Wrapping up Cash for Clunkers

When the end comes for a Cash for Clunkers car, it's an ugly death.

A solution of sodium silicate — a substance known as liquid glass — is poured into the crankcase of gas guzzlers that have been traded in for new vehicles as part of a federal program to help the environment and stimulate the economy. Then the motor is started and revved to 2,000 rpm to let the liquid coat the moving parts, ultimately seizing it.

“It takes seven to 15 minutes with two quarts in it to kill it,” said Jim Johnson, manager of Action Auto Parts and Recyclers in Medford.

He's got about 10 clunkers that will be cannibalized for parts as one of the final steps in a federal program that has been a hit with consumers, but has proven too bureaucratic for some dealers as their checks from the government come trickling in.
“It's been an absolute nightmare,” said Alan DeBoer, who is a partner in four dealerships in Medford and Ashland. “They're going to put a lot of dealers out of business.”

DeBoer said he got his first check for one of the clunkers this week, and he's sold 30 cars out of his Ashland Chevrolet dealership alone, negotiating through what he describes as too much red tape.

DeBoer said, “The government's answer to the problem is instead of simplifying the rules, they're adding more people.”

In the meantime, the profits a dealer makes could be wrapped up in that much anticipated check from the federal government.

“Dealers are out millions of dollars,” said DeBoer.

The Cash-for-Clunkers program, which began July 24 and will end Monday, provides rebates of up to $4,500 on a used vehicle that is traded in for a new model. The federal government has put a total of $3 billion into the program.

Robert Sacks, spokesman for Lithia Motors, said his company already has received some payments from the federal government and the program has been successful for his company. The program has forced the local dealerships to search far and wide to fill their lots with new vehicles.

“It has been a tremendous boon for us,” Sacks said. “The response is so overwhelming we're buying vehicles from other stores and shipping them out West.”
At 88 new car Lithia franchises, more than 1,800 Cash-for-Clunkers deals have been worked out. To date, the federal government owes Lithia some $6 million to $8 million, but the company has been paid for only about 70 clunkers so far, said Sacks.

He said Lithia has got the ability to wait for the money, but would prefer to receive it as soon as possible to put it to work.

Sacks said the paperwork and verification process can be a bit cumbersome, but he understands why it is required and why people need to prove they've had ownership and insurance on the vehicle.

“If somebody is defrauding the government, then people are going to get upset that somebody is defrauding the government,” he said.

Getting approval to make the transaction happens pretty quickly, Sacks said, but before the dealership can get its money it must certify that the engine in the clunker has been destroyed.

When Lithia turns over its disabled vehicles to recycling yards, it usually tries to get $50 to cover costs such as draining the oil and transporting the vehicle.

If the company gets additional money for a vehicle beyond the $50, Sacks said the Cash-for-Clunkers program requires dealers to give that money back to the customer. Sacks said the amount is worked into the Cash-for-Clunkers transaction.
Sometimes a vehicle has little or no value to a recycling yard, so Lithia can end up eating some or all of the $50 cost, he said.

One of Lithia's vehicles, a 1994 Toyota pickup with a six-cylinder engine, was being dismantled at Action Auto this week.

Action Manager Jim Johnson said he's already got a buyer for the seat, bed and canopy.

Apparently there was nothing much wrong with the vehicle, which had a piece of paper attached to the engine warning it had been badly damaged during the “kill” process.

The dipstick was coated with a thick gooey mixture of oil and liquid glass.

Johnson said he can't sell anything related to the engine block, but could sell wires, the fuel-injection system and other parts not damaged. As part of the Cash-for-Clunkers program, he must take out all the parts for the vehicle within six months, then what's left is recycled, he said.

Because of the condition of the Toyota, Johnson said it would have been a lot more valuable selling it as a used car rather than parting it out.

“You know the used car salesmen at Lithia were crying when this came in,” said Johnson.

Reach reporter Damian Mann at 776-4476 or dmann@mailtribune.com.

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