Washington, DC – In a letter to President Obama, U.S. Senator Dianne Feinstein (D-Calif.), Susan Collins (R-Maine), and Charles Schumer (D-N.Y.) today proposed using unused stimulus funds to help pay for a fleet modernization program – known as “cash for clunkers” – that would provide incentives to consumers to encourage the sales of more fuel efficient vehicles and help save American jobs. President Obama signaled his support for this type of incentive program earlier this week.

Senators Feinstein, Collins and Schumer introduced a bipartisan bill in January to create a national fleet modernization incentive program. Specifically, the legislation authored by the Senators (S.247), would provide a voucher of up to $4,500 for drivers who turn in fuel-inefficient vehicles to be scrapped, and purchase a more efficient new or used vehicle. Vouchers could also be redeemed for transit fares for participating local public transportation agencies.

The program would operate for four years, from 2009 – 2012, and is expected to encourage the early retirement of up to one million vehicles per year. The traded-in vehicles that would be scrapped must have a fuel economy of no more than 18 miles per gallon, be in drivable condition, and have been registered for at least the past 120 days.

Following is the text of the letter sent by the Senators to President Obama today:

April 1, 2009

The Honorable Barack Obama
The White House
1600 Pennsylvania Avenue NW
Washington, DC

Dear Mr. President:

As authors of the Senate’s only bipartisan “cash for clunkers” legislation, we were very pleased to hear you endorse the framework of our legislation this week. We would like to work with you to enact and fund a fleet modernization program that meets the dual goals of increasing vehicle sales and reducing oil consumption.  We strongly recommend you propose to the Congress the stimulus funding that you support reprogramming for this purpose.

Our bill is called the Accelerated Retirement of Inefficient Vehicles Act (S. 247).  The legislation would stimulate automobile sales and increase the fuel efficiency of America’s fleet, in compliance with our international obligations.  Here are some of the highlights of the legislation:

• Our legislation would reward consumers for scrapping the worst gas guzzlers on the road, instead of targeting old vehicles regardless of their condition, emissions, or fuel consumption.  Gas guzzlers, according to recent reports by Kelly Blue Book, lose value more quickly than other vehicles, making it difficult for Americans to trade them in.  
  
• The legislation targets only a subcategory of vehicles for trade-in, assuring that we do not establish an unintended floor price on all used cars. 
  
• Our bill would provide more significant payments to those who trade in newer gas guzzlers, which would otherwise consume gasoline excessively for many years to come.  This incentive structure assures that the largest payments are not made for the trade-in of “clunker” vehicles pulled from the scrap heap.  
  
• To assure compliance with international trade obligations, our bill allows any fuel efficient vehicle to qualify.  It does not require that the vehicles purchased be assembled in the United States or North America, although many consumers will purchase such vehicles.
  
• To address the needs of lower-income people, our legislation allows for the purchase of fuel efficient used vehicles.  

Our proposal would address the greatest challenge to automotive sector profitability: the dramatic drop in vehicle sales from 17 million to 10 million new cars sold annually.  While Federal loans to automobile manufactures, parts manufacturers, and dealers provide a bridge to companies experiencing a dramatic and unexpected reduction in revenue, only a program to increase vehicle sales will help to restore healthy cash flows to levels where profitability is possible.  In other words, the problems faced by the automotive sector require both a demand-side and a supply-side stimulus.

The incentive system created by our bill will advance the broad public goal of increasing the average fuel economy of the United States fleet more quickly than standards for new cars alone.  If enacted, the bill is projected to save 40,000 to 80,000 barrels of oil per day and to reduce greenhouse gas emission by 7.6 million metric tons of carbon dioxide equivalent per year.

We are aware that other “Cash for Clunkers” proposals have been put forward and we are eager to consider other ideas to meet the dual goals of stimulating automobile sales and improving the fuel efficiency of America’s fleet.  We are willing to consider changes to our bill that would bring all interested parties to the table.  Finally, we encourage you to consider proposing to the Congress from which stimulus account the necessary resources – in the range of $2 billion to $4 billion – should be drawn.

Again, thank you for expressing your general support for our fleet modernization idea.  We look forward to working with you to enact this proposal.

                                                           
Sincerely,

Dianne Feinstein                                             Susan Collins                       
U.S. Senator                                                    U.S. Senator                       

Charles E. Schumer
U.S. Senator

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