The aftermarket has strongly opposed auto scrappage proposals. "It seems arrogant to destroy perfectly good vehicles just to entice consumers to purchase a car that they might not be able to afford," says Kathleen Schmatz, president and CEO of the Automotive Aftermarket Industry Association (AAIA).
There are two main "cash for clunkers" bills vying for passage, the most recent the Consumer Assistance to Recycle and Save (CARS) Act (H.R. 1550) introduced in March by Rep. Betty Sutton (D-Ohio). It contains a "Buy American" provision that would prohibit consumers from using cash trade-in vouchers to buy cars such as the Toyota Prius assembled in Japan. That is the most controversial — though far from the only — difference between it and the other contender, The Accelerated Retirement of Inefficient Vehicles Act (S. 247), introduced by Rep. Steve Israel (D-N.Y.) and Sen. Dianne Feinstein (D-Calif.). The Feinstein bill would allow vouchers to be used for used and new cars whose efficiency is 25 percent greater than the average of cars in that class.
Resistance to Sutton's bill comes mainly from foreign-owned automakers who argue the "Buy American" provision violates trade laws. But a lobbyist for one of the Japanese companies says the foreign and American manufacturers are in talks on a compromise bill, which would avoid the negative trade implications.
Assuming a compromise emerges, it will have to outline how incentives are paid. If the program is successful, its pricetag could reach up to $2 billion. Obama indicated he wanted to fund from the American Recovery and Reinvestment Act of 2009 (ARRA), the stimulus bill signed in February, but the funding source currently remains unknown. And Obama's proposed $3.5 trillion 2010 budget does not include "cash for clunkers."
A "cash for clunkers" bill could be a double whammy for the aftermarket. First, older cars would be taken out of circulation. Second, because they would be scrapped many of their parts would be destroyed, reducing the supply of parts eligible to be reconditioned and circulated back into the retail distribution channel. Neither of those effects — and their impact on small businesses — has gained a foothold in congressional consciousness.
Stephen Barlas has been a full-time freelance Washington editor since 1981, reporting on regulatory agency, congressional and White House actions and issues.
