08-24-2009

After a weekend sales surge, auto dealers are racing to file for "cash for clunkers" rebates before the program ends Monday evening.

Many are moving early to halt sales of vehicles under the Car Allowance Rebate System, which provides federal rebates of as much as $4,500 for consumers who trade in older vehicles for more fuel-efficient models, to give themselves time to process paperwork. They worry that if a last-minute rush to enter applications jams the system, they will be on the hook for rebates already given to customers.

In Center Line, Mich., just north of Detroit, Bob Thibodeau Ford sold more than 40 vehicles with clunker rebates as of Friday, but the dealership has since started winding down its clunker business.

"We decided we'll have to have these deals completed by noon Monday" to be sure they are approved by the 8 p.m. deadline, said owner Bob Thibodeau.

Smart Toyota in Madison, Wis., stopped doing clunker sales Saturday amid concerns about processing the 250 deals it has accepted since July 27. According to Blane Einbeck, the dealership's marketing director, only 17 of those sales have been fully approved for reimbursement so far.

In Denver, Go Toyota, which is owned by dealership chain AutoNation Inc., sold 85 vehicles Friday, leaving the store's inventory depleted of certain models. AutoNation stopped its clunker sales on Friday.

The weekend's jump in auto sales is likely to lift August sales to more than one million cars and trucks, according to J.D. Power & Associates. That would represent a 2% increase from the year-ago period, the first time the industry has seen a year-on-year rise since June 2007.

Many in the auto industry expect the rate of sales to slip in September, as a result of the ending of the clunkers program. Lean inventories are also likely to squeeze sales in the weeks ahead.

For now, dealers' biggest worry is processing the clunker sales they have already made. To qualify for reimbursement of rebates given to customers turning in clunkers, dealers have to scan documentation of the deal and upload the forms to the Department of Transportation Department's Web site. The site has at times been slow or has shut down because so many dealers were trying to log deals.

Dealers said the site was down for maintenance early Saturday and again early Sunday, slowing their efforts to file applications at off-peak hours.

AutoNation, which operates 264 dealerships in 15 states, sold 12,024 vehicles with clunker rebates in total, including more than 1,600 on Friday alone. AutoNation has uploaded a large majority of deals to the Transportation Department but is still waiting on final approval on 87% of them, the company said.

Borrowing ideas from the company's disaster recovery plan, the company Friday set up a round-the-clock processing operation at its accounting office in Irving, Texas. It put other back-office tasks such as invoicing on hold for the weekend, and pulled employees from nearby dealerships to build a 180-person team to enter deals 24 hours a day, said Maura Berney, AutoNation's vice president of shared services.

Meanwhile, on the sales lots, lack of inventory has already blocked some prospective sales. Kevin Donley, of Pleasant Ridge, Mich., whose wife is expecting their fourth child in five weeks, was looking late last week to trade a 1992 Jeep Wrangler with 135,000 miles for a new minivan. But to qualify for the $3,500 government rebate under the clunker program, he would need to buy a Chrysler Town and Country minivan with a 4-liter engine -- and he hadn't been able to find one as of Sunday. The upshot, he said: "I get to keep my Jeep for a while."

Congress originally allocated $1 billion for the program, but that was nearly exhausted after one week. It authorized a second allocation of $2 billion and had hoped it would last until Labor Day, Sept. 7. But amid a strong response from consumers, the government said last week the program would end Monday.

The weekend saw a final rush of rust-buckets roll onto dealer lots. Mr. Thibodeau took in one Ford Escape sport-utility vehicle that had been stripped of almost everything of value, including the face of the car radio. A battered Ford Explorer SUV had 220,000 miles on the odometer -- and no back window. "It certainly ran, but barely," Mr. Thibodeau said.

Corrections & Amplifications 

AutoNation Inc. has sent a large majority of its cash-for-clunkers deals to the Transportation Department but is still waiting on final approval on 87% of them. A previous version of this story incorrectly said it has filed paperwork on only 13% of its clunker sales.