Friday, July 31, 2009 2:19 PM

The House approved a bill Friday afternoon to provide $2 billion to continue the federal government's week-old "cash for clunkers" program, which has proven so popular with consumers that it was almost out of cash. The 316-109 vote split Republicans but attracted the support of nearly every Democrat in the chamber.

The money will come from funds in the already-passed economic stimulus package that were intended for energy loan guarantees. Congress will seek to replenish the energy program at a later date.

"If you were planning on going to buy a car this weekend, using this program, this program continues to run," White House press secretary Robert Gibbs said Friday. "If you meet the requirements of the program, the certificates will be honored."

Senate leaders hope to bring the bill up next week. Conservatives who opposed both the original cash for clunkers program and the stimulus package as a whole may seek to slow the process, as might liberals who want the program's mileage standards to be revised upwards.

Two members of the Michigan congressional delegation said the administration had told them it would continue to honor exchanges made under the program "until further notice."

Lawmakers also want problems fixed in the way the program has been administered and and to ensure auto dealers are being reimbursed in a timely fashion. Technical glitches have made it difficult for the administration to know exactly how many exchanges have taken place and how much money has been paid out to date.

"The question I have is, how do you make sure it's a smooth transaction?" said Michigan Rep. Thaddeus McCotter (R). "It's a glitch in the electronic record-keeping that's the problem."

As the House debated the hastily-drafted measure, Rep. Jerry Lewis (R-Calif.) lamented that there had been "not one hearing on the cash for clunkers program on the Appropriations Committee," and no consideration by the House of how the program had worked so far or how much more money it would need in the future. "Here we are, shoveling another $2 billion out the door," he said.

But supporters of the program emphasized that its dire financial straits indicated that it was working. "This is the best $1 billion of economic stimulus funds that the government has ever spent," said Michigan Rep. Candice Miller (R).

Only 40,000 applications for turning in clunkers have been filled out, according to a Congressional official. But dealers say they have many clunkers sitting on their lots that they have not processed and stacks of paperwork they can't get through the government's system. Government officials told Congressional leaders that 200,000 forms still need to be processed, according to survey results done of dealers involved in the program.

Congressional leaders expressed concerns that people's cars will be destroyed even before their car has been officially approved for the program.

Auto dealers, who have said the program is confusing to execute, are following the developments closely. Peter Kitzmiller, president of the Maryland Automobile Dealers Association, said Friday that he will advise dealers to continue negotiating trade-in deals with customers, but to stop delivering cars until the government gets a handle on the funding issue.

Greg Lewis, sales manager at Fitzgerald Auto Mall in Gaithersburg, said Fitzgerald dealerships have suspended clunker sales -- not only because of the funding issue but because of ongoing problems with processing transactions through the Web site of the National Highway Traffic Safety Administration, which administers the program.

Fitzgerald dealerships are on the hook for nearly $1 million worth of deals already made with buyers, Lewis said, and officials are believe it would be "a big gamble" to make new deals at this point, "It's just constantly crashing," Lewis said of the computerized system.

Kitzmiller said that given the processing difficulties, "I have no idea how NHTSA knows if they are out of money or not. I'm pretty sure they don't know how many deals are in the pipeline."

In New York, Honda dealership general manager Brian Benstock said one of his showrooms was full of people Thursday night when television news shows reported that the program would be suspended at midnight. "We started telling customers 'fish or cut bait,' " he said. At 11:55 p.m., Benstock's staff told one hesitant customer that "the hour glass is closing," Benstock said. The man gave up his 1997 Mitsubishi Diamante and left with a brand new Honda CRV at 1 a.m.

Benstock said he's taken in 60 clunkers since the program started but has yet to get paid from the government. "We haven't received a dime," Benstock said. "We knew the government program was going to end but we had no idea it would happen this fast," Benstock said.

