U.S. ‘Cash-For-Clunkers’ Plan May Cover Overseas Cars (Update1)
April 17 (Bloomberg) -- U.S. lawmakers may let cars made overseas
qualify for a proposed “cash-for-clunkers” program in a bid to secure
passage of the measure, designed to help revive domestic auto sales at a
An option under consideration would distribute subsidies to new-car
buyers based on manufacturers’ U.S. market share, said Representative
Edward Markey, who crafted the idea. The approach may overcome
objections that an original plan subsidizes North American-made products
“What I have been looking for is a solution that would treat all
manufacturers fairly,” Markey, a Massachusetts Democrat, said in an
e-mail yesterday. “I am hopeful that this could prove to be a
constructive way forward that all sides could agree on.”
Spurred by the success of a similar program in Germany, backers say they
want to speed the measure through Congress soon after it returns from a
recess next week. The goal is to stoke sales at automakers including
General Motors Corp. and Chrysler LLC, which are surviving on taxpayer
aid and face bankruptcy deadlines imposed by the Obama administration.
New autos sold at an annual rate of 9.86 million units in March, making
the first quarter the slowest pace for 3-month sales in 27 years,
according to Autodata Corp. of Woodcliff Lake, New Jersey. The rate
averaged 16.8 million this decade through 2007.
“There are a lot of ideas out there on the table and certainly we’re
exploring them,” Representative Betty Sutton, an Ohio Democrat who
sponsored the original clunkers proposal, said in an interview. “I’ve
always been open to finding mechanisms, avoiding wrinkles, if people
have differing views.”
Consumers would get vouchers worth as much as $5,000 for trading in
models from 2001 or earlier for a new vehicle, under the legislation
Sutton proposed March 17. The program may spur sales by more than the 21
percent increase witnessed in Germany in February while improving the
environment, Sutton has said.
Other cash-for-clunkers proposals have been introduced by lawmakers such
as Senator Dianne Feinstein, a California Democrat, and Steve Israel, a
New York Democrat who put forth a plan in January.
Lawmakers, automakers, the United Auto Workers union and representatives
of President Barack Obama exchanged ideas on the clunker legislation
during Congress’s two-week break, Sutton said. Obama’s endorsement of
the concept March 30 creates “high likelihood” that lawmakers can
quickly resolve disputes over the plan, she said.
The question of how much in subsidies each manufacturer’s customers
should receive has been a sticking point.
A clunkers plan failed in Congress earlier this year after the UAW
voiced concern that foreign-made autos would be eligible for subsidies.
Sutton’s proposal responded to those concerns by making only products
assembled in North America eligible. Free-trade proponents said her plan
wouldn’t meet World Trade Organization requirements, and automakers that
import cars assembled outside the U.S., including Japan’s Toyota Motor
Corp., objected to the terms.
One compromise may be to disregard where vehicles are made in granting
subsidies, while awarding some sort of “bonus” for U.S. content, Sutton
Under the market-share approach also being considered, all manufacturers
who sell vehicles in the U.S. would be able to get at least some
subsidies, Sutton said.
General Motors had 22 percent of the market share in 2008, so its
customers would receive 22 percent of the federal funding set aside for
subsidies. Toyota, at a 17 percent U.S. share, would get 17 percent of
GM is “pleased to see that members of Congress are trying to address the
sticking points,” said Kerry Christopher, a company spokesman.
“Scrappage programs clearly have been highly successful in increasing
auto sales in other countries. The U.S. needs to follow suit.”
The UAW supports the new approach, said Alan Reuther, the union’s
legislative director. Subsidy amounts “would vary, based on the market
share of each manufacturer in some base year,” he said in an e-mail.
Michael Stanton, president of the Association of International
Automobile Manufacturers, said his group is studying the market-share
option. The Arlington, Virginia-based association represents
manufacturers such as Toyota and Honda Motor Co.
Incentive to Purchase
“We hope it’s crafted in such a way that all manufacturers can
participate,” Stanton said. “We would hope that at the end of the day a
consumer could be able to use the incentive to purchase the vehicle that
he or she wants.”
Talks on a cash-for-clunkers program will continue after Congress
reconvenes next week, said Nadeam Elshami, a spokesman for House Speaker
Nancy Pelosi, a California Democrat. “There’s broad bipartisan support
in Congress and we’re working with the administration,” he said.
It isn’t clear whether such a bill would be offered as a stand-alone
measure or attached to another piece of legislation, Elshami said.
“There’s momentum that has been generated” for a plan, said Stuart
Gosswein, director of regulatory affairs for the Specialty Equipment
Market Association. “We’re frustrated this was revisited as an issue.”
The Diamond Bar, California-based trade group, which represents
companies that make and sell parts for older vehicles, sent letters to
every congressional office April 14 outlining its opposition to a
clunkers plan, Gosswein said.
Trade-in vehicles would be “damaged in accidents or have mechanical
problems,” the group’s letter said. “These cars are not being driven
much in their current condition and have minimal impact on the