(Source: Timesonline, UK & Autocar, UK)

A £2,000-a-car scrappage scheme aimed at kick-starting Britain’s depressed motor industry has hit trouble after a dispute between car companies and the Government over costs.

Manufacturers, including Ford and Honda, have told dealers not to register any new vehicles under the scheme, which is starting today.

Consumers are being offered £2,000 towards a new car if they trade in a motor that is at least ten years old.

The car companies said that they were seeking “clarification” from the Department for Business, Enterprise and Regulatory Reform (BERR) over “administrative” details.

The Government insisted that it had been clear on details of the scheme, under which manufacturers would pay £1,000 and the Government £1,000 towards the cost of the incentive.

However, the car manufacturers want dealers to share the cost.

The eleventh-hour hitch will come as a huge embarrassment to the Prime Minister, who had heavily promoted the “bangers for cash” scheme as the route to revitalising Britain’s depressed motor industry.

Gordon Brown and Lord Mandelson, the Business Secretary, visited a Nissan dealership today to talk to consumers signing up to the scheme.

Mr Brown said the £300 million project would prove “very popular” and “a great help to the British car industry.” It would help the economy to “move forward,” he said.

A BERR spokesman said: “Thirty-eight manufacturers have signed contracts with the Department which set out clearly that manufacturers provide £1,000 and the Government matches it.

“We understand several dealers are unhappy about the idea they should share the costs. The Government also needs to ensure VAT is paid in accordance with the scheme.”

Though the scheme was revealed in the Budget the final details emerged only at a meeting on Thursday, manufacturers said.

However, President of the AA Edmund King has pointed out that the £2000 incentive can be used as a deposit to help car buyers get finance. He added that the scheme would “transform the chances of survival in a crash for thousands of car owners” whose current old cars offer substantially less protection than newer models.

But Friends of the Earth executive director Andy Atkins said the scrappage scheme was “a lost opportunity”.

“A well-designed scheme could have played a limited role in cutting emissions from our roads,” he said. “But, unlike some other countries, the UK scheme doesn’t prevent motorists part-exchanging an old, small model for a brand-new gas guzzler.”

Business secretary Peter Mandelson visited a car dealership today to launch the scheme and said there has been a positive response from the industry.

“I am delighted by the response of the motor industry. Thirty-eight companies have signed up – all the major UK car manufacturers and a number of other companies. This means more choice for consumers and a boost for British brands. 



“The scheme has been met with a flood of enquiries from customers. It will provide a boost to the industry and kick-start sales.” 



The confirmed list of manufacturers who have signed up to take part are: Allied Vehicles, Bentley, BMW, Chevrolet, Citroen, Daihatsu, FIAT, Ford, Honda, Hyundai, Isuzu, Jaguar, Kia, Land Rover, London Taxis International, Mazda, Mercedes Benz, MG Motor, Mitsubishi, Nissan, Perodua, Peugeot, Porsche, Proton, Renault, Rolls Royce, SAAB, SECMA UK, Subaru, Suzuki, Toyota, Vauxhall, Volkswagen, Volvo, Koelliker UK Ltd, Iveco Ltd, Chrysler and Renault Trucks UK Ltd.

(Source: USA Today & Image: Jalopnik)

As the American lawmakers are getting ready to pass the landmark “cash for clunkers” legislation, many of you are still left wondering what this legislation entails and how it will affect you.  The media chatter in the past has offered very little except that the legislation would provide federal vouchers of up to $4,500 for people to trade in their older vehicles for new ones that get better mileage.

Talk of the vouchers has kept some would-be new car and truck buyers on the sidelines, waiting to see whether they’d qualify for government help. So, for the moment, the idea is hurting sales. Based on interviews with lobbyists and congressional offices, the USA Today captured the details of this legislation in a nice Q & A format:

Image: Newsday

Q: What’s the idea behind “cash-for-clunkers”?

