Aug. 20 (Bloomberg) -- The U.S. “cash for clunkers’’ vehicle trade-in program, criticized by dealers for slow reimbursement, has processed 37 percent of the applications it has received, the U.S. Transportation Department said.

The agency said it has handled 167,000 of the 457,476 dealer requests for payback submitted as of today. The department, which is administering the $3 billion effort intended to spur new-car sales, didn’t say how many of the processed transactions have been paid out and how many were rejected or sent back to dealers for further information.

Dealers have complained of difficulty running businesses while awaiting payment in the program, which gives consumers as much as $4,500 when they trade in for new vehicles with better mileage. While Transportation Secretary Ray LaHood said yesterday they’ll get the money, a dealers trade group said there’s growing risk those accepting more deals won’t be repaid.

“We understand some of the frustration,” White House press secretary Robert Gibbs told reporters today at a briefing. “But I think it’s also helpful to understand that we cannot” process applications “that are legally incomplete, that don’t fit the requirement. That requires us to go back to the dealer to get additional information.”

Officials from the National Automobile Dealers Association trade group met yesterday with the Transportation Department to discuss concerns that payment delays add to the burden on retailers of trying to recover from a sales slump.

NADA urged a plan to end the effort so retailers know when to stop accepting trade-ins. LaHood said yesterday the agency would announce wind-down plans this week to help alert dealers.

Reimbursement Rate

Representative Joe Sestak, a Pennsylvania Democrat, said last week the effort has so far paid retailers for only 2 percent of their claims. The Transportation Department said it has hired more staff to speed up the process.

Transactions submitted so far total $1.91 billion, the department said. The program exhausted the initial $1 billion less than a week after it began before Congress added an additional $2 billion intended to keep it going through Labor Day, which is Sept. 7.

Senate Majority Leader Harry Reid, a Nevada Democrat, asked LaHood in a letter today to speed up payments, saying “dealers have been forced to effectively finance the CARS vouchers for buyers until the dealers are reimbursed by the federal government, placing a strain on dealers’ balance sheets that, if prolonged, could eventually offset some of the benefits of the program.”

Cash Advances

More than 1,000 people are processing the applications, LaHood said yesterday. That compares with fewer than 200 when the program began. The agency is training more of its staff and is using Citigroup Inc. contractors to handle the paperwork.

“We are doing everything in our power to expedite the processing of these applications in a program that’s been successful, again, for consumers, dealers, manufacturers and workers,” Gibbs said.

General Motors Co. plans to provide cash advances to dealers awaiting government rebates as the initiative spurs auto demand, GM said on its Web site today.

The advances will be made for qualifying new-vehicles sales already exchanged under clunkers through the life of the program, GM said on its Web site today.

The government’s initiative may give GM its best sales this year in August. New-vehicle retail sales in the U.S. will top 1 million in August for the first time in the past 12 months, J.D. Power & Associates forecast today.

Ford Motor Co. is increasing the availability of credit for dealers’ used-vehicle financing to provide cash flow relief to dealers awaiting ‘clunker’ payments from the government, said Meredith Libbey, a spokeswoman for the automaker’s loan unit.

To contact the reporters on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net

Last Updated: August 20, 2009 15:33 EDT