Inventory Floor Planning Solutions

NEIL ROLAND
AUTOMOTIVE NEWS
APRIL 24, 2009 – 3:39 PM ET

WASHINGTON — The Obama administration is exploring ways to expand financing to car dealers, the head of the National Automobile Dealers Association said today.

NADA Chairman John McEleney said members of the auto task force told him they are trying to find ways to let dealers borrow money to buy new cars from manufacturers.

One option the task force is looking at is working with the Small Business Administration, said McEleney, who met with task force adviser Ron Bloom and others yesterday.

“The task force wants that to happen, and they’re trying to find avenues, including through SBA,” McEleney said in an interview.

The dealers group did not request a specific figure, nor did the task force offer one, he said. Task force members did not commit to providing aid or specify a deadline by which they would decide, McEleney said.

The SBA confirmed that the agency is looking into expanding aid to automakers.

“We are looking seriously at whether there can be changes in the program and considering making changes that would allow the loans that NADA is seeking,” said SBA spokesman Mike Stamler.

A White House spokeswoman did not immediately respond to a request for comment.

SBA guidelines limit aid eligibility to dealers with less than about $29 million in annual revenue, Stamler said. An average dealer’s revenue is about $40 million to $45 million, McEleney said.

Dealers typically obtain floorplan loans from captive finance companies, national and regional banks, and credit unions. The lenders obtain their capital from a variety of sources, including securitized loans.

NADA has unsuccessfully sought assistance from the administration’s Term Asset-Backed Loan Facility, which provides backing for consumer and small-business loans.

TALF funds AAA-rated securitizations, in which loans are bundled and sold to institutional investors and financial institutions. But floorplan securitizations, in which lenders bundle dealer loans into asset-backed securities, are rated below investment grade.

General Motors has prepared plans to reduce the number of dealers to 4,100 from 6,200 by 2014.

About 900 U.S. dealers went out of business last year, leaving around 19,000 today. McEleney estimated that 1,200 will go out of business this year.

Source: Automotive News

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