Cash for Clunkers success limited by its flaws

updated 7:43 p.m. ET Aug. 20, 2009

WASHINGTON - It's revived business at car dealerships, taken gas-guzzlers off the road and given a badly needed boost to struggling auto factories. By many measures, the government's Cash for Clunkers program has been a success.

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, has 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, Congress deeply underestimated how many people would be lured to dealerships by rebates of up to $4,500. Initially, lawmakers committed just $1 billion, an amount that was burned through in just a few weeks.
• Transportation Department: Presented with just 30 days to get the program up and running, agency officials 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.
• Bureaucracy: Government rules to prevent fraud created paperwork requirements that many dealers didn't fully understand.
• Dealers: 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 are still 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 Cash for Clunkers a true success.

"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-based Fitzgerald Auto Mall dealership chain.

Cash for Clunkers will end Monday evening, the Transportation Department said Thursday, saying dealers must have all their claims filed by then in order to be repaid.

President Barack Obama declared the program a success Thursday, and government officials stress that dealers who get their claims in will 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.

FirstPerson Traded-in clunkers Msnbc.com readers share photos of their old jalopies destined to be destroyed as part of the government’s ‘cash for clunkers’ program.

It has been a huge hit with car buyers. About 450,000 new vehicles have been sold so far under the program, worth nearly $2 billion. That is far more than original expectations of analysts, who believed that 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 has added shifts at some plants to handle the extra demand.

But Cash for Clunkers, has also been a bureaucratic headache.

Congress only set aside about a month for the program to get up and running and picked the National Highway Transpiration Safety Administration, which specializes in road safety and vehicle recalls, to run it. The agency, known as NHTSA, had never 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 dealers' applications began rolling in.

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