A: Supporters say it would replace older vehicles with new ones that use less fuel, are safer and pollute less. And it would give the struggling auto industry a sales boost.

Q: What’s the bill’s status?

A: It’s in a House committee and backed by the president. Senators from both parties are prepared to co-sponsor similar legislation as soon as this week.

Q: Sounds like a sure thing.

A: Not so. Environmental lobbyists, who don’t think it boosts fuel economy enough, might derail it or get it changed enough in the Senate that a compromise would take awhile.

Q: Any groups trying to keep it from being derailed?

A: You bet. Car companies, autoworkers, component suppliers and car dealers, among them. The House bill “will help jump-start auto sales and the U.S. economy, while also providing environmental benefits and increasing energy security,” says Ziad Ojakli, Ford Motor spokesman.

Q: What’s the price tag?

A: About $4 billion. The money is currently proposed to come from Energy Department funding included in the already enacted $787 billion economic stimulus package.

Q: If the House bill becomes law, how would it work?

A: The government would send up to $4,500 to the selling dealer on your behalf, if you:

1. Trade in a car that — this is a key point — has been registered and in use for at least a year, and has a federal combined city/highway fuel-economy rating of 18 or fewer miles per gallon.

2. Buy a new car, priced at $45,000 or less and rated at least 4 mpg better than the old one (gets a $3,500 voucher). If the new one gets at least 10 mpg better, you get the full $4,500.

Example: Trade that well-worn 1985 Chevrolet Impala V-8, rated 14 mpg, for a 2009 Impala V-8 rated 19 mpg and the government will kick in $3,500. Downsize to Chevy Cobalt (27 mpg) or even a larger Honda Accord (24 mpg) and get $4,500.

Mileage ratings back to 1985 are at www.fueleconomy.gov.

Q: What about trucks?

A: It’s more complicated.

For standard-duty models — most SUVs, vans and pickups:

1. The old one must be rated 18 mpg or less.

2. The new one must be at least 2 mpg better for $3,500 or at least 5 mpg better for $4,500.

For heavy-duties (6,000 to 8,500 pounds gross vehicle weight rating):

1. The old one must be rated 15 mpg or less.

2. The new one must be rated at least 1 mpg better for $3,500, or 2 mpg or more for $4,500.

Work trucks (8,500 to 10,000 lbs.) don’t have mpg ratings, so age is the criteria. The old one has to be a 2001 model or older. And only $3,500 is available.

Q: Is it worth it for $4,500?

A: The assumption is that the people most likely to use the program would trade in cars worth less than $4,500. Thus, while not necessarily clunkers, most would be at least 8 years old.

Q: Can I combine these incentives with other offers?

A: Yes. For instance, you could trade for a hybrid and get the voucher, claim the hybrid tax credit and get dealer or manufacturer discounts. You also could deduct the sales tax, if any, on your next federal tax return.

Q: Would I ever see the $3,500 or $4,500?

A: No. It’s an electronic transfer from the government to the dealer. Dealers want to be sure the amount can be counted as cash from the buyer, which would help buyers get credit because they’re financing less.

Q: What does the dealer do with my trade-in?

A: Gives it to a salvage operator. The engine, transmission and some other parts must be destroyed so they can’t be reused. The idea is to cull fuel-thirsty, polluting drivetrains. Operators can resell other parts, however.

Q: What’s to keep me from buying a junkyard car for a few hundred bucks, getting it barely running and trading it?

A: The one-year-in-service requirement noted earlier. Lawmakers wanted to exclude the revival of so-called junkyard dogs, because they’ve already been taken off the road.

Q: What do I get if I recently bought a car that would have qualified?

A: The bill contemplates making the incentives retroactive to March 30, but it’s unclear how to find and junk cars that were traded in that long ago. Some might already be back on the road, driven by new owners.

Q: What’s wrong with environmentalists’ idea that the new car or truck should get much better fuel economy than the House bill currently requires?

