Moneybags GM to Cover Clunker Deals

by Edward Niedermeyer

Published: August 20th, 2009

General Motors has announced that it will lend dealers cash to cover their government clunker rebates for 30 days while the NHTSA figures out how to wind down the program. “We want to do all we can to provide customers with timely new vehicle deliveries and dealers the liquidity they need to run their businesses,” says Mark LaNeve in a company press release. “This will continue the sales momentum of our new fuel-efficient vehicles such as the Chevrolet Cobalt, Equinox and Buick Enclave.” Or, it could mean dealers will end up owing GM instead of the government owing them.

According to GM spokesfolks paraphrased by Automotive News [sub], “GM will offer the loan for any clunker deal deemed by the dealership to qualify, whether or not the government has given formal approval. The dealer must repay the loan within 30 days or GM will take the money owed back from the dealer’s open account with the automaker” [emphasis added]. If, as the NHTSA alleges, a large number of deals aren’t ending up qualifying, GM’s dealers will be in trouble no matter what. Would you rather wait for the government to pay you, or end up on the hook to GM? What a fun choice that is.

Ford and Chrysler have not made any decision to advance clunker cash to its dealers, but Hyundai was smart and started doing it before the program even began. Which might help explain why the money went so fast. Toyota Financial now pre-approves dealers in good standing for a special clunker credit line, while American Honda Financial is allowing dealers to deduct the amount of the rebate when the dealer pays off the inventory loan on a vehicle. At this point though, waiting for the NHTSA to sort out the tiny details (you know, like how much money is actually left) might not be a bad idea.

Edward Niedermeyer

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JK43123 on Aug 20, 2009
Isn’t owing money to the government or gm really the same thing? GM is covering government bailout money with government bailout money. John

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Monty on Aug 20, 2009

Actually, the Monopoly man's name is "Rich Uncle Pennybags". The budgeted amount for C4C was what, $3 billion? How much was the bailout to Wall Street? IIRC it is now somewhere north of $1 trillion. C4C is a drop in the bucket, and is probably going to end up somewhat mitigating the highs and lows of the economic cycle for a return to what passes for normal. If the federal government ends up on the hook for another $200 or so million, it's to be expected from a government program that initially had amorphous guidelines at best.

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