GM to give dealers cash advances on 'clunkers' deals

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Faced with weeks-long reimbursements for rebates from the federal government's "cash for clunkers" program, GM is stepping in and agreeing to advance dealers amounts due them until Uncle Sam can get the lead out and get the claims processed.

In doing so, GM said, dealers will have the cash on hand to keep their businesses running as new car buyers continue to stream into showrooms to take advantage of incentives of up to $4,500 to turn in a gas guzzling vehicle toward the purchase of new one.
GM's announcement Thursday comes a day after hundreds of auto dealers in New York withdrew from the program, citing delays in getting reimbursed from the federal government through the Car Allowance Rebate System, or CARS, the formal name of the program, run by the U.S. Department of Transportation.

GM's move makes perfect sense, said Jessica Caldwell, industry analyst for Edmunds.com, a online car-buying guide. Having said it will ramp up production of several popular vehicles, including its Chevrolet Malibu, the automaker wants to ensure that dealers have the money on hand to buy the cars bring them onto their lots, Caldwell said.

GM acknowledged as much, saying in a statement, "(The cash advances) will continue the sales momentum of our new fuel-efficient vehicles." Further, GM said it "intends to provide these advances for qualifying new vehicle sales already transacted under the CARS program, and will provide advances going forward as long as the CARS program is in effect."

Caldwell said the program has proven burdensome to dealers in part because of its lengthy and detailed application process. "It's just a nightmare," she said.

And despite reports of an early termination of the program, now slated to end sometime in early September rather than the original Nov. 1 target date, Caldwell said, it's still too soon to determine if the $3 billion allotted for the program is anywhere near being used up.

It isn't known how many claims are in the process, and some that have been submitted are likely to duplicates, she said.

Earlier this week, the federal government said it plans to triple the number of workers employed to process claims under the CARS program to help speed reimbursement to dealers.
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