Could Cash For Clunkers Make A Return? Ford Hopes So

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Ford argues that restarting US auto sales after coronavirus is going to take some stimulus.

In the earlier part of President Obama's first term here in the US, the Car Allowance Rebate System, or "CARS", was implemented as a way of encouraging a public still reeling from the 2008-'09 financial crisis to go out and buy new, more fuel-efficient vehicles. Colloquially known as "cash for clunkers," the program guaranteed extra cash to each American citizen who traded an eligible older vehicle in to the dealer toward the purchase of a new car.

It was a used car bloodbath. Under the rules of the program, dealers were obligated to render the engines useless by filling the crankcases with sodium silicate, a.k.a. "liquid glass," so that there was no chance they could be salvaged and resold. Drivetrain components could only be scavenged in certain circumstances. And no matter what, whether a cash for clunkers car had yet been stripped of all its most useful bits or not, it had to be shredded or crushed within 180 days.

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The US could see such a program return, if Ford has any say in the matter. Bloomberg reports that internally, at least, that Ford is discussing the importance of a clunkers-like program for jumpstarting auto sales by the time the US emerges from its coronavirus-induced hibernation.

"We think some level of stimulus somewhere on the other side of this would help not only the auto industry and our dealers... but will help the customers as well," Ford's Vice President of US Marketing, Sales and Service, Mark LaNeve, told Bloomberg. "We're in discussions about what would be the most appropriate."

Cash for clunkers is just one model being discussed within Ford, although LaNeve says the program "was very effective at that time." Although it certainly thinned the market of cheap wheels for low income earners. But that's not exactly the problem of a company that only sees income on selling new cars.

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Ford, like other automakers, has had to pause its North American vehicle production in response to the COVID-19 outbreak. But despite the output gap, the automaker should emerge with plenty of inventory on hand; LeNeve says that as sales dipped in March in response to new US social distancing guidelines, many models saw their inventories soar to more than a 100-day supply. Even the Ford F-150, the company's best-selling model, saw its sales decline by double digits in the first quarter of 2020.

But moving those vehicles after the dust settles might require some stimulus, Ford believes, as more than 10 million Americans have filed for unemployment benefits just over the last two weeks.

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Source Credits: Bloomberg

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