A program that didn’t run on all cylinders; Close Up.(News)

The Seattle Times (Seattle, WA) August 21, 2009 Byline: Stephen Manning; The Associated Press WASHINGTON — It’s revived business at car dealerships, taken gas-guzzlers off the road and given a needed boost to struggling auto factories. By many measures, the government’s “cash for clunkers” program has been a success. fitzgeraldautomall.net fitzgerald auto mall

Yet, as it winds down, there is another lasting image: the hasty planning and troubled execution that nearly derailed the program early on and, lately, led some frustrated dealers to drop out amid long waits for the government money.

The responsibility for the $3 billion stimulus program’s flaws is widely spread.

* Congress — relying on auto-industry forecasts that the program wouldn’t have a major effect on moribund sales — deeply underestimated how many people would be lured to dealerships by rebates of up to $4,500. Lawmakers initially committed $1 billion, an amount that was burned through in just a few weeks.

* Transportation Department officials, presented with only 30 days to launch the program, didn’t set aside enough staff or resources and were overwhelmed by the heavy response from consumers. Systems set up to handle and reimburse dealer claims were swamped.

* Government rules to prevent fraud created paperwork requirements that many dealers didn’t understand fully.

* Hungry for sales, dealers made cash-for-clunkers deals weeks in advance even though they were advised against it. This created a big backlog the moment the program officially began. And many still are filing bad paperwork that is holding up their claims, despite repeated government attempts to clear up the confusion.

Dealers are thrilled with the revived sales but say the lesson learned is clear — more time and planning was needed to make the clunkers program a true success.

Problematic bureaucracy “I love the sales, but the bureaucratic end of it is very problematic, very frustrating and very unnerving,” said Scott Addison, an executive with the suburban Washington, D.C.-based Fitzgerald Auto Mall dealership chain.

The program will end Monday night, the Transportation Department said Thursday, saying dealers must have all their claims filed by then to be repaid.

Approved in June, the program seemed straightforward. Dealers would offer rebates to customers seeking to trade in older vehicles for new, more fuel-efficient car and trucks. The dealers would front the money and then be reimbursed by the government.

The program has been a huge hit with car buyers. About 450,000 new vehicles have been sold under the program, worth nearly $2 billion. That is far more than original expectations of analysts, who believed cash-for-clunkers would provide only a small bump in sales.

Automakers are scrambling to fill depleted inventories of the Fords, Toyotas and Chevrolets that are the most popular sellers. General Motors added shifts at some plants.

But the program also has been a bureaucratic headache.

Besides the relatively brief setup time, Congress picked the National Highway Transpiration Safety Administration (NHTSA), a Department of Transportation division that specializes in road safety and vehicle recalls, to run the program. NHTSA never had run a program like this before. It devoted 30 employees and 200 contractors to handle the program — and they were swamped almost from the moment applications began rolling in.

“We were not anticipating the number of transactions would be anywhere near what it is at this point,” Daniel Smith, the NHTSA associate administrator overseeing the program, said in a recent information session with dealers.

The agency has tried to fix problems as they arise. Staff working on the program is being tripled to 1,100, the computer system has been beefed up and some rules that dealers found especially time-consuming have been eased.

Part of the reason for the backlog in paperwork is that dealers ignored government warnings and started cutting cash-for-clunkers deals weeks before the program officially began. Thousands of sales were waiting to be processed when the program began July 27.

Moreover, many shoppers were buying vehicles that were much more fuel-efficient than their trade-ins, making them eligible for the higher $4,500 credit. That meant the original $1 billion couldn’t go as far.

The government’s computer system also was overwhelmed. Some dealers brought staff in after midnight to try to scan and send documents, only to have the online system crash. Transportation officials eventually improved the computer system to smooth the claims process.

But many of the problems lie with dealers. For example, many cash-for-clunkers deals weren’t approved because dealers didn’t write “Junk Automobile, Cars.gov” in black magic marker on the title of the older cars buyers were trading in. website fitzgerald auto mall

Government officials say the tough rules are needed to prevent fraud. “Part of the problem is … some of the information was not provided to us,” Transportation Secretary Ray LaHood said. “The application or the form that needed to be filled out by the car dealer was inadequate, and we had to send it back to them. That caused a great deal of delays.” Regardless, dealers often have to wait up to 10 days just to find out a claim has been rejected, meaning they have to start over. And only 167,000 of the 458,000 applications had been reviewed as of Thursday, creating a huge backlog.

Underestimations The government had estimated each dealer would make only about 12 sales under the program. But a NADA survey showed that dealers were making about 14 sales each, with some making more than 100. The survey, sent to lawmakers and the White House late on July 30, showed that the program was running out of cash fast.

In Washington, D.C., that news created broad confusion, prompting Congress to add an additional $2 billion. But problems persisted, as dealers reported they were fronting rebates worth millions of dollars without getting repaid. That created a cash crunch for many.

LaHood said this week all dealers will be repaid. But some in states such as New York are starting to pull out of the program, saying they can’t afford the long waits.

“The program is choking on its own success,” said Connecticut Attorney General Richard Blumenthal, who sent a letter Thursday to LaHood asking it to reform cash-for-clunkers. “It expanded exponentially without sufficient basic preparation.” Associated Press reporter Ken Thomas contributed to this report.

CAPTION(S):

Mark Lennihan / The Associated Press: A combination of factors sent significantly more ”clunkers” to junkyards to be flattened and shredded than auto dealers or the government expected. The program’s success choked computer systems receiving applications for rebates and left dealers without payouts for weeks. (0409638288)