The cash for clunkers program is a classic example of bad policy. Very bad policy.
No matter which way you approach the program, it is nothing more than a transfer of wealth from taxpayers (or more accurately the children and grandchildren of today's taxpayers) to car users. In effect one group of citizens (taxpayers) are being asked to subsidise the discretionary consumer spending of another group of citizens (car owners).
Unlike many other areas of government spending (e.g. welfare, essential services), this is morally indefensible.
The benefits to the various components of the car industry are, at best, a debatable a side issue.
If the objective was to improve the environment by replacing high mpg cars with lower mpg cars, then the program is flawed. There are much more cost effective ways of achieving the same or better environmental results.