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U.S. House Approves ‘Cash for Clunkers’

The U.S. House approved a plan Tuesday offering up to $4,500 for owners of gas-guzzling clunkers to trade in their wheels for new models in a bid to boost the lagging market for new vehicles.

With broad support from both political parties, the bill passed by a wide margin of 298-119, with two abstaining. Backers in the Senate hope to attach it to whichever major bill will move through that chamber next, although there's still a disagreement there over whether the plan should focus on higher-mileage models.

The House bill sets aside $4 billion to pay for electronic vouchers given to owners of older vehicles toward new models. With auto sales running at their lowest rate in four decades, the Congressional Budget Office estimated the bill could spur sales of about 625,000 vehicles; backers are hoping for 1 million.

The act "will shore up millions of jobs and stimulate local economies," said Rep. Betty Sutton, D-Ohio. "It will improve our environment and reduce our dependence on foreign oil."

The government's interest in goosing the vehicle market extends to its ownership in General Motors Corp. and Chrysler LLC, both of which are counting on a healthier U.S. market in the coming years for survival.

"The auto industry is going through a tremendous restructuring," said Rep. Sander Levin, D-Mich. "If there is not increased demand, that restructuring cannot succeed."

Under the plan, owners of cars and trucks that get less than 18 miles per gallon could get a voucher of $3,500 to $4,500 for a new vehicle, depending on the mileage of the new model.

The plan does have several hurdles that will keep some potential buyers on the sidelines. The clunker being traded in will be crushed or recycled, meaning it will have no trade-in value beyond the voucher. Of the 25 million vehicles estimated to qualify for the voucher, most will be trucks: even 15 years ago, only five models of midsize sedans managed just 18 mpg.

To ensure the vehicles being crushed are actually coming off the road rather than cinder blocks, the trade-ins have to have been registered and insured for at least the past year.

The bill was backed not only by Detroit automakers, but also by the UAW, the National Automobile Dealers Association, the U.S. Chamber of Commerce and other business groups.

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