DETROIT — In a statement released this week, GMAC Financial Services said it is doing everything it can to provide broad-based funding support for dealerships during the difficult economy.

For instance, even with the tight credit markets, the company said it is continuing to provide wholesale financing for about 75 percent of GM dealers, which it says is consistent with levels over the past five years.

"The stresses facing some automotive dealers today are the result of the U.S. economy in recession, a weakened auto industry and inadequate sales for some dealers to meet expenses and manage debt," officials explained in a statement.

"We work with dealerships facing financial difficulties that have GMAC loans, but cannot extend credit indefinitely if there is a default or significant risk of loss. In our 2008 financial report, GMAC increased its loss reserves for impaired loans from the prior year, from $8 million to $138 million, due to anticipated U.S. dealer defaults," they continued.

The company noted that dealers are not required to finance wholesale inventory via GMAC. They can utilize any lender. However, the financial institution said it realizes that many banks and companies have cut offer wholesale financing due to the "strained credit markets and uncertainty in the industry."

"GMAC is working to preserve such funding for its existing wholesale dealer accounts," executives pointed out. "GMAC currently extends over $20 billion in wholesale financing to U.S. dealers."

However, there are limitations to what GMAC can do for dealers who are struggling.

With the company's approval as a bank holding company, the TARP funds, which were much welcomed, also came with additional government oversight of GMAC's credit risk management process.

"We must continue to protect our capital when the risk of loss appears too high," the company said in its statement. "When GMAC cannot resolve with the dealer its concerns over wholesale pay-off performance, profitability and operating trends, and is unable to continue wholesale arrangements, the dealer is given 90 days to locate an alternative lender," officials highlighted.

"If a dealership cannot meet its commitments and cannot raise additional capital or find alternative financing, then in some cases, the dealership owners, not GMAC, may make a decision to close the dealership," they added.

People in communities throughout the country are speaking out in support of dealers, and the company said it recognizes the many contributions dealers offer to their localities.

However, the company said, "In many cases, it is unfortunate that the vocal support has not translated into sufficient vehicle sales to sustain the business, likely due to the difficult economy. No business can survive without customers, even with the best of lenders at their side."

Speaking about their curtailment policy, officials explained that wholesale financing is basically a revolving credit line that is secured by individual vehicles. And as these units age, their value decreases and loan risk climbs.

"Requiring a portion of the loan to be repaid after a period of time, known as curtailment, is not new for GMAC and is standard practice for any collateral-based lender," executives indicated.

"Until recently, GMAC did not need to extensively enforce its curtailment policy because there was not a lot of aged inventory in the system," they continued. "Today, the situation is different. With the significant reduction in auto sales, there are a growing number of aged vehicles on dealer lots. Curtailments are required for GMAC to manage the risk of lending against this aged collateral."

Dealers who can turn their inventory effectively can avoid paying this, or perhaps only pay a little. However, for those who are unable to move inventory quickly, GMAC said it sees its curtailment policy as a sound business practice.

"GMAC considers its curtailment practice on new vehicles to be fair and reasonable, and General Motors recently indicated that GMAC's policy is actually more lenient than that of other wholesale lenders," the company pointed out in its statement.

The company requires monthly curtailments only on past model-year vehicles (new 2007 GM models and any new 2008 GM models financed for more than 18 months).

Moreover, the company reported that it only requires a percentage of the loan (10 percent per month) to be repaid monthly on aged inventory, rather than requiring full-vehicle payoff after a certain time frame, which is something that other lenders may do.

"Regarding used vehicles, the majority of GMAC wholesale dealers are not required to pay any curtailments until a used vehicle has been financed for six months," the company stated. "Further, most dealers are not required to pay off a used vehicle until it has been financed for one year."