A Clunky Success

Posted Aug. 28, 2009, at 5:51 p.m.

A look at the numbers shows that the “cash for clunkers” program did what it was supposed to — new car sales soared and those that were sold get vastly better gas mileage than what was traded in. The lingering question is: Was it worth it?

The program, which was begun in late July and meant to last through the year, cost $3 billion. Congress initially appropriated $1 billion, but the program was so popular, that money was gone in a week. A second infusion, of $2 billion, lasted only through late August.

The U.S. Department of Transportation this week tallied up the clunker numbers after the program ended Tuesday.

More than 690,000 vehicles were traded in (they must be scrapped under the cash for clunkers rules). The average fuel economy for the clunkers was just fewer than 16 miles per gallon; the new vehicles get an average of nearly 25 mpg, more than a 50 percent improvement. This will save up to 10 million barrels of crude oil over the next five years, saving drivers who participated in the program between $700 and $1,000, according an analysis by Ford Motor Co.

The program was a boon to automakers, which have been suffering their worst year in memory due to the national economic downturn. Sales, particularly among Japanese automakers, surged in August. They are expected to drop back to low levels next month, and 2009 will be the weakest for car sales in nearly two decades.

Toyota appeared to be the biggest beneficiary of the program, with more than 19 percent of all sales that were part of the clunker program. Its Corolla and Camry models were among the top sellers during the month that the program lasted.

Still, the company announced Wednesday that it would, for the first time, shut down production in Japan to reduce costs because of slumping demand. It is also closing a plant in California. It expects to reduce production by nearly half through next June.

Ford, on the other hand, is increasing production of some models.

In sum, car dealers sold a lot more cars in August than in previous months, giving a small boost to the overall economy — and to local coffers in the form of excise taxes.

The gas mileage improvements are good, but saving 10 million barrels of oil over five years when the U.S. imports nearly 10 million barrels a week isn’t really significant. But if the program began a lasting switch from gas guzzlers to cars with better gas mileage, this is an important gain.

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