Deep in the last stronghold of the struggling U.S. auto industry, Rosario Criscuolo says he owes the survival of his business to Toyota Motor Corp <7203.T>.

If it weren't for Toyota, I'd be gone, said the owner of Spartan Auto Group, which runs three auto dealerships selling Toyota, Lexus, Infiniti, Volkswagen and Mazda brand cars. Without them I'd be selling papers on the corner.

To fund the $25 million worth of gleaming new cars at his showrooms, including here in Michigan's capital, Criscuolo needs floorplan financing, or inventory loans.

Floorplan financing is the lifeblood of U.S. auto dealers because it allows them to pay for vehicles when they take delivery and carry them until they find a buyers.

But many auto dealers say the credit crunch has left them unable to bring in new cars or keep those they already have, choking off production by the U.S. automakers.

If we don't fix this wholesale credit issue, this whole thing collapses, said John McEleney, National Auto Dealers Association chairman, who owns two dealerships that between them sell Toyota, General Motors and Hyundai branded cars. Every week there are more dealers that are being impacted and going out of business.

In Criscuolo's case, his bank lenders stopped providing floorplan financing. Had Toyota's finance arm not taken over funding for all his brands, he would have been in trouble.

They have tightened credit lines a little, but I'm very fortunate to have them, he said.

His sales have improved in March, he said, but over the winter, monthly sales at his Lansing dealership fell by about half. So Criscuolo cut advertising spending and turned the heat down a few degrees to save money.

Cash is king right now, he said.

To help dealers in worse shape than Criscuolo, the NADA and two other dealer associations have called on U.S. President Barack Obama to have the Federal Reserve's Term Asset-backed Loan Facility -- set up to provide $200 billion to finance new debt backed by auto, credit card, student and small business loans -- to boost floorplan financing.

Rating agency downgrades for auto finance companies like GMAC LLC have cut off access to TALF funds.

SPIKE IN CLOSURES

U.S. auto sales fell nearly 40 percent in the first two months of the year to their lowest level in 27 years.

As a result, the NADA expects 1,200 dealerships will go under in 2009, up from 900 in 2008. Job losses at U.S. dealerships over the past 12 to 14 months exceeded 50,000.

This is a huge problem spread out across little and large communities across the country, said Russ Darrow, chairman of the American International Auto Dealers Association, who owns 15 dealerships in Wisconsin, selling U.S. and foreign brands.

Bob and Mary Cockerham run a dealership in Santa Fe, New Mexico, selling Kia brand cars. Their sales are down about 50 percent, forcing them to cut staff to 17 from 80.

With most of their financing cut off, they say they are fighting for survival.

There are thousands of Marys and Bobs out there who will go out of business unless something happens, Bob Cockerham said. But it doesn't have to be this way.

GOVERNMENT GUARANTEES

The lack of floorplan financing stems from the collapse in the asset-backed security market, analysts say.

Mirko Mikelic, a portfolio manager at Fifth Third Bank said the sale of asset-backed securities guaranteed under the TALF by Nissan Motor Co Ltd <7201.T> and Ford Motor Co was a positive sign, but the government needs to do more to address this issue and bring confidence back to the market.

In the meantime, dealers like Jeff Williams, who sells VW, Subaru and Audi cars near Lansing are doing everything they can to save cash.

Williams said he is working closely with VW and Audi's finance arms and cut his inventory. I haven't even tried to get floorplan financing from anyone else because I know wouldn't get it, he said. Some people I know have been cut off by banks overnight.

Some dealers like Chris Mayes, however, said many of the retailers in trouble have themselves to blame.

Mayes, who co-owns a dealership in Norman, Oklahoma, selling Kia and Suzuki models, said: The writing was all over the wall from last summer that this was coming.

Mayes' sales are down significantly but he cleaned up his inventory and is still making a profit, he said.

The dealers who didn't do what I have are the ones who are going out of business, he said. They've been flippant with their money over the years so why should we bail them out?

(Editing by Maureen Bavdek)