Will 'cash for clunkers' die in the Senate?
The "cash for clunkers" program faces two hurdles. The first is that it has nearly run out of money -- after only a week in the market. It has apparently helped push up July domestic car sales, however, and Ford (F) says it will have its first year-over-year sales improvement in nearly two years when it announced figures for last month.
The second, and more severe problem, is that while the House has approved another $2 billion for the program, the Senate may reject it. U.S. car sales could drop sharply in August without the stimulus program. The recovery in the auto market could be arrested just as it begins.
A number of Republican Senators are fighting the expansion of the "clunkers" fund because they think it is another form of aid to an industry that has already taken over $70 billion in U.S. taxpayer money. Senator John McCain toldFox News, "Within a few weeks we will see that this process was abused by speculators and people who took advantage of what is basically a huge government subsidy of corporations that they already own." A filibuster in the Senate would almost certainly push any decision off until after the Congress's summer recess.
"Cash for clunkers" may be absolutely essential to the fortunes of GM and Chrysler. Ford has demonstrated that its new vehicles are selling well against the Japanese. The other two U.S. car firms have not done as well. If the program dies for lack of funding. GM and Chrysler will face another very high hurdle in their race to get back to profitability.
Douglas A. McIntyre is an editor at 24/7 Wall St.