http://www2.timesdispatch.com/rtd/business/transportation/article/CASH15_20090814-215206/286145/

PETER BACQUE AND LOUIS LLOVIO TIMES-DISPATCH STAFF WRITERS
Published: August 15, 2009

Richmond Ford has sold 74 cars and trucks thanks to the federal government's wildly popular cash-for-clunkers rebate program.

But so far the dealership has received zero dollars due it from the federal auto-sales promotion, according to Richmond Ford President Ron Kody.

"Until the government pays the dealers," Kody said yesterday, "we're burning through a lot of our cash to make these deals work."

McGeorge Car Co. Inc. has taken in 141 cash-for-clunker deals, marketing manager Nick Scola said, while receiving only 11 approvals back from the federal government and just six payments.

Virginia auto dealers, already pummeled by the recession, are waiting worriedly for millions of dollars from the government in reimbursements from the cash-for-clunker program, which has far outpaced expectations for its popularity with consumers.

"The dealers are absorbing a considerable amount of risk," Scola said yesterday. "Essentially we're extending an interest-free loan to the federal government."

A survey this week of the Virginia Automobile Dealers Association's membership indicates that the U.S. Department of Transportation has approved less than 10 percent of cash-for-clunker transactions and reimbursed dealers for less than 3 percent of their deals. Almost 10 percent of applications were rejected.

Almost 20 percent -- 102 -- of the association's 519 members participated in the survey. They said they'd made 4,072 cash-for-clunkers deals, for an average of 36.4 per dealer.

Without identifying them, "I've got one dealer at $3 million, two or three at $2 million" in federal rebates due them, said Don Hall, the dealer association's president. "They're all sweating right now because the money's slow."

"I do believe they'll be paid," Hall said, but "the federal government has got to get its act together."

The hurriedly implemented rebate program gives buyers either a $3,500 or $4,500 discount toward a more environmentally friendly vehicle when they trade in their old gas-guzzling car or truck, and then purchase or lease a qualifying new one.

By yesterday, dealers nationally had sold 358,851 cars and trucks worth about $1.5 billion through the cash-for-clunkers program, the U.S. Department of Transportation said in Washington.

On July 27, the National Highway Traffic Safety Administration, which is handling the program for the federal Transportation Department, estimated that cash-for-clunkers would drive sales of only 250,000 vehicles.

"NHTSA didn't expect, none of us expected, the response to the program to be as strong as it was," said Michael Allen with the Virginia dealers association.

The program is supposed to end Nov. 1, though McGeorge's Scola doubted it would last till next weekend: "I think they'll run out of money."

"What happens if they figure out in 30 days from now that a million deals were done?" Kody said. "Will we get reimbursed? If we don't, we've lost money on every deal."

The Traffic Safety Administration normally is responsible for safety highway safety and research, not auto-sales promotions like cash-for-clunkers.

However, the agency said in a statement yesterday, "The Department of Transportation is committing enormous resources and working overtime to process the overwhelming volume of applications both quickly and responsibly while getting rebates paid for complete and valid deals."

The federal Transportation Department said it "has also been holding daily sessions with dealers and their associations to emphasize the importance of submitting fully complete applications and avoiding common but important mistakes. The information we are asking for is required under law to make sure we provide money only for legitimate transactions."

Some auto manufacturers' financing divisions and banks are trying to help dealers as they sweat out waiting for the federal payments.

American Honda Motor Co. yesterday said it would underwrite dealers, who finance their inventory through the manufacturer, until the dealers get paid.

David Iida, a spokesman for Honda, said dealers would get an additional 20 days to pay off vehicles sold under the "clunkers" program. About 250 U.S. Honda dealers and 60 Acura dealers are affected. Dealers usually have about seven days to pay Honda back.

Toyota Motor Sales U.S.A. and Dallas-based Comerica Bank reportedly have offered dealers similar aid.

Under the cash-for-clunkers program, the old vehicles' engines have to be irrevocably disabled by having the oil drained from the engine and replaced with sodium silicate solution that seizes the motor.

Vehicles can then be sent to salvage yards as scrap.

"We'll have to pay $50-$100 to have them hauled off," Richmond Ford's Kody said.

Central Virginia dealers said they are holding off on disposing of the cars until the federal government pays up.