Even if Congress approves the $2 billion extension on the program, dealers say the money will only last a week if the interest keeps up at current levels. That means the program will again be out of money during the August recess of Congress.

Benstock and other dealers say that there's pent up demand. The U.S. auto industry had been selling 17 million cars a year, but this year they expected to sell 10 million.

"The clunker customers have been hanging on for years and all of a sudden someone is giving them an opportunity to get a newer car," Benstock said.

The House bill was drafted after Michigan lawmakers held an emergency meeting Friday morning in the office of Sen. Carl Levin (D).

The program, formally known as the Car Allowance Rebate System (CARS), gives vouchers worth up to $4,500 to consumers who trade in gas-guzzling cars for more fuel-efficient models. The highly publicized effort -- passed by Congress in late June to help the flagging U.S. auto industry and launched just a week ago with $1 billion in funds -- was scheduled to run until Nov. 1, or until money ran out.

But as tens of thousands of people rushed to trade in their cars, sources familiar with the discussions who spoke on condition of anonymity said, federal transportation officials worried that the program's coffers could be empty by week's end.

Shortly before 1 a.m. Friday, several local dealers said in interviews that they would wait to see how the government was going to proceed with the program before they accepted any more clunkers. Dealers had been expecting an overwhelming response to the program to continue through the weekend.

"Clearly, this has been a very stimulative program that's got consumers back into the car market. It's our hope that possibly more funds can be made available," said Cody Lusk, president of the American International Automobile Dealers Association.

Lusk said the group has fielded hundreds of calls from frustrated dealers who have had problems entering vehicle data into the program's Web site. He said frequent crashes of the site have made it harder for car sellers to complete deals.

Jack Fitzgerald, who owns several dealerships in the Washington region, said his stores have already taken in about 200 clunkers. He said the government hyped the program too much before setting clear rules and guidelines on it. He suggested that the government consider lowering the dollar amount of the vouchers and extending the program for more time.

Tammy Darvish, another major auto dealer in the Washington area, said that her more than two dozen dealerships have had lots of interest in the program but that its success has left dealers strapped for money as they wait for payments from the government.

Under the program, dealers credit the amount of the voucher to customers who buy new cars. They then get reimbursed by the government.

"There's a whole lot of money out there that dealers haven't collected on," said Darvish, who noted that she's taken in about 200 clunkers. "We've sold the cars and we've processed the paperwork, but we haven't been reimbursed. I'm out about $1 million. The government is supposed to reimburse me for that."

At a Toyota dealership in Silver Spring Bob Grimm, a 64-year-old retired Defense Department worker, came last week to look at buying his son a new car. He didn't buy then but went home and researched the prices on the Internet. He came back Friday and made the deal. He traded in his clunker -- a 1996 Chrysler minivan with 176,000 miles on it. With the $4,500 voucher he got from the clunker program, plus getting rebates and other incentives -- he ended up buying a 2010 Toyota Corolla for $11,370. The car's manufactured suggested retail price was $18,505.

"That's why I couldn't resist the deal," said Grimm, who drives a 2006 Corvette. "It was $4,500 off the $15,870 price."

The Toyota Silver Spring dealership manager Ethan Rossignol said Toyota estimated his dealership would sell 200 cars in July. They've sold 350 -- 110 of them were consumers buying new cars after trading in their clunkers. His back lot, now dubbed "The Clunker Lot" is full of gas guzzlers from the 1990s. There is a Mercedes station wagon, a 1991 Cadillac Brougham with 130,000 miles on it, Chevy Suburbans, Jeep Grand Cherokees, Ford Explorers and Mercury Grand Marquis.

"It's nuts," Rossignol said of how busy his dealership has been. "It is one of the best things to happen to the automobile industry in a decade."

Staff writers Sholnn Freeman, Paul Kane, Tom Heath and Scott Wilson contributed to this report.

www.washingtonpost.com/wp-dyn/content/article/2009/07/31/AR2009073101173.html