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Cash For Clunkers Leaves Dealers in the Lurch

An overwhelmed bureaucracy has left auto dealers with massive cash flow problems as they await government reimbursement.

by
Brian Douglas

Bio

August 18, 2009 - 12:39 am
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Politicians have been quick to crow about the success of the Cash for Clunkers program and its stimulative effect on automotive sales, and compared with dumping over $80 billion into AIG’s black hole, I suppose Clunkers seems like a home run. Thousands of consumers have benefited, cashing in their trades for $3,500 to $4,500.

But most of the auto dealers have been left trying to get reimbursed by the hastily conceived bureaucracy.

For some, it’s hard to work up a lot of sympathy for car dealers. Aren’t these the same miscreants that folklore suggests are less fun to experience than a root canal? Of course, most new car dealers are hardworking entrepreneurs who toil in a hyper-competitive business with high capital costs and modest returns. And with the recent turmoil in the car business, those who survived have struggled to stay afloat.

So the government-driven demand for new cars should be a welcome boon to business, but for most it’s become a boondoggle of paperwork submitted to too few government new hires — who reject 80 percent of the submissions. And even those forms that are correct in every way are still unpaid, leaving dealers who have worked the hardest on the program facing enormous cash flow problems.

Some have had to stop doing deals because they couldn’t float the feds any longer.

When this program was put into place, the Department of Transportation’s National Highway Traffic Safety Administration issued 136 pages of rules, followed by a 20 page amendment, to guide participants. With tongue firmly in cheek, the NHTSA folk claim that this sizeable stack of documents conforms to the government’s Paperwork Reduction Act. That’s a relief.

Among other requirements, the rules assure that participating dealers will be reimbursed within ten days, but that just didn’t happen. Transportation Secretary Ray LaHood held a news conference on August 4 and claimed that payments have begun dispersing after “computer glitches” were fixed. LaHood also claimed that other website problems were addressed and processing should go smoother.

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