July 31 (Bloomberg) -- The U.S. House opened debate on an emergency measure to add as much as $2 billion to the “cash for clunkers” program after a burst of demand exhausted most of the initial $1 billion.

The initiative to encourage new-car sales is still in operation, White House press secretary Robert Gibbs told reporters today. Members of Congress had said late yesterday that the clunkers offer was being suspended.

“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.”

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 program to generate about 250,000 vehicle sales and to have enough money to last until about Nov. 1.

The Michigan delegation led efforts for congressional approval to transfer economic stimulus funds for the Energy Department to the clunkers program, Senator Debbie Stabenow, a Democrat from the state, said today in an interview. Members said the effort has the Obama administration’s support.

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

‘Working That Through’

“We’re working that through” with Congress, David Axelrod, a senior adviser to President Barack Obama, said today of efforts to find more funds.

Axelrod, who spoke to reporters after a meeting with House Democrats, didn’t comment on whether the administration supports the $2 billion price tag cited by the Michigan lawmakers, and White House spokeswoman Jen Psaki said “we have not confirmed” the figure.

The funding was offered as an amendment to legislation by Representative Barney Frank, the Massachusetts Democrat who heads the House Financial Services Committee, which would ban incentive pay for Wall Street executives.

House Recess

The House is scheduled to recess for its August break after today’s session, adding urgency to efforts to authorize more funds. The Senate is scheduled to be in session next week.

The effort to revive the program may face opposition from lawmakers demanding that it produce greater environmental benefits and others opposed to using taxpayer money to support the auto industry.

“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.”

Other industries are hurting in the U.S. recession, and the auto industry shouldn’t get more aid, Representative Jeb Hensarling, a Texas Republican, said in a statement.

A backlog of applications from dealers for reimbursement under the clunkers program has contributed to confusion over its status. There are 20,000 certifications waiting to be processed, Gibbs said.

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.

$4,500 Credits

“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.”

Administration Reports

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.

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, Stabenow said. The McLean, Virginia-based association worked with the delegation on the measure to keep the program going, she said.

Charles Cyrill and David Hyatt, spokesmen for the association, didn’t respond to phone calls or e-mails seeking comment today.

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.

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

Patrick McGowan, who with his wife bought a Hyundai Motor Co. Elantra on July 28 under the program, said he wonders whether the dealership in Benton Harbor, Michigan, where they purchased the car will be left without government reimbursement.

“I asked them when I was there what happens if the government runs out of money before the paperwork clears,” said McGowan, 37, an editor for a Catholic publication, in a phone interview yesterday. “They didn’t really know.”

McGowan and his wife Annie Vorhes McGowan, a University of Notre Dame Ph.D. student, wouldn’t have traded in their 1998 Isuzu Motors Ltd. Rodeo for a new car if it weren’t for the $4,500 rebate they got through the clunkers program and the additional $2,000 rebate from Hyundai, he said.

140,000 Miles

“Our car had 140,000 miles on it,” he said. “We in a million years weren’t going to buy a new car.”

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.

“We had a lot of good feedback from dealers as far as how much traffic they had as a result of this program,” said Greg Thome, a spokesman for Toyota Motor Corp. “Everybody is surprised that the popularity was that immediate.”

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 12:29 EDT