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Cut-down ‘cash-for-clunkers’ bill is go

Squeezed: The US car scrappage incentive scheme gets the green light from the Senate, but on a smaller scale than proposed.

US Senate slices spend on car sales incentive before giving it the green light

General News logo19 Jun 2009

THE US Senate has approved the cash-for-clunkers car-buying incentive scheme, but not before slicing it by three-quarters, from the original $US4 billion ($A5 billion), one-year scheme to a $US1 billion ($A1.24 billion), three-and-a-half-month package.

All that now stands between car buyers wanting to trade in old gas guzzlers on more efficient new models and incentives of up to $US4500 ($A5624) are President Barack Obama and a pen full of ink.

That signature is expected to be a formality, as Mr Obama has already expressed his support for the scheme to lift moribund US car sales and rid the roads of some of the worst polluters.

The voucher system is expected to kick in about a month after the White House sends the bill back to Congress, and remain active until about November.

Legislators hope the three-month burst will help spur the recovery of depressed US car-makers, especially General Motors and Chrysler, and save thousands of jobs across the whole industry, including suppliers and dealers.

Between 150,000 and 250,000 new-vehicle sales are expected to be generated by the scheme, with the same number of old cars and pick-ups being crushed as a consequence.

80 center imageLeft: US President Barack Obama.

Bizarrely, the bill ended up being attached to legislation for a $US106 billion ($A132 billion) military assistance package for US troops in Iraq.

This move to expedite the car scrappage scheme raised the ire of some Republican senators, who tried to vote it down on a point of order. However, the vote was beaten 60-36 on party lines, before the whole package was passed by the senate, 91-5.

Some opponents to the scheme argued that it did not do enough to encourage a more fuel-efficient fleet, while others opposed it on financial grounds, saying the US could ill-afford more spending to boost recovery.

Yet others argued that the scheme would merely pull-forward the market at the expense of US taxpayers, leaving a vacuum in sales once it runs out.

Under the scheme, car buyers will get a $US3500 ($A4320) voucher if they trade in a passenger car that gets less than 18mpg (13.0L/100km) for a new car getting at least 22mpg (10.7L/100km). Vouchers for $US4500 would be awarded if the new car gets at least 10mpg more than the trade-in car. Light-commercial vehicles – including America’s favourite pick-ups and SUVs – are also eligible, but with more complex rules.

While the bill only allows for a shortened initiative ending about November, Automotive News reports that the original sponsor of the legislation, Ohio Democratic representative Betty Sutton, will try to resurrect a longer-term program at the beginning of the US financial year, on October 1.

Scrappage schemes have successfully rejuvenated markets in Germany, China and France, but so far have had less impact in other countries, including Spain, the UK and Italy.

The Australian government has rejected calls for a similar scheme in Australia, preferring to offer business tax breaks on new cars – a move that seems to be paying dividends as the end of financial year looms.

Read more:

Congress cranks clunkers cash scheme

‘Cash for clunkers’ scheme closer in US

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