I have written about the Cash For Clunkers program that passed the House last week at least two times. What a great idea to get gas guzzlers off the road. All a consumer has to do is turn in their old car that averages 17 MPG or less and they will qualify to receive a voucher worth up to $4,800 to purchase or lease a new vehicle. I won't dally by explaining all the qualifications required to receive the exact rebate one would qualify for because they differ between the House and Senate version. They will also probably change twenty times before Obama signs the legislation.

The collision industry was is in favor of the bill because automobiles involved in accidents that were purchased through this program would be fixed while the old clunkers would probably be totaled. The dealers are in favor of the bill for obvious reasons. Mechanical shops may not favor the bill because new cars normally return to the dealer during the warranty period. Recyclers are not in favor of the bill because the cars that are turned in must be crushed so they will not have an opportunity to use the parts. Consumers may or may not be favor of the law, which we will look at in a few minutes.

This morning I will share my opinion on who might find this law valuable and who might not. If passed, the new law would result in all the things I outlined in the previous paragraph. So some groups would be happy and some not so much.

Simply by the title I thought that the legislation would be designed to get gas guzzling old cars off the road, but that does not appear to be the case. If you are driving a new Cadillac Escalade that gets 15 MPG and you decide you want a more fuel-efficient automobile you could qualify for $4,800. Of course you wouldn't turn your Escalade in because all you would get would be the $4,800 and your actual trade in value is greater than that. However if your Escalade had 100,000 miles on it, had been in a drivable accident where you received a cash settlement you could take advantage of the government gift as long as your car was drivable.

There are tons of people (probably the ones who voted for Obama) who not only qualify, but also need a new car. They are driving a real clunker that gets lousy gas mileage, burns oil and is a danger on the highway. But alas, what good would $4,800 do to these people who probably have little or no credit and wouldn't be able to finance the difference in cost between the money from the "gov" and the cost of the new vehicle. Or what about the 9.3% of the public that is presently unemployed do you think they would buy a new car not knowing if they had enough money to live on until they can find another job.

I'll tell you who might find these offer attractive, teenagers who are driving older cars that aren't worth much. They could buy a small inexpensive new car and their payments would be pretty low after the incentive money. They could also use the money to buy a 3 series BMW that wouldn't do the American auto industry any good at all. In fact they might be attracted to any car that is of foreign manufacture and built outside the U.S. and it wouldn't help the US auto makers.

If the Cash for Clunkers program succeeded, the automotive recyclers would lose the opportunity to fill their inventories with much needed used parts, which would of course lower the prices of the parts available to collision repairers. Insurers would be happy because this would result in lower claims costs. But since all cars traded in on the program must be crushed all of the good parts will end up in those square pieces of metal that come out of the crusher--- what a waste. Get rid of the engines if they want, but why waste the sheet metal?

The government hopes to promote the sale of one million cars with this program. I think they will be lucky to sell one hundred thousand. Come to think of it if they run GM like they propose to run Cash for Clunkers you can depend on your new Cadillac looking and running like a YUGO.

Hold the presses--

They have changed the rules again and I'll be darned if I will write this entire commentary over again. So here are the changes as of Thursday the 18th: The funding has been cut from four billion to one billion. That means that only about 250,000 cars could be purchased instead of one million cars.

Only cars build after 1984 would qualify. SEMA was behind this amendment which would protect cars that were antiques that many car buffs might want to rebuild. Senator Judd Gregg (R) New Hampshire said he was going to invoke a senate rule to strip this provision from the bill which was orginally a war time spending bill. The Cash for Clunkers amendment was added later. Hey this is only Thursday who knows what will happen before this newsletter is sent on Saturday.

Saturday the 20th: The bill has approved by House and Senate all that has to happen now is for Obama to sign it.