Dealerships create 'clunker graveyards.'
(Photo courtesy of Smart Motors)
The Car Allowance Rebate System (CARS), more commonly known as ‘Cash for Clunkers,’ has generated showroom traffic throughout the country. Now customers, dealers, and politicians are scurrying to handle the unexpected volume’s effect on new cars, disposal vehicles, and budgets.
After the original budget was surpassed the House of Representatives apportioned another two billion dollars and left for a month-long vacation. The Senate will take up the issue Monday with early indications from both sides of the aisle that passage may not be easy. In the original bill the Senate dropped the House’s requested $4 billion by 75 percent. If they repeat this reduction it would mean only half a billion more available for the program.
The program has not been without its challenges. Its start-and-stop nature is just one cause of frustration. It started on Monday, was halted at the close of business Thursday, started again Friday morning, and then put into a state of uncertainty for the weekend. Salespeople worked late each evening to complete pending orders. Jeff Gallardo of Wally Edgar Chevrolet Buick in Lake Orion, Michigan, put in long hours because “the paperwork to qualify someone is very extensive. We have to be careful to make sure the dealership can get the government money”.
Buyers also became nervous as talk about the end or suspension of the program indicated to many their deals may not happen. This prompted Rick Case Automotive Group in South Florida to issue a press release Friday afternoon to reassure buyers that deals were still being written for the program. According to Nicole Dunwoody, Rick Case Automotive Group “will continue to honor the ‘Cash for Clunkers’ program through this weekend and until the government decides to end the program”.
Beyond the paperwork and start-stop communications dealers are wrestling with storage problems. At Smart Motors in Madison Wisconsin they have created a ‘Clunker Graveyard’ for the high-mileage vehicles they have taken in. Jim Geisking says the dealership sold 150 the first five days of the program and is staying open until 11:30 to handle demand. He says this is the first time in the dealership’s century long history they have extended hours for a special program. General Manager Allen Foster, adds, “some models have sold out but we still have 300 vehicles that qualify for the program.”
Connection to healthcare
The program difficulties have given fodder to critics of the government healthcare proposals. Particularly the rapid expenditure of the allocated dollars is hard to disregard. Successful business development requires fairly accurate forecasting of success and failure points. Gallardo had run numbers breaking down the dollars into how many cars each dealer in America could sell and quickly realized the funding would run out within a few days. He was advising customers to decide early on their new vehicle to make sure they could close the deal as soon as the program began.
Other dealers were doing the same as salespeople across the country ran the numbers reaching conclusions similar to Gallardo’s.
Critics now say the dollars estimated for the healthcare budget may be equally as inadequate.
In the Michigan Medicaid program some procedures are already being rationed. Dental benefits were drastically reduced beginning with the new budget year, which started July 1. Recipients were told of the reductions in early June which resulted in a flood of Medicaid appointments at participating dentists. Tooth extractions, which continue to be covered, were postponed until the new budget year creating wait periods as long as two months.
Business development lesson
Business development requires a strategy of doing creative new programs and refinements to existing products and services. To be effective these changes should be reviewed in advance to objectively consider worst and best case scenarios.
For more info: CARS government website.
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