WASHINGTON -- The National Automobile Dealers Association is asking anybody and everybody in government to consider providing federal guarantees for dealer inventory financing.
The request is evidence that market conditions are not improving for dealers, despite massive government intervention in banks and credit markets.
Floorplan lending is contracting dramatically, says an NADA fact sheet on the issue. Even creditworthy dealers are having trouble finding access to any floorplan financing, or the financing available to them is being offered on terms that are not competitive and not commensurate with the risk to the borrower.
NADA says the pullback has occurred among captive finance companies, regional banks and the small group of other lenders that specialize in floorplan loans -- even though dealers repayment history is excellent and the loans are well collateralized.
The crisis affects dealers who sell import brands as well as Detroit 3 brands, the association says.
While dealers nationwide normally need about $100 billion in inventory financing, the cost to government for guarantees would be little or nothing, NADA spokesman Bailey Wood said today.
Wood said NADA is making the pitch for guarantees to the White House, Treasury Department, Federal Reserve, Small Business Administration and members of Congress.
The program itself is about building confidence in the lending markets, Wood added.
NADA suggests a program of guarantees that would last three years.
NADA has backed a range of government steps, including a new federal commitment of as much as $1 trillion to increase the issuance and sale of securitized loans, such as those made to vehicle buyers and to dealers for inventory.
The California New Car Dealers Association warned today that restrictions on floorplan lending are the most cited reason for dealership closings in that state.
In California, 137 new-vehicle dealerships closed last year, 23 have shut this year, and 131 others could go out of business in the next six months without floorplan relief, the association said.
California dealers today sent their own letter to Treasury Secretary Timothy Geithner asking for help.
Peter Welch, the associations president, said: Continued dealership closures in California and across the nation will cause our economy to fall further into recession, cost jobs to thousands of dealership employees and suppliers, and hurt local communities.
California dealers are asking that any floorplan lender receiving federal assistance be prohibited from imposing harsh terms on its borrowers.