GM Will Advance Money to Dealers for Slow Clunker Payments
By Brendan Moore
GM announced today that they will provide a 30-day line of credit to dealers for the cash for clunkers proceeds owed to those dealers from the federal government.
GM will electronically deposit funds in a dealer’s account that will cover whatever amount the dealer says is owed to them by the federal government under the clunkers program, and the funds will be automatically withdrawn after 30 days. This will give the dealers operating capital for 30 days while the lag in federal payments is shortened.
GM stated the the 30-day line of credit offer will be in effect for as long the clunker program lasts.
Other manufacturers, notably Toyota, VW and Honda, have already quietly provided help to their dealers regarding the lag in clunker funds through various mechanisms. Ford and Chrysler, the other two Detroit automakers, had no comment on the GM plan.
The news from GM comes fresh on the heels of fast-growing dealer concern about the slow payments under the clunker program, and, a public statement by the NADA (National Automobile Dealers Association) that their calculations show that the clunkers program is already out of cash again, based on their surveys of dealers and the amount of pending deals in the sales pipeline. The NADA has publicly warned dealers not to make any more deals under the clunker program because there is a strong risk that the dealer may not be reimbursed for the deal.
The Department of Transportation (DOT) says the agency still has funds available. It should be noted, however, that the NADA’s survey results turned out to be more accurate than the DOT’s projection previously, when the initial %1 billion USD in program funding was depleted almost immediately after program launch. An additional $2 billion was added to the program last week, and was forecast to last until Labor Day, but if the NADA is again correct in their assessment, then that forecast will have been too optimistic.
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