Leadership Lessons from the US Government and the Cash for Clunkers Program

Cash for Clunkers: What we can learn about Leadership from Bureaucrats?

Whether you agree or disagree that the US Government should be in the business of incentivizing the populace to buy new cars, the fact is that the so-called “cash for clunkers” program simply demonstrates that our government, like all governments, does not employ an overabundance of thoughtful leaders.

If the goal of the program, also known as the Car Allowance Rebate System (CARS), was to encourage the sale of 200,000 new vehicles, then it has been a smashing success. In fact, the one billion dollar program that was scheduled to run for the next three months ran out of money in less than a week. Oops.

“It has succeeded well beyond our expectations and all expectations,” commented President Barack Obama.

Thoughtful Leaders “Do the Math”

Just who in our government was setting these expectations? We all knew the program, which pays dealers up to $4,500 per vehicle to junk old cars traded in for new fuel-efficient cars, only had enough money for about 200,000 such transactions.

• There are roughly 20,000 new car dealers in the US.
• That equates to 10 clunker deals per dealer.
• The average dealer can sell 10 cars in about 3 hours.

We’re actually surprised the program lasted as long as it did given that the demand for new cars in the US has been depressed for more than a year. One could argue that the US auto industry, which is currently selling about 500,000 fewer new cars each month that it did just two years ago, has more pent up demand than the housing market. Prior to the Cash for Clunkers program, you were more likely to catch the Swine Flu than you were to get New Car Fever.

Now, for the Real Ugly Truth about CARS

It’s clear we didn’t plan well enough for the execution phase of this program. Not only did the government drastically underestimate the potential acceptance of CARS, but they’ve been failing (unsurprisingly) to keep up with the very basics of their own program.

Just a couple of quick examples:

TheManager signed up weeks ago at the Cars.gov website to be alerted when there were updates to the program. By our tally there have been dozens of such updates, though we’ve received none of the promised email communications. No biggie, and certainly not surprising.

Now we learn that the website created by the feds to handle dealers’ claim submissions has taken up to an hour to process each transaction. Additionally, there are reports of repeated rejections as dealers spend countless hours submitting and resubmitting data. A little more of biggie, but again, not surprising.

So, who are we Entrusting with CARS?

Let’s not forget that this is program between the government (think: no accountability) and car dealers (think: Rudy Russo in Used Cars). You wouldn’t trust either of these groups to babysit your kids let alone run a now multi-billion dollar program designed to make the world more fuel-efficient. (Congress added $2 billion to the program today.)

Seriously, there are great people who work for the US Government and there are certainly great people who manage and own new car dealerships in America… there just aren’t enough of them in either profession.

The CARS program requires that the clunker “be crushed or shredded so that it will not be resold for use in the United States or elsewhere as an automobile. The entity crushing or shredding the vehicles in this manner will be allowed to sell some parts of the vehicle prior to crushing or shredding it, but these parts cannot include the engine or the drive train.”

Who will inspect this crushing and shredding? Who will ensure that none of these vehicles is resold inside or outside of the US? Who will ensure that no unscrupulous dealers submit false claims? If we are relying on the goodness of mankind to ensure everyone, including the government and car dealers, does the right thing then we are being more than a little naïve.

Thoughtful leaders, of course, take pride in not being naïve. The government could certainly use a few more thoughtful leaders.