U.S. Launches Auto ‘Clunker’ Program

In what may prove to be boon for the U.S. auto industry and, by extension, Midwest states that have been adversely affected by auto manufacturer bankruptcies, the U.S. government launched its $1 billion cash incentive program to stimulate auto sales by getting consumers to part with gas guzzling cars and trucks and buy more fuel efficient vehicles.

The program, which offers up to $4,500, will be overseen by the Transportation Department. Dealers and manufacturers are offering additional incentives, including matching funds in some cases, to help boost sales. Congress approved the program to help the U.S. auto industry after handing out billions of dollars in bailouts and the bankruptcies of General Motors Corp and Chrysler Group.

Trade-ins must get no more than 18 miles per gallon; they must be drivable and no more than 25 years old. No model later than 2001 will qualify. Trade-in vehicles must also meet specific ownership and insurance criteria.

The government estimates the program will help finance up to 220,000 new car purchases, or about 12 per dealer in the United States. The program is not expected to boost manufacturing output unless it is extended beyond $1 billion.

Congress has not ruled out additional funding if the program is successful.

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