By Jeff Bennett


DETROIT -(Dow Jones)- General Motors Co. said Thursday that it will provide cash advances to its U.S dealers to cover their “Cash for Clunkers” rebate until they are paid by the federal government.

GM will deposit the money in a dealer’s open account and then retrieve it after 30 days if a payment had been received from the federal government, said spokesman John McDonald. The money will come from GM’s normal operations fund.

Ford Motor Co. (F) and Chrysler Group LLC officials had no immediate response.

The move comes as dealer angst grows across the country about non-payment from the program that started at the end of July. Consumers were given rebates of as much as $4,500 if they traded-in their older gas guzzlers and bought a more fuel-efficient vehicle.

Dealers have complained about the complexity and paperwork which has slowed reimbursements. Some have also stopped offering the rebate until they get paid. The delays have drained dealers’ cash reserves and put them at risk for losses.

Marty Krepsky, general sales manager at Bill Wink Chevrolet in Dearborn, Mich., said he is waiting on more than $100,000 owed to the dealership through the program.

“A dealer going out and borrowing a couple thousand dollars under a short-term loan is just not going to happen,” he said. “This is really going to help us and I plan to apply for whatever we are eligible to receive.”

The Obama administration vowed to reimburse dealers the cost of the rebate that sparked a car-shopping frenzy when the scheme was launched in July. The response pushed legislators to add another $2 billion in August to the original $1 billion set aside for the program.

Through Thursday morning, dealers had submitted applications to be reimbursed for more than 457,400 vouchers totaling about $1.91 billion. Of those, some 167, 000 had been processed – meaning they had been either approved or sent back to dealers for more information.

An Obama administration official said Thursday that the department was making “good progress” in reviewing the applications. The administration continues to add workers to the program, with more than 1,100 people reviewing applications.

John McEleney, chairman of the National Automobile Dealers Association, said dealer representatives told administration officials during a meeting Wednesday that they believed the pace of clunkers sales may have already outstripped available funding, and urged them to consider suspending the program. But the administration replied it was confident that the program was still within budget, he said.

GM said its sales alone over the past two months have exceeded internal forecasts by more than 60,000 vehicles, largely because of the clunkers program, Mark LaNeve, vice president of U.S. sales at GM said in a statement Thursday.

New-vehicle retail sales in August are forecast to cross the 1 million mark for the first time in the past 12 months because of the program, according to J.D. Power and Associates.

Transportation Secretary Ray LaHood said Wednesday the department would announce within 48 hours how it intends to discontinue the program in order to ensure the agency has enough money to make the payments.

-By Jeff Bennett, Dow Jones Newswires; 249-204-5542;

(Tess Stynes and Josh Mitchell contributed to this article.)

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