General Motors Co will provide cash advances to dealers to cover Cash for Clunkers rebates while the incentives are being processed by the U.S. government, the company said on Thursday.

GM said the action would provide dealers with the liquidity to run their businesses while they wait for the government's checks.

The move comes in the face of weeks-long delays in reimbursements and addresses growing concerns among dealers that the program's $3 billion funding may run out before they receive the cash owed to them.

A group representing the country's some 20,000 new car dealers warned on Wednesday that dealers who accept additional deals under the rebates program face a growing risk that they may not be paid back.

Given the popularity of the program and the rapid pace at which 'clunker' deals are being done, it is difficult, if not impossible, to accurately project the 'burn rate' of available funds, the National Automobile Dealers Association said in a statement.

As of Thursday morning, auto dealers had submitted claims to Washington for nearly 457,500 vouchers totaling $1.9 billion, according to the U.S. Department of Transportation.

GM said sales in the past two months have exceeded its internal forecast by more than 60,000 vehicles, largely driven by the federal incentives.

The program offers payments of up to $4,500 to people who trade in older, less fuel-efficient vehicles for new, more efficient ones.

The automaker intends to provide advances for qualifying new vehicle sales already transacted under the rebates program and will provide advances going forward as long as the program is in effect, it said.

U.S. Transportation Secretary Raymond LaHood told dealers on Wednesday that the government would unveil plans by Friday to wind down the rebates program, while reassuring them sufficient funds remain available.

NADA Chairman John McEleney told Reuters he expected the government would provide a date after which it would not accept any more claims for rebates.

By late July, the clunkers program, inspired by similar programs in Europe, had been drained of its original $1 billion budget. Congress authorized another $2 billion to extend the program, which has been likened to a shot of Adrenalin for the U.S. auto market.

U.S. retail vehicle sales in August are projected exceeding 1 million units for the first time in the past 12 months -- boosted by the rebates -- auto industry forecasting firm J.D. Power & Associates said on Thursday.

Combined with sales to fleet customers such as rental companies and government agencies, total light vehicle sales are expected to come in at 1.1 million units in August, down just 8 percent from a year earlier, the agency said.

Improved consumer confidence and credit availability during the past six months have combined with the (rebates) program to lift industry sales out of their slumping year-to-date levels, which have been down approximately 35 percent year over year, said Gary Dilts, senior vice president at J.D. Power.

On a seasonally adjusted basis, widely tracked by analysts, U.S. August auto sales could be as high as 12.2 million units, up from 11 million units in July and the highest rate of 2009, the agency said.

(Reporting by Soyoung Kim, editing by Gerald E. McCormick and Maureen Bavdek)

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