Fueling The German Car Market

Thousands of cars aren't being crushed in Germany because they're worthless. What drove them to a junkyard outside Bonn is a bounty the German government is paying for old cars to keep the country's new car industry booming.

By turning cars nine years old or more into scrap, Germans are helping their auto industry thrive despite the deepest recession in 60 years, reports CBS News correspondent Richard Roth.

New car dealers are just thrilled, said salesman Thomas Oldenfeld.

"For the whole economy it's very good," he said.

Proof that an old car's been junked is worth 2,500 Euros - about $3,300 off the sticker price of a new car.

Since the government-funded plan began, new car sales have soared - up 40 percent last month, compared with March a year ago, though dealers point out the used car market has become a basket case.

"The second-hand car market overnight went down like the amount of money that the government pays you for the wrecked car," said Volkswagen salesman Arne Hildebrand.

The pattern is the same in almost a dozen European countries that have adopted similar schemes, which amount to an indirect government subsidy to the automakers, and theoretically benefit the environment as old cars are replaced by new greener models.

Right now it's rescuing the manufacturing business, but economists warn there is a hitch. The government incentive is creating demand the marketplace alone might not sustain. How will the carmakers do when the subsidy stops? In Germany, where one in five people work in the auto industry, they're willing to face that question later.