Scrap Industry News

The House Committee on Energy and Commerce has passed a one-year program intended to remove older, less fuel-efficient cars from the road while encouraging consumers to purchase more fuel-efficient vehicles. However, the Senate has introduced what some say is a slightly greener version of the legislation.

Similar programs have been introduced in a number of European countries, leading to an increase in new auto sales in some.

The agreement in the House is based on H.R. 1550, introduced by Congresswoman Betty Sutton, and H.R. 520, introduced by Congressman Jay Inslee. The legislation is expected to result in the sale of 1 million new automobiles that offer higher gas mileage, according to the Energy and Commerce Committee.

Under the legislation, a consumer with an older vehicle could get $3,500 to $4,500 in government vouchers to use toward the purchase of a new car with gas mileage that exceeds the old car’s by at least 4 miles per gallon for passenger cars.

However, the Senate proposal, which is part of the Waxman-Markey climate change bill, requires that the replacement vehicle get at least 24 mpg. Under the Senate proposal, officially known as the Drive America Forward Act, a trade-in that achieves a 7-mpg improvement would earn a driver $2,500, while a 10-mpg gain would yield $3,500. A 13-mpg increase would earn a driver $4,500.

While proponents of the legislation say the program would boost auto sales and reduce the number of older, less fuel-efficient automobiles on the roads, some opponents say the legislation could have negative effects in the future.

A statement by the Automotive Recyclers Association (ARA), Fairfax, Va., notes: "What may be a voluntary program for a consumer turning in a vehicle under the ‘Cash for Clunkers’ program now quickly becomes a compulsory program for non-participating consumers later because of reduced access to replacement parts, which in turn causes inflated prices."

ARA Executive Vice President Michael E. Wilson questions the sensibility of the program given the current situation of the automotive manufacturers. "With the daily questions in the media about the economic survival of major automobile manufacturers and their suppliers, how irresponsible is it for Congress to push for the needless scrapping of millions of replacement parts when the very supply chain for new parts is in jeopardy."

Such a program could, however, benefit operators of automobile shredders, as the older vehicles would have to be destroyed. The increased scrap flow could help auto shredder operators improve their operating margins.

A fact sheet on the House version of the "Cash for Clunkers" legislation is available at http://energycommerce.house.gov/Press_111/20090505/cashforclunkers.pdf.