 2008 and more than 16 million in 2007.

Auto analysts questioned whether it would be enough of an incentive for many consumers burdened by debt or financially stressed by the troubled economy.

"That is the major sticking point for Americans: How do you finance your vehicle? How do you pay for it?" said Rebecca Lindland, an auto industry analyst for the consulting firm IHS Global Insight.

A group of senators led by California Democrat Dianne Feinstein were pushing an alternative version that would require consumers to trade up for more fuel-efficient cars and trucks to qualify. They complained that even a 2009 Hummer H3T, which gets 14 mpg in city driving and 18 mpg on the highway, could qualify for the incentives under the House bill.

Under Feinstein's plan, a passenger car owner's trade-in would need to get 17 mpg or less to qualify and only new passenger cars getting at least 24 mpg would be eligible. Owners could receive a $2,500 voucher for a new car that gets at least 7 mpg more than their old car. The voucher would increase to $3,500 for new cars with a 10 mpg improvement and $4,500 for new cars with a 13 mpg increase in fuel efficiency.

Old trucks, minivans and SUVs also would need to get 17 mpg or less under Feinstein's approach, and the new trucks, minivans and SUVs would need to get at least 20 mpg. The vouchers for the larger vehicles would also range from $2,500 to $4,500. The Feinstein plan would also provide a $1,000 voucher for the purchase of a used passenger car with a mileage of at least 24 mpg and a used truck or SUV with a mileage of at least 20 mpg.

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