Canada urged to beef up "cash for clunkers" plan

Tue Apr 7, 2009 4:24pm EDT
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TORONTO (Reuters) - Ottawa's support for auto parts companies is a good step toward helping the auto sector in Canada, but a robust scrappage program would give the struggling industry an even bigger boost, the chief executive of Ford Motor Co's Canadian unit said on Tuesday.

David Mondragon told Reuters he supported the move by the government of Canada to increase the funding it will make available to insure money owed by manufacturers to auto parts suppliers.

"Our industry is very interdependent, as we all know, and we understand the fragility of some of the suppliers in Canada and in the U.S., so any support that can be offered to them is well supported ... by Ford," he said.

But he said what he would really like to see is a new scrappage program in Canada to replace the current model that gives consumers C$300 ($242) toward a new, more environmentally friendly vehicle when they get rid of their older ones.

"I think that less than a dozen people have taken advantage of that C$300 offer to scrap their vehicle," said Mondragon, pointing out that the average 10 year-old car is worth between C$3,000 and C$4,000.

Mondragon said he believes a "cash for clunkers" program that offers C$3,500 toward an new vehicle would help the industry, and the economy, claw back some of the losses brought on by five straight months of auto sales declines.

Germany, for example, said on Tuesday it would increase funds for its popular car scrapping subsidy to 5 billion euros ($6.77 billion) from 1.5 billion. The plan, which will run until the end of the year, offers consumers 2,500 euros for cars nine years old or older toward new, lower-polluting vehicles.

Reid Bigland, chief executive of Chrysler's Canadian arm, said in a statement he would also like to see a more aggressive scrappage program in Canada.

"Done right, these programs can provide a welcome economic stimulus, automotive sales stimulus, and help the environment at the same time by getting older vehicles off the road," Bigland said.   Continued...