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Cash for clunkers equals jobs in Gorham

The deals are still going at Berlin City, where more than 100 people have traded clunkers for new cars. (Photo by Erik Eisele) (click for larger version)
August 12, 2009
GORHAM — The Car Allowance Rebate System, or CARS, rolled out two weeks ago under the more common moniker "Cash for Clunkers." In that time Americans bought roughly 250,000 vehicles and drained the program's $1 billion budget. Congress allocated another $2 billion last week to keep CARS running through Labor Day.

And the Berlin City family of dealerships is glad they did. The day the money ran out, managers took a gamble: they bet the government would continue to fund the program, and they kept doing sales.

"We were still taking clunker deals," said Ed Watson, general manager of the Berlin City's GM Superstore, before Congress had approved the $2 billion.

They stopped for a couple of hours, but right away they decided to allow customers to trade in older vehicles with poor fuel efficiency for new ones with better gas mileage.

"We'd like to see it continue, of course," Mr. Watson said. "We had a huge surge in traffic in all our stores."

"It's definitely created traffic, an amazing amount of traffic," said Peter Allain, a salesman at the GM store. "The first four or five days were really madness.

He said he had done several clunker deals and another was coming in that day. More than 100 people had taken part in the program since it started 10 days earlier.

"The auto industry needed a boost," he said. "This certainly helped us."

The surge has been enough to deplete the dealership inventory.

"Product is really starting to run thin," Mr. Watson said.

"You never have the right color," said Mr. Allain. "It's created a lot of urgency."

It's also created jobs. Allen Binette, one of the general sales managers at Berlin City, said he's looking for one additional salesman, and at the Toyota division they are looking for two.

"It's been an unbelievable program for us," he said. "We hope it continues."

The GM Superstore has also rehired several sales people.

Car salesmen work 100 percent on commission, so the increase in sales also means larger pay checks.

"And they spend the money locally," Mr. Binette said.

But there are some concerns whether the bump in sales can last.

"What it's going to do to December and January, I don't know," said Mr. Allain. He's concerned that customers may have simply pushed up their timeline for replacing their cars.

Mr. Binette disagrees.

"Most of these people wouldn't be here trading," he said. The people it has attracted are not the normal new car customers. It has opened up the market to people who wouldn't have considered a new car before.

"It's getting people to spend money and taking gas guzzlers off the road," he said.

Some "clunkers," however, maybe shouldn't have been turned in.

"A lot of these cars belong on a used car lot," said Leo Poulin of P & L Auto Parts, the company tasked with disposing of the cars.

The cars have be disabled so they can never be sold again, and for Mr. Poulin that wipes out much of the car's value.

"We've got to take the good with the bad. And it's a lot of bad," he said.

It takes about four hours to process a vehicle, to drain all the fluids and prepare to crush it. P & L Auto gets $110 per ton for the crushed cars, but they have to pay $35 per ton to transport them. Most vehicles are between one and one and a half tons, so they net between $75 and $112.

"There's really no big money in the junk market right now," he said.

But if the engines still ran he could get more value out of each car. Instead, the dealerships pour salt water into the engines and run them until they sieze.

"It's a shame to do that," he said, because some of these cars have low miles. Destroying the engines makes them nearly worthless.

"You've got to destroy the car, that's the sad part," said Mr. Allain, but otherwise the incentive is working. People can get $3,500 or $4,500 for their old car, depending on the improvement in their fuel economy.

"Ninety percent of them have been for $4,500," Mr. Watson said, indicating people were going for more fuel efficient cars. At this point, he said, the biggest problem is keeping up with demand. Much of his lot is empty because GM factories have been shut down for months.

"We really won't see any inventory increase until September," he said. "It's going to get even worse."

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