A: Opponents say the environmentalists’ fuel-economy improvement thresholds are so high that foreign brands benefit disproportionately, because their lineups tend now to have more small, fuel-efficient vehicles.

But the American Council for an Energy-Efficient Economy complained in a statement criticizing the House bill that the proposal as it stands now is way too lenient.

The council charged that the bill “aims primarily to clear Detroit’s unsold inventory from the storage lots,” rather than to seriously cut fuel use.

Q: How soon could this become law?

A: Depends on how much critics can sway the Senate, and to what piece of legislation this “fleet modernization” bill is attached.

If it becomes part of a larger bill that’s likely to get lots of debate, it could take awhile. If it’s attached to urgent, must-pass legislation, such as an appropriation bill, it could move quickly to the president’s desk.

A current plan is to add the program as an amendment to climate change legislation now being considered.

As proposed, it would be in effect for just one year.

(Source: Detroit Free Press & Image: Jalopnik)

WASHINGTON — Congress appeared ready Wednesday to move forward on a bill to pay people to surrender their old gas-guzzlers for new, fuel-efficient models — but the auto industry hasn’t decided what it wants out of the program.

While backers of a cash-for-clunkers plan announced a deal earlier this month, the final bill has yet to be crafted because of a last-minute dispute between foreign and domestic automakers over incentives for leasing. Environmental groups aren’t thrilled with the compromise, saying it is weighted too heavily toward truck buyers.

But with House and Senate leaders, along with President Barack Obama, voicing support, industry officials say they are hopeful a bill that will boost a lethargic market for new vehicles will get through Congress in weeks. Backers say the compromise would cost about $4 billion — paid for by money from the economic stimulus plan passed earlier this year — and could boost sales by 1.3 million vehicles over a year, according to industry officials.

Owners of cars and trucks that get less than 18 m.p.g. could get a voucher of $3,500 to $4,500 for a new vehicle, depending on the mileage of the new model, but no trade-in value because the vehicles would be scrapped.

“This is a jobs bill that helps the environment,” said Ziad Ojakli, Ford’s group vice president for governmental affairs.

The plan does have several hurdles that will keep some potential buyers on the sidelines. The clunker being traded in has to be kept off the road — meaning it will have no trade-in value beyond the voucher. Far more trucks on the road will qualify for the vouchers than cars: even 15 years ago, only five models of midsize sedans managed just 18 m.p.g.

And while the compromise among U.S. House members was unveiled earlier this month, the actual bill will be kept under wraps until it is introduced with the House Democrats’ plan to control carbon emissions through a cap-and-trade system, expected no later than Monday.

Although cash-for-clunkers programs in other nations have been motivated by environmental goals to improve the mileage of vehicles on the road, environmental groups are lukewarm about the U.S. compromise.

(Source: AASHTO)

Rough Roads Ahead:  Fix Them Now or Pay for It Later, a report released today by the American Association of State Highway and Transportation Officials (AASHTO) and TRIP, reports that one-third of the nation’s major highways, including Interstates, freeways and major roads, are in poor or mediocre condition.  Roads in urban areas, which carry 66 percent of the traffic, are in much worse shape. 

Extracts from the press release: Driving on rough roads costs the average American motorist approximately $400 a year in extra vehicle operating costs. Drivers living in urban areas with populations over 250,000 are paying upwards of $750 more annually because of accelerated vehicle deterioration, increased maintenance, additional fuel consumption, and tire wear caused by poor road conditions.

 “The American people are paying for rough roads multiple times,” said Kirk T. Steudle, Director of the Michigan Department of Transportation, at a news conference held to release the report. “Rough roads lead to diminished safety, higher vehicle operating costs and more expensive road repairs. It costs $1 to keep a road in good shape for every $7 you would have to spend on reconstruction. It’s another drag on the economy.”  

