Boy, that was fast. The U.S. government's "cash for clunkers" program, launched last week, has already burned through nearly $1 billion.
Even though the funds to be used as rebates for new car purchases have already been spent, government officials are reportedly working to keep the popular program alive. Sources deny reports surfacing late Thursday that said the program was suspended and note that officials "are working to keep it up and running."
USA Today and other news outlets reported that the government suspended the program, which was originally intended to last through October. According to Politico, the Obama Administration told Congress that the program was going broke and in danger of blowing through its full $1 billion in program funding in a single week.
Autoblog reported early Thursday that dealers had requested $95 million. Apparently, additional funding requests were several times that number.
Clearly, the program fulfilled its intended purpose of giving a boost to the auto companies. Less clear is the efficacy of the program as an economic stimulus mechanism. U.S. automakers and legislators had pushed for a $4 billion program but the ballooning budget deficit spooked Congress and the administration into cutting "cash for clunkers" down to a smaller size.
Dealers are fuming. Many are fearful they will get left holding the bag for clunkers they had accepted but will not be able to redeem for rebates. Consumers, likewise, are angry that the program ended nearly as soon as it started. (Click here to read one car buyer's story about actually using the "cash for clunkers" program.)
Car makers are aggressively pushing to expand "cash for clunkers," which was a nice way to expand their sales at the taxpayers expense and, in many cases, encourage people trade in older cars for newer models with moderately better fuel mileage.
The Obama administration and Congress will likely figure out a way to expand "cash for clunkers" as the political pressure to do so is likely to be excruciating. And the program has been, in the eyes of many, an unqualified success. According to auto analysis firm J.D. Powers Assoc., "cash for clunkers" has created 110,000 new sales. In some cases, these sales were not people who qualified for rebates but those who attempted to sign up, realized they were ineligible, and bought a new car anyway.
The only obvious losers could be dealers who likely took in more clunkers than they will be able to redeem. This could hurt struggling dealers, who have seen sales fall to historic lows due to the general weakness in the U.S. and global economy. Most likely, this would impact dealers selling autos made by U.S. firms. GM, Chrysler and Ford all have significantly higher numbers of dealers per thousand cars sold as compared to the Japanese makers. Unforeseen costs due to rebate snafus could disproportionately hurt GM, Ford and Chrysler dealers.
Update: Reports indicate that on Friday morning Congress is working on a $2 billion extension of the program.
For more information on the "cash for clunkers" program, please visit AOL Autos.