House narrowly passes scaled-back 'cash-for-clunkers' bill

The U.S. House on Tuesday narrowly passed a scaled-back version of a bill that would give consumers cash vouchers of between $3,500 and $4,500 if they trade in their cars for newer, more fuel-efficient vehicles.

The $1 billion cash-for-guzzlers proposal, modeled after successful programs in Germany and other European countries, is part of a $106 billion supplemental spending measure designed mostly to fund the wars in Iraq and Afghanistan. It also extends billions in new credit to the International Monetary Fund.

Fleet modernization legislation approved by the House last week contained between $3.5 billion and $4.5 billion in federal consumer incentives in an attempt to spur car and light-truck sales and increase the fuel economy of vehicles driven by Americans. The program was to last a year.

The scaled-back version approved late Tuesday, inserted last week in conference between House and Senate leaders, would provide funding for less than three months, said Nichole Francis Reynolds, chief of staff for Rep. Betty Sutton, D-Ohio, who sponsored the original cash-for-guzzlers bill.

"There was concern among some senators that the original legislation's fuel economy standards for eligible new cars were too weak," a spokeswoman for Sen. Dianne Feinstein, D-Calif., said in an interview. "There was also some concern that the bill passed without any hearings, without adequate review."

President Barack Obama and his fellow Democrats, who control both chambers, had to fight hard for the bill. But in the 226-202 vote, they managed only to get five Republican votes and saw 32 Democrats vote against it.

Short life span

If the supplemental spending measure is approved in the Senate, the cash-for-guzzlers program would go into effect a month after it is signed by Obama, Reynolds said. The program would end Oct. 1, the start of the 2010 fiscal year.

The Senate is to take up the supplemental spending measure later this week, the Feinstein spokeswoman said.

It is unclear how long it will take the Senate to pass it, as a number of senators have objections to different aspects of the overall bill, according to Reynolds.

The shrinkage of the cash-for-guzzlers program means that the issue will be taken up anew in fiscal 2010, with possible hearings convened, the Feinstein spokeswoman said.

The Congressional Budget Office has estimated that 600,000 cars would be sold with $4 billion provided in the Sutton bill initially approved by the House, Reynolds said. About 150,000 would be sold if the scaled-back version ultimately is enacted, she said.

In a live Web chat with journalists on Tuesday, General Motors CEO Fritz Henderson said he is expecting a 10 percent lift in retail sales from such a measure. GM has benefited from similar programs in Europe, he said.

"GM and Opel have benefited from this program, and we would expect to be able to participate proportionally in any U.S. program," he said.

Second round?

Sutton has begun approaching House leaders about trying to free between $2.5 billion and $3.5 billion for the program in fiscal 2010, which begins Oct. 1, Reynolds said. That amount includes the total provided in the congresswoman's bill approved by the House, minus the $1 billion in the supplemental spending measure.

A bill that mirrored the House legislation had been introduced in the Senate by Debbie Stabenow, D-Mich., and Sam Brownback, R-Kans. Feinstein introduced a competing measure with stricter fuel economy standards.

The cash-for-guzzlers provision of the supplemental spending measure would offer customers $3,500 vouchers if they trade in cars that get less than 18 mpg for new vehicles that get at least 22 mpg. Vouchers of $4,500 would be awarded if the new cars get at least 10 mpg more than the old.

By Neil Roland- Automotive News