July 31 (Bloomberg) -- The U.S. House approved an emergency measure to add $2 billion to the “cash for clunkers” automobile purchase program after a burst of demand exhausted most of the initial $1 billion in less than a week.

President Barack Obama said he was “very pleased with the progress the House has made.” The administration is “working with Congress to ensure the program can continue,” he told reporters at the White House.

The Senate will try to act on the bill next week, said Jim Manley, a spokesman for Majority Leader Harry Reid.

Named the Car Allowance Rebate System, the program provides credits of as much as $4,500 for the purchase of a new car when turning in an older vehicle to be scrapped. Lawmakers had expected the first $1 billion to generate about 250,000 vehicle sales and last until about Nov. 1.

“Consumers have spoken with their wallets, and are saying they like this program,” said Representative David Obey of Wisconsin, the chairman of the Appropriations Committee.

The House voted 316-109 to transfer money to the program from an Energy Department fund for loans to innovative energy projects that wasn’t to be distributed until next year.

The auto program will continue without interruption, White House press secretary Robert Gibbs told reporters today.

Buying This Weekend

“If you were planning on going to buy a car this weekend, using this program, this program continues to run,” Gibbs said. “If you meet the requirements of the program, the certificates will be honored.”

Some Republicans, such as Representative Jeff Flake, of Arizona, said the program is being administered badly and picks economic winners and losers.

“Why are we deciding to aid this sector and not another?” Flake said during the House debate.

Demand kindled by the clunkers program may push U.S. auto sales to a 2009 high in July, possibly signaling a bottom in the market’s worst slump since at least 1976. Sales have run at a seasonally adjusted annual rate of fewer than 10 million units since December. That pace trails last year’s total of 13.2 million and the 16.8 million average from 2000 through 2007.

The Michigan congressional delegation led today’s efforts for action, saying they had the Obama administration’s support.

“The administration worked overnight literally to identify a source for these funds,” Senator Carl Levin, a Michigan Democrat, said in an interview. “They are not only on board, they are enthusiastically leading this effort.”

House Recess

The House approved the infusion of funds before leaving for its August break after today’s session. The Senate is scheduled to be in session next week.

The effort to revive the program may face demand from senators that it produce a greater improvement in energy efficiency than is now required.

“Any extension of the ‘cash for clunkers’ program must go further in advancing the goals of better fuel efficiency and greater emissions reductions,” Senators Dianne Feinstein, a California Democrat, and Susan Collins, a Maine Republican, said in a joint statement. “We will not support any bill that does not meet these goals.”

The program was designed to subsidize more new-vehicle purchases in the effort to revive dealerships and automakers while getting older, less fuel-efficient vehicles off the road. Much of the money was committed within six days after the program began.

Doubt Erased

“Any doubt that the CARS program would jump-start auto sales is completely erased,” said Greg Martin, a General Motors Co. spokesman. “More than 200,000 cleaner, more fuel-efficient cars are on the road and a vital industry gets a needed boost. We hope there’s a will and way to keep the CARS program going a little bit longer.”

The Transportation Department had said this week that the money wasn’t running out.

“When we get close, we will start alerting dealers so they don’t get caught with a deal in the pipeline,” said Rae Tyson, a department spokesman, in an interview July 28. “We’re not going to leave them hanging. We’re not going to run out of money in a couple days.”

The administration’s reports on clunkers applications from dealers didn’t indicate that the funds were almost gone. The National Highway Traffic Safety Administration, which is running the program, said yesterday that 22,782 vehicles worth $95.9 million had been sold.

Dealers Association

Yesterday, the National Automobile Dealers Association, which represents about 19,700 new car and truck dealers, came to the Michigan delegation with concerns about the $1 billion being used up, with 40,000 transactions completed and about 200,000 in the pipeline, according to Senator Debbie Stabenow, a Democrat from the state. The McLean, Virginia-based association worked with the delegation on the measure to keep the program going, she said.

“Until further definitive guidance on the availability of funding is provided by the administration, dealers who accept additional ‘clunkers’ deals may face a risk that they will not be reimbursed,” John McEleney, the association’s chairman, said today in a statement.

Dealers are “in limbo” on the future of the clunker discounts, said Hart Oshman, general manager of Lone Star Ford in Houston.

“We’ve done 15 of them ourselves,” Oshman said today in a phone interview. “I want them to keep the program going as long as I’m going to be able to get my money from the government. That’s the one thing that concerns me.”

Open to 3 A.M.

Tamara Darvish, who owns 18 dealerships in the Washington area, kept her Toyota dealership in Silver Spring, Maryland, open until 3 a.m. today delivering cars under the program after reports it would end at midnight.

“Customers were alarmed by the deadline and fearing they were going to be too late,” Darvish said today in a phone interview.

Dealers, who are reimbursed by the federal government for the clunkers rebates they give consumers, are required to immediately junk the trade-in cars under the program by disabling the engines.

Obama signed the clunkers program into law June 24 after Congress approved it the previous week as part of legislation to finance the Iraq and Afghanistan wars.

To contact the reporters on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net; Roger Runningen in Washington at rrunningen@bloomberg.net

Last Updated: July 31, 2009 13:43 EDT