US follows Europe's lead on cash for clunkers (Feature)

By Daniel Leaderman Jun 20, 2009, 3:23 GMT

Washington - Following Europe's example, the United States will offer consumers cash for their old, lumbering, gas guzzlers - a move greeted Friday by foreign and US carmakers.

The US Congress appropriated 1 billion dollars for a 'cash-for- clunkers' programme late Thursday, offering tax-free vouchers of up to 4,500 dollars for trading in old vehicles for models with better fuel efficiency by November 1.

The bill, aimed at giving an emergency infusion to car sales and reducing carbon emissions, will become law with a signature from President Barack Obama, who supports the legislation.

Congress also put to rest concerns by foreign carmakers that an American programme would apply only to cars made in the US, Mexico or Canada. The bill passed by Congress contains no such restrictions, and means a Toyota made in Tokyo could be traded for a Chrysler made in Detroit, and vice-versa, a congressional staffer confirmed.

Stefan Jacoby, Volkswagen of America's president and chief executive, called the vote 'historic' and in a statement urged US shoppers to put Volkswagen's 'fun-to-drive, fuel-efficient vehicles' on their 'shopping list.'

US lawmakers may have hoped the bill would rather help boost the struggling domestic car industry, with Chrysler fresh out of bankruptcy court and General Motors still reorganizing.

The Alliance of Automobile Manufacturers praised the Senate for passage of the fleet modernization, saying it would 'help restore consumer confidence in the economy by stimulating vehicle sales' and benefit the environment.

Ford Motor Company said in a statement that the legislation would 'help consumers, support jobs and improve the environment.'

The programme was cut down from an initial 4-billion-dollar proposal, but the US car industry estimates that it could still generate sales of 250,000 cars by November - a result that no one in Detroit would sneeze at.

The success of similar programmes in Germany and other European countries made headlines in the United States and caught the attention not only of General Motors, Ford and Chrysler but also of the US Congress.

The bill establishes the Consumer Assistance to Recycle and Save (CARS) programme, which will offer vouchers to offset costs of new vehicles purchased or leased between July 1 to November 1.

Obama would free up money for the vouchers from the 787-billion- dollar stimulus programme passed by Congress in February.

The US car market is in steep decline. In 2008, sales plummeted from 16 million to 13.2 million vehicles. For 2009, experts project the figure will drop to under 10 million cars.

Voucher amounts will depend on the type of vehicle and improvement in efficiency. The new passenger cars must get at least 10.7 litres per 100 kilometres to qualify. The trade-ins must have guzzled more than 13.1 litres per 100 km and be less than 25 years old.

The new light trucks must have an efficiency of at least 13.1 litres per 100 km.

The bill dictates that the trade-in vehicles must be junked or dismantled so that usable parts - which can't include the engine block or drive train - can be salvaged.