Congress moves to extend autos 'clunkers' plan

By John Crawley and Kevin Krolicki

WASHINGTON/DETROIT (Reuters) - The U.S. Congress moved to triple the funding for the government's successful "Cash for Clunkers" auto rebate program, which has brought car buyers back into showrooms and raised the outlook for an industry beset by abysmal sales, bankruptcies and job cuts.

The program, which gives drivers a rebate to turn in an old car to buy a new one, received a boost on Friday when the U.S. House approved $2 billion for it on top of the initial $1 billion approved in June to stimulate auto sales.

"The downward spiral has been broken," said Mike Jackson, chief executive of U.S. dealership group, AutoNation Inc. "We saw a stabilization in sales in the second quarter, and there will be a recovery in automotive sales."

Ford Motor Co shares closed up 61 cents, or 8.25 percent, to a new 52-week closing high of $8.00, as the rapid success of the program, initially funded with $1 billion, raised the outlook for the embattled auto industry. Ford shares were as low as $1.02 in November.

Automakers are due to report U.S. sales next week.

The speed with which consumers exhausted the clunker fund appeared to have caught the White House and Congress off guard, but President Barack Obama moved swiftly to call the program a boon to the economy.

The incentive program offers consumers up to $4,500 to trade in gas guzzlers for more fuel efficient vehicles. Trade-ins cannot be more than 25 years old or get more than 18 miles per gallon in most cases. The program was approved in June and was expected to last through October.

"The pace of sales has picked up dramatically," Ford's U.S. marketing and sales operations, Ken Czubay, said about business over the past month.

The U.S. Department of Transportation formally started collecting data and approving vouchers this week, but dealers were able to offer incentives beginning July 1.

Government and industry officials estimated that sales of nearly 250,000 vehicles have been made over the past month.

"I wasn't really looking for a new car, but that was a big incentive. That was the driving force to finally get rid of the old car," said Michael Papa, a Detroit-area restaurant owner.

WHO KNEW?

Obama administration officials considered suspending the program on Friday but opted to keep it going at least through the weekend.

"It has succeeded well beyond our expectations and all expectations," Democrat Obama said during remarks on the economy. "We're doing everything possible to continue this program."

Analysts have said they expect the program to give the economy a bit of a lift in the current quarter.