Streetsblog San Francisco

As the Senate gears up for debate this week on approving
$2 billion more in "cash for clunkers" new-car rebates, Transportation
Secretary Ray LaHood has vowed to work with the program’s main private
contractor — Citigroup — to iron out any kinks in the system that auto dealers use to apply for taxpayer-subsidized reimbursements.

Citigroup, one-third of which is controlled by the government that gave the bank a $45 billion bailout, is reportedly tripling the number of workers on its "clunkers" contract to handle the increased demand.

That
extra work could involve more money for Citigroup, but the amount the
bank is getting from the Obama administration to help manage the car
rebates remains unknown.

Streetsblog Capitol Hill has asked
the U.S. DOT for a copy of the contract, as well as data on any other
companies that may have bid on the opportunity, and will update this
post as more information becomes available.

What is known, as
LaHood noted yesterday, is that the government did not anticipate the
size of the car-deal backlog that ended up accumulating between July 1,
when the "clunkers" rebates got an initial $1 billion infusion, and
July 27, when the program officially launched.

"There were some bureaucratic problems in the process, in
making sure we had enough people contracted with to do the paperwork,"
LaHood told
C-SPAN’s Newsmakers show. "You don’t want to have these kinds of
problems, but it’s the kind of problem that shows the program has been
very successful."

LaHood
also made no bones about the Obama administration’s desire to see the
rebates extended without any stronger fuel-efficiency requirements for
cars that are traded in. Sens. Dianne Feinstein (D-CA) and Susan
Collins (R-ME), have suggested they would not support any new money unless greater environmental benefits were ensured from the auto purchases.

"In
a way, we’re meeting the metric they would like," LaHood said of the
two senators, asserting that fuel efficiency benefits have been
enhanced by the amount of trucks that are being swapped for smaller
vehicles.

Two weeks ago, Ray LaHood candidly addressed the need to reduce the nation's vehicle miles traveled in order to halt the devastating effects of climate change. But the Transportation Secretary had a decidedly different message today.

"Go out and buy a car, Americans!" LaHood decreed this morning as he and lawmakers from auto-producing states officially kicked off the U.S. DOT's "cash for clunkers" program.

Originally touted as a boost to both the environment and the adrift domestic auto industry, the "cash for clunkers" concept quickly became nothing but the latter after Congress watered it down to apply to cars that get as little as 22 miles per gallon -- and trucks that boast even lower fuel efficiency.

But today's event continued to perpetuate the erroneous claim that $1 billion in public subsidies for new car purchases would help reduce emissions as well as rescue the auto industry.

"This really is a three-for," Sen. Carl Levin (D-MI) said. "It's great for the economy, a great thing for consumers ... third, of course, it's great for the environment itself."

Who the program isn't great for is transit riders hoping to escape their cars. The original "clunkers" bill would have allowed car owners to take their trade-in benefit in the form of transit vouchers, but LaHood said that option is unavailable now that the program has been implemented.

The program also brings bad news in the fine print for owners of serious "clunkers": Benefits are not available for cars manufactured before 1984.

While the DOT estimates that as many as 250,000 autos will be scrapped before the initial infusion of cash runs out, car industry forecasters at Edmunds.com believe only 50,000 extra sales will result, leaving the taxpayers with a whopping $20,000 bill for every new car purchased.

What's more, the program could have an unforeseen cost as dealers figure out how to transport the junked vehicles to a government-approved salvaging plant. Other than the engine, parts of the old "clunker" can be recycled into other cars, but that resale is not required.

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