WASHINGTON, June 9 (Reuters) – A proposal to help boost sagging U.S. auto sales is expected to clear the House of Representatives on Tuesday, but prospects for quick action in the Senate remain uncertain.
House leaders have settled on a compromise proposed by Representative Betty Sutton of Ohio that would offer vouchers to consumers worth up to $4,500 to help pay for new, more fuel-efficient vehicles.
Lawmakers, aides and lobbyists expect the Democratic-controlled House to approve by a comfortable margin the bipartisan measure, known as “cash-for-clunkers.” A two-thirds majority is needed for passage under rules established by leadership.
Wrangling in the Senate over unrelated legislative and procedural issues has clouded the proposal’s immediate prospects in that chamber. But senators are expected to coalesce around a similar plan in coming weeks.
Congressional and industry proponents envision the program will spur up to 1 million sales over a year. U.S. auto sales have slumped sharply this year and are far below the annual rate of 14 million units of a year ago and 17 million units in 2005.
The decline accelerated the financial deterioration of Chrysler and General Motors Corp (GMGMQ.PK), which are restructuring in bankruptcy and rely on billions in federal assistance to survive.
A centrepiece of the plan is to remove bigger, older gas guzzling vehicles, made mainly by U.S. manufacturers, from the roads. Total fuel savings will depend on the mix of vehicles purchased.
While Japanese and other foreign companies sell the most popular fuel-efficient cars, the mileage goals of the “clunker” program are modest enough to include the bread-and-butter sport utilities, pickups and vans that are more fuel-thirsty and continue to make up the strong majority of sales for U.S. manufacturers.
GM, Chrysler and Ford Motor Co (F.N) are under pressure from the government and consumers to make more efficient cars to compete with products offered by overseas rivals like Japan’s Toyota Motor Corp (7203.T) and Honda Motor Co (7267.T).
Gasoline prices — a driver of consumer purchasing habits — are down sharply from levels a year ago which could help U.S. manufacturers, especially GM and Chrysler, further reduce heavy inventory backlogs on dealer lots. Chrysler has ceased production through this month while GM has sharply reduced its output domestically.
Ford, which has promoted the “clunker” program more aggressively than rivals, is struggling but is healthier financially than GM and Chrysler. It has also scaled back capacity but has aggressively managed its inventory to levels comparable to Japanese competitors.
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