'Cash for clunkers' scheme boosts US car manufacturers

AMERICAN CARMAKERS are considering a boost in production after congress approved an extra $2 billion in vouchers to encourage consumers to trade in old cars for new, more energy-efficient models.

The US government has already spent more than $775 million out of $1 billion originally earmarked for the scheme, known as “Cash for Clunkers”, which has only been operating for two weeks.

The programme, which gives consumers vouchers worth between $3,500 and $4,500 for trading in cars that get less than 18 miles per gallon for models that achieve at least 22 mpg, helped the US car industry to have its best month in almost a year in July.

“Now more American consumers will have the chance to purchase newer, more fuel-efficient cars and the American economy will continue to get a much-needed boost,” President Barack Obama said.

The extra $2 billion approved this week could subsidise the purchase of more than 400,000 new cars as the big three US carmakers – Ford, Chrysler and General Motors – find themselves with unexpectedly lean inventories.

All three companies are now considering a boost in production that could create new jobs at manufacturing plants and at hundreds of dealerships.

Congress has extended the scheme until early September but some industry analysts warn its impact may not be as dramatic from now on as many of the customers who qualified for subsidies have already traded in their old vehicles.

The scheme’s supporters argue that it not only boosts car sales but also helps reduce carbon emissions, but Republican critics complain that it will do little more than add to an already ballooning federal deficit. “What we’re doing is creating debt,” said New Hampshire senator Judd Gregg. “The bill to pay for those cars is going to come due on our children and grandchildren.”

Dealers say they have already sold about 250,000 new cars under the scheme, which obliges dealers to scrap old vehicles traded in. The transportation department said this week that about 45 per cent of the cars bought under the programme are from US manufacturers.