 The report uses the latest government statistics to show pavement conditions in all 50 states and vehicle operating costs by state and urban areas. The report also finds that:

• 30 to 60 percent of the roads in the nation’s largest urban areas are in poor condition.
• 36 percent of the roads in the Detroit urban area are in poor condition compared to the Los Angeles area and surrounding communities, which have 64 percent of their roads in poor condition.   
• 61 percent of rural roads are in good condition.
• 72 percent of the Interstate Highway System is in good condition, but age, weather conditions and burgeoning traffic are eroding ride quality.

 “Our nation has invested $1.75 trillion in our public highway system over the past 50 years,” said John Horsley, AASHTO Executive Director.  “We hope Congress will make it possible for the federal government to sustain its share of the increased investment needed to keep America’s roads in good condition.  If not, it will cost the American people billions more later.”

 The report points out that traffic growth has far outpaced highway construction, particularly in major metropolitan areas.  The number of miles driven in this country jumped more than 41 percent from 1990 to 2007 — from 2.1 trillion miles in 1990 to 3 trillion in 2007. In some parts of the country, dramatic population growth has occurred without a corresponding increase in road capacity, placing enormous pressure on roads that, in many cases, were built 50 years ago.  

“The federal stimulus program is providing a helpful down payment towards repairing some of the nation’s rough roads,” said Frank Moretti, TRIP’s Director of Policy and Research. “But it will take a significant long-term boost in investment by all levels of government to provide Americans with a smooth ride.”

 The full report is available at http://roughroads.transportation.org, along with examples from states working to improve their highway systems, charts and photographs.  Rough Roads is part of Are We There Yet?  We Can Be!, AASHTO’s effort to build awareness and support for the nation’s transportation system. 

As reported in yesterday’s post, the House Energy and Commerce Committee Chairman Henry A. Waxman, Subcommittee Chairman Edward J. Markey, Chairman Emeritus John D. Dingell, Congresswoman Betty Sutton, Congressman Jay Inslee, and Congressman Bart Stupak reached an agreement on a “Cash for Clunkers” program that will help the auto industry while cleaning our air. This agreement is based on H.R. 1550, introduced by Congresswoman Sutton, and H.R. 520, introduced by Congressman Inslee.  The fact sheet published on the Committee’s website offers the following detail:

Consumers may trade in their old, gas-guzzling vehicles and receive vouchers worth up to $4,500 to help pay for new, more fuel efficient cars and trucks. The program will be authorized for up to one year and provide for approximately one million new car or truck purchases. The agreement divides these new cars and trucks into four categories. Miles per gallon figures below refer to EPA “window sticker” values

• Passenger Cars: The old vehicle must get less than 18 mpg. New passenger cars with mileage of at least 22 mpg are eligible for vouchers. If the mileage of the new car is at least 4 mpg higher than the old vehicle, the voucher will be worth $3,500. If the mileage of the new car is at least 10 mpg higher than the old vehicle, the voucher will be worth $4,500.

• Light-Duty Trucks: The old vehicle must get less than 18 mpg. New light trucks or SUVs with mileage of at least 18 mpg are eligible for vouchers. If the mileage of the new truck or SUV is at least 2 mpg higher than the old truck, the voucher will be worth $3,500. If the mileage of the new truck or SUV is at least 5 mpg higher than the old truck, the voucher will be worth $4,500.

• Large Light-Duty Trucks: New large trucks (pick-up trucks and vans weighing between 6,000 and 8,500 pounds) with mileage of at least 15 mpg are eligible for vouchers. If the mileage of the new truck is at least 1 mpg higher than the old truck, the voucher will be worth $3,500. If the mileage of the new truck is at least 2 mpg higher than the old truck, the voucher will be worth $4,500.

• Work Trucks: Under the agreement, consumers can trade in a pre-2002 work truck (defined as a pick-up truck or cargo van weighing from 8,500-10,000 pounds) and receive a voucher worth $3,500 for a new work truck in the same or smaller weight class. There will be a finite number of these vouchers, based on this vehicle class’s market share. There are no EPA mileage measures for these trucks; however, because newer models are cleaner than older models, the age requirement ensures that the trade will improve environmental quality. Consumers can also “trade down,” receiving a $3,500 voucher for trading in an older work truck and purchasing a smaller light-duty truck weighing from 6,000 – 8,500 pounds.

