Alliance of Automobile Manufacturers shares current industry view

President Barak Obama signed into law the Cash for Clunkers legislation (Title XIII - Consumer Assistance to Recycle and Save Program) on June 24. The new regulations are to be published by the Department of Transportation on July 24, which will officially launch the program.

The limited program (the program is set to expire this fall) will provide $1 billion in grants for automobile purchases by consumers.

To learn how the legislation and regulations will affect automobile sales and manufacturing, the auto recycling industry and the overall economy, American Recycler queried Charles Territo, the Alliance of Automobile Manufacturers’ senior director of communications for his take on this economic stimulus package.

What is this importance of this legislation and its accompanying regulations?

Territo: Automakers are hopeful that the Cash for Clunkers (CARS) program can provide a much need boost in auto sales and dealership foot traffic. Automakers believe a wellcrafted fleet modernization program will provide two beneficial effects – helping to stimulate auto sales during the current economic/credit crisis and replacing older, less fuel-efficient vehicles with cleaner, safer, more fuel-efficient ones.

A fleet modernization program can deliver benefits to consumers, the environment and the economy.

How will the legislation and regulations affect the auto recycling industry?

Territo: This legislation has the potential to add as many as 250,000 vehicles to the auto recycling industry. The law stipulates that only the engine must be scrapped and rendered inoperable. All other vehicle parts can be reused.

How will the legislation stimulate auto sales, especially by GM, Chrysler and Ford?

Territo: Companies are in the process of compiling information about eligible vehicles. The number of vehicles a company has will play a large part in how the program will stimulate their sales. The CARS program is open to all manufacturers and new automobile dealers. Around the world, consumers are already benefiting from similar programs, and the resulting economic stimulus has been significant. In January, Germany implemented a fleet modernization program. At the end of the first month of the program, sales in Germany were up 21 percent over 2008. Corresponding sales in the United States were down 41 percent for the same period. Fleet modernization programs have been adopted in China, U.K., Brazil, Spain, Austria, France, Italy, Portugal, Romania and Slovakia, and are under consideration in several others.

How is the legislation expected to reduce green house gas emissions? How important is it for the environment to remove older cars from service?

Territo: Vehicles today are 75 percent cleaner for smog forming emissions than vehicles just five years ago. The program is designed to encourage consumers to trade in their older, less efficient vehicles for cleaner, safer and more fuel- efficient new vehicles. Ultimately, oil savings and emissions reductions will happen only if buyers can use this program to buy vehicles that meet their needs.

How do you think the public will react to the legislation and do you think people will make the connection between the need to stimulate the auto industry and help to reduce GHG?

Territo: It is estimated that there are roughly 77 million vehicles eligible for trade-in under the terms of the CARS program. If 1 in every 300 eligible vehicles is traded in, this program will be an overwhelming success.

What can the auto recycling industry do to help make the law and regulations a success?

Territo: The auto recycling industry can work with local auto dealers and help coordinate the scrappage efforts for vehicles traded in as part of the CARS program.

In terms of future legislation and government support, what do you foresee is required to help restore the health of American automobile manufacturers and the environment?

Territo: Continued investment in advanced technologies, retooling and research and development of battery technology. Since consumers are often reluctant to pay higher upfront costs, policymakers can accelerate sales of fuel-efficient autos through consumer incentives like tax credits and auto loan interest tax deductibility.