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'Cash-for-Clunkers' Suspended as Funds Run Dry (news story on CNBC.com)

'Cash-for-Clunkers' Suspended as Funds Run Dry

CNBC.com
30 Jul 2009 07:49 PM ET

The so-called "Cash for Clunkers" program will be suspended because the funds set aside for the effort are on the verge of running out, Capitol Hill sources told CNBC.

Transportation Secretary Ray LaHood has notified key senators that the program will "run out of money at midnight tonight," sources said.

The U.S. government allocated up to $1 billion for incentives to encourage Americans to trade in older and less fuel-efficient vehicles for new models.

Consumers are eligible for a rebate of up to $4,500. Auto industry executives have said they expect the program to add about 250,000 vehicles to the 2009 sales tally.

Automakers and their dealerships have already said the program is hugely popular with consumers. Ford Motor's sales chief said on Thursday that it has seen a sharp increase in sales over the past week since its dealers began accepting trade-ins under the program, the automaker's U.S. sales chief said Thursday.

"We were having a strong month before (cash for clunkers) started," said Ken Czubay, who heads Ford's U.S. marketing and sales operations. "The pace of sales has picked up dramatically."

Czubay said that while Ford did not have a forecast for the industry-wide sales rate for July, it appeared likely that overall sales could top 10 million vehicles on the annualized basis tracked by analysts.

That would represent the highest sales rate of the year and would strengthen expectations that U.S. vehicle sales have stabilized after a four-year decline that drove them to their lowest levels since the early 1980s.

Similar government incentives have boosted sales in Europe and the auto industry has already begun lobbying for additional funding for the U.S. program.

- CNBC Chief Washington Correspondent John Harwood contributed to this report.

© 2009 CNBC.com