Here is a PDF copy of the Fact Sheet:

(Source: Detroit Free Press & Image: Jalopnik)

WASHINGTON – The Obama administration and U.S. House members have reached a compromise over a “cash for clunkers” bill that would offer as many as one million vehicle buyers a voucher for up to $4,500 each to spur car and truck sales.

(Source: Wall Street Journal)

General Motors Corp. is expected this week to accelerate talks with the United Auto Workers union and move toward closing about 2,600 dealerships.

 The giant auto maker also is likely this month to approach banks holding secured debt, hoping to work out terms to ease the company’s debt burden.

Reaching agreement on these fronts is critical if GM is to restructure outside of bankruptcy court.

The company has new leverage as it re-engages in talks, thanks to the bankruptcy filing last week by Chrysler LLC. But differences between the two auto makers mean that leverage can take GM only so far.

“The move with Chrysler signals to the GM creditors that bankruptcy is a viable option,” said Lewis Rosenbloom, a bankruptcy lawyer with Dewey & LeBoeuf. Mr. Rosenbloom’s firm does extensive work for GM and Chrysler. “The government is not just going to throw money at this without getting a consensual accord, so I think this is a harbinger of things to come.”

The Treasury Department has given GM until June to work out a restructuring plan and has indicated it may push the company into bankruptcy if the necessary deals don’t materialize.

GM’s hopes of staying out of court hinge on its ability to convince thousands of unsecured bondholders, owed $27 billion, to accept a small equity stake in the company in exchange for forgiving most of the debt. Several bondholders have said the equity exchange will fail if the terms aren’t sweetened.

(Source: Washington Post)

Chrysler, one of the three pillars of the American auto industry, will file for bankruptcy today after last-minute negotiations between the government and the automaker’s creditors broke down last night, an Obama administration official said.

(Source: New York Times)

Union leaders said Sunday that they had reached an agreement with Chrysler that meets federal requirements for the automaker to receive more financing.

The deal includes Fiat, the Italian automaker with which Chrysler was ordered by the government to form an alliance before Thursday.

Neither the United Automobile Workers union nor the company released details of the tentative agreement, which would modify the union’s 2007 contract and reduce the amount of money Chrysler must pay into a new health fund for retirees.

Image: New York Times

The union plans to have its 26,000 Chrysler workers vote on the deal by Wednesday.

Chrysler said the agreement, reached during marathon negotiations over the weekend, satisfied the requirements laid out by the Obama administration for a deal by an April 30 deadline.

Even with the agreement, Chrysler is expected to seek Chapter 11 protection, in a case mapped out by the government in advance, including safeguards meant to protect worker benefits, people with knowledge of the company’s plans said Sunday night.

A new company would be set up with the best assets of Chrysler, these people said. Fiat of Italy would own 20 percent to 35 percent of the new Chrysler, they said, with the government also holding a stake. Some of the equity in the new company would also be given to Chrysler’s creditors as repayment.

These people spoke on condition of anonymity because the deals had not been finalized.

The Treasury Department has also reached an agreement with Daimler of Germany, the former owner of Chrysler, to settle tax and other claims left over from its sale of Chrysler in 2007 to Cerberus Capital Management, the private equity firm.

In order to persuade the union to back the sale to Cerberus, Daimler agreed to pay $1 billion to Chrysler if the company’s pension plans were terminated in a subsequent bankruptcy filing. Details of the Treasury’s deal with Daimler were not available.

Last week, the union reached an agreement in principle with the administration and Chrysler that would protect workers’ pensions in the event of a bankruptcy filing and provide for a change in the financing of a health care trust set up in 2007.

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