OK, I realize this blog is targeted at Green IT, but hey, even IT professionals have to drive to work, right? And I’ll bet while there’s no “standard” vehicle type for IT folks, the one thing we all have in common is that we love the smell of a new car. Only packaging peanuts falling from new server equipment could smell better.

Well, as you may or may not have heard, the car industry is in a mess right now. In a good year, the industry is worth between 16 to 17 million units a year, and in a so-so year, maybe 14 to 15 million units. So far in 2009, Americans are on track to purchase less than 10 million new vehicles, far below a sustainable and profitable level. GM and Chrysler are begging for help from Washington, and even healthy carmakers like Toyota and BMW are feeling the pain.

Some in Congress have suggested the government step in to stimulate car sales through a coupon program. The so-called “cash for clunkers” program would provide a financial incentive for consumers to trade in old cars for new models. There are various plans being floated out there, and they all require consumers purchase a relatively fuel-efficient model in order to qualify for the cash. A similar proposal in Germany raised car sales over 20 percent. These proposals have been floating for a while, but before he left for his European trip, President Obama expressed his support for the concept, so the wheels are spinning (metaphorically of course) in Washington to get this done.

Craig Cather, in an op-ed in the Cleveland Plain Dealer recently, pointed out that 78 percent of U.S. annual vehicle sales are to replace older cars, and the population of 1997 and older cars is 86 million vehicles, so there’s a lot of potential here to take a chunk out of that number and replace them. If only 5 percent of those older cars were replaced, it might cost the government $13 billion in cash incentives (a relative bargain compared to the cost of industry bailouts) and lift the industry volume to a sustainable level. It would also reduce greenhouse emissions by about 12 million tons a year.

Therefore, in one program, the government can stimulate car sales and at the same time, take a lot of older gas-guzzling vehicles off the road and replace them with fuel-efficient models, thus reducing our consumption of foreign oil and helping the environment at the same time. What’s not to like? Well, the devil, as always, will be in the details of whatever proposal Washington ends up adopting.

If the government simply gives you cash for dumping or scrapping an older vehicle, the problem is that the government’s payment may be less than what your trade-in is actually worth. Joseph White explored this vexing problem in in the Wall Street Journal yesterday. One bill gathering a lot of attention comes from Rep. Betty Sutton (D-Ohio).

Her proposal, the Consumer Assistance to Recycle and Save Act of 2009 (get it – CARS Act) would give a $5,000 voucher to anyone who purchases a U.S.-made vehicle getting over 30 mpg on the highway. If you are interested in seeing what vehicles would qualify, you can search the EPA’s database (http://www.fueleconomy.gov/feg/advancedSearch.htm). I did just that today. The search criteria I used was 2009 models, all vehicle types other than vans, SUVs, and pickups. Highway EPA mileage had to be above 30 mpg. There are 94 models that qualify. Under Sutton’s bill, only vehicles assembled in the U.S. would qualify, and by my count, that’s a distinct minority of vehicles on this list. As far as the Detroit 3 are concerned, the models covered are the Pontiac G3, Chevrolet Malibu, Saturn Aura, Pontiac Vibe, Chevrolet Cobalt, Pontiac G5, and Ford Focus. I don’t think the Chevy Aveo would count because it’s basically a Daewoo from Korea. Of course, foreign carmakers also assemble in the U.S., so vehicles such as the Camry and Altima hybrids would likely qualify.

However, this morning’s Wall Street Journal reports that the White House is pressing for a program that would replace about 2 million cars and cost taxpayers $4 billion to $6 billion. More significantly, in order to avoid annoying our trading partners, place of assembly will not be a factor in deciding which vehicles count.

I have mixed feelings about this. On the one hand, my free-trade instincts tell me that any time the government launches a program like this, it distorts consumer demand and forces producers into artificial business models that are ultimately unsustainable, and can have unpleasant and unintended consequences. All this talk about money for trading in cars, for example, must surely be causing potential car shoppers to take a wait-and-see approach for the details of the plan to emerge, which causes car sales to sink even lower. On the other hand, the idea that we can take this crisis as an opportunity to get rid of gas-guzzling SUVs and replace them with fuel-efficient cars is appealing. Ultimately, I think that regardless of its ideological merit, this program will cause a LOT of people to trade in their cars and will be quite successful.

Start planning now – what flavor will your new car smell come in?