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Cash for Clunkers program a mixed bag for Morris auto dealerships

Morris Auto Plaza has a unique advertising "vehicle" for its participation in the Cash for Clunkers program, but dealership owner Joel Krusemark said he's "taking a more cautious road" on submitting contracts until he's certain his business will be paid by the government.

By Tom Larson, Sun Tribune

The Cash for Clunkers program represents a mixed bag for local auto dealers, and they remain apprehensive about it even after the federal government approved a $2 billion infusion on Thursday.

On the one hand, the program has increased traffic at the dealerships. On the other, red tape is making it frustrating for the dealer owners and some potential customers.

"I hope the health care issue is better organized than this," joked Joel Krusemark, owner of Morris Auto Plaza. "Or else we're in trouble."

The federal government's Car Allowance Rebate System -- dubbed Cash for Clunkers -- is designed to give customers savings of $3,500 and $4,500 on new vehicle purchases if they surrender gas-guzzlers and other inefficient vehicles. There are various measures of fuel economy and vehicle ownership and use that must be met to qualify.

The goal is to increase fuel efficiency, improve the environment and provide a boost to the ailing auto industry.

But interest in the program has been intense, with the initial $1 billion allotted to carry the program into the fall gone in just days. The U.S. Senate on Thursday allotted another $2 billion to keep the program going.

The administration required to run the program has overwhelmed dealers, and the rules have changed in mid-course, which has created more headaches, said Tom Krusemark, owner of Valu Ford and Chrysler.

"The program brings people around," he said. "I'm just not sure the government went into the program knowing how much the paperwork would be a burden on the dealerships."

The hectic days began July 27 when the program began.

Dan Dripps, owner of Heartland Motor Co., said the dealership has written between 15 and 20 contracts under the program. But the money has been slow to arrive and reports that the initial money allotted was gone so quickly left dealership owners nervous. New cars have left the lots and owners aren't positive they'll be paid for them, Dripps said.

Chaos was the order of the day early in the first week. The Minnesota Auto Dealers Association warned its members to not do any Cash for Clunkers deals after midnight on July 30. The next day, the MADA's word to members was to continue writing contracts, Dripps said.

"I wish (the government) had done that behind the scenes so it didn't cause a panic for consumers and dealers that have deals out there that they wouldn't get paid for," Dripps said.

Consumers were left believing that there was no money left so there was no use in pursuing a deal. They didn't have time to research vehicles and deliberate on a major purchase, he said.

"It's definitely a great deal for consumers," Dripps said. "There's been a tremendous response and we've been overwhelmed with questions from people wanting to trade. It's been a little challenging as far as the administrative process."

Customers and dealers also have had to deal with rules that were changed after the program started, and some customers have been declined because their registration lapsed, even for a few days. The program requires continuous ownership of the vehicle for at least a year and insurance coverage has to be current.

Joel Krusemark said his dealership has submitted a few deals for approval but that he's "taking a more cautious road" and holding the vehicles until receiving authorization. Morris Auto Plaza also is not destroying the engines of the "clunkers" brought in -- which is another of the government's stipulations in the program -- until money is in hand for the new vehicles.

"I'm not comfortable with that," he said. "Dealers don't want to be left with nothing until they know what's going to happen."

Joel Krusemark was at a vehicle auction Thursday and spoke with a metro-area dealer who has sold 800 cars under the CARS program. He's been paid for six, and estimated he is sitting on $3 million of potential liabilities.

Dealers also are worried about inventory holding up. Stocks of many of the higher mileage vehicles are dwindling, said Tom Krusemark, who has seven deals pending.

"Cars are disappearing," he said. "The smaller cars are basically gone."

All three dealers agreed that the program will help an auto industry that has seen both General Motors and Chrysler declare and emerge from bankruptcy in recent months.

"This is definitely going to get the guys in Detroit back on the assembly lines, cranking out cars," Tom Krusemark said.

"The results," Dripps said, "are exactly what they were hoping for. They just underestimated the interest."