Area car dealers hope for bailout
The Daily Progress/Andrew Shurtleff
Cars for sale are lined up at the Colonial Auto Center in Albemarle County. New vehicle registrations in Albemarle dropped 18.7 percent during August, September and October, compared with the same months in 2007, according to the Virginia Automobile Dealers Association.
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By Brian McNeill
Published: November 28, 2008
If a $25 billion emergency loan package for the auto manufacturing industry does not win approval in Congress, auto dealers in the Charlottesville area say local sales of certain vehicles might take a nosedive.
The “bridge loan” package sought by General Motors, Ford and Chrysler would lend taxpayer money to the three biggest domestic automakers to help them survive the credit crisis and avoid the specter of bankruptcy.
If Congress opts to not approve the bailout, local auto dealers said, one or more of the “Big Three” might go bankrupt, almost certainly causing sales of that brand’s vehicles to plummet at dealerships.
“We wouldn’t be devastated, but it’d be painful,” said Carter Myers, owner of Carter Myers Automotive Group and a former chairman of the National Automobile Dealers Association. Myers’ dealerships sell a variety of brands, including five made by General Motors, as well as Ford Motor Co.’s Lincoln and Mercury.
Consumers, the dealers said, would not be interested in spending $30,000 or so on a vehicle manufactured by a bankrupt firm, partly out of fears that they might be unable to find parts or a dealer to service it.
At the same time, they added, if sales go down for vehicles made by a bankrupt company, prices would probably increase by a few thousand dollars for competitors’ brands.
Meanwhile, Myers said, the resale value of existing domestic vehicles would be diminished. If the Big Three filed for bankruptcy, he said, the 125 million domestic autos on the road would lose an estimated $2,000 of value per vehicle, equaling a total loss of $250 billion. “We’re talking about a huge public loss,” he said.
The Charlottesville-area auto market is somewhat insulated by the travails of the domestic auto manufacturing industry, as more than two-thirds of local vehicle sales are imports.
Yet auto sales are down significantly from last year in the area, as well as elsewhere in the state. New vehicle registrations in Albemarle County, for example, dropped 18.7 percent during August, September and October, compared with the same months in 2007, according to the Virginia Automobile Dealers Association.
Contributing to the lackluster sales, dealers said, is the financial industry’s tightening of lending standards for auto loans. Some 90 percent of vehicles sold in the Charlottesville area, they said, are financed.
Across Virginia, auto dealers have taken a hit. At least 15 dealerships in the state have closed in the past 10 months, with more dealers on the verge of closing, said Michael Allen, the auto dealer association’s director of public affairs.
If one or more auto manufacturing companies goes bankrupt, he added, the state’s dealers will almost inevitably see a loss of sales, service and jobs.
“When they say it would have a ripple effect, it would be a pretty big ripple,” he said. “It’d impact a lot of communities in Virginia.”
Auto dealers, he pointed out, tend to be among the largest employers in many parts of the state.
Future layoffs are not expected to occur at Brown Automotive Group, which operates several Charlottesville-area dealerships. The company, which employs roughly 300 workers, has already made “minimal” layoffs and combined its Honda, Dodge and Chrysler sales staff as vehicle sales dropped off in recent months.
If an auto industry bailout package is not approved, Brown has already positioned itself to weather the possible failure or merger of one or more of the big automakers, said Jay Malone, sales director.
However, he said, the manufacturing companies need Congress’ approval of the loan package to protect jobs, sales and the vitality of the overall industry.
“This is a serious situation,” Malone said. “They really need this bridge loan to be given to them. They think they’re going to get it, but it’s going to take until the next administration. … We feel like they’re going to make it through this, but they’re going to need that money.”
It remains to be seen if Congress will approve the $25 billion loan package for automakers.
U.S. Sen.-elect Mark R. Warner, D-Alexandria, has said he is not opposed to the auto industry bailout, but wants it to require carmakers to create a turnaround plan, cut expenses and possibly develop a more fuel-efficient vehicle that gets 60 or 80 mpg.
Newly elected as GOP whip, U.S. Rep. Eric I. Cantor of Henrico, is opposed to the auto bailout plan.
In an interview with the Washington Times, Cantor — who represents the 7th District, which includes the counties of Madison, Louisa and Orange — said his party needs to stand against the plan, even if it costs them votes. “We have a failed model of our auto industry in our country,” he said. “For decades now, they’ve been on the decline. For decades, they’ve been conceding in terms of their labor contracts, that have saddled management’s ability to look beyond the next pay period, when they should be looking five years down the road and designing the cars people want to buy.”
Each of the Big Three automakers has until Tuesday to submit to Congress a report on their company’s finances. Congress is scheduled to reconvene during the second week of December to consider the carmakers’ request.
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Posted by ( pjhokie68 ) on December 03, 2008 at 12:50 pm
Bib Al, in the grand sceme of things, you have some very valid points. Yes, the Big Three DID do this to themselves. They,ve been encumbered by huge legacy costs, and been out-enginered by the Japanese and the Koreans for years. Also, the proposals they are making, in many cases, don’t go far enough.
First, addressing the “auto industry bail-out” itself, it seems pretty simple. Congress approved over $700 billion in bailout money for the banking and insurance industries without putting in any safeguards OR much in the way of restrictions on those getting the money. One of the MAIN purposes of this money was to keep the credit market from collapsing. A collapse of this market would kill many small businesses very quickly, and obviously hinder the real estate and automobile markets. However, since this money was approved, these companies HAVE NOT begun to improve more loans, but instead, are actually improving LESS loans and sitting on the money they got from the government. They’re sitting on OUR MONEY. That’s right…your not hearing this part of the story…..your just seeing the effects.
So, of course the american auto industry comes calling, and congress, feeling burned about the terrible mistake they have made with the banks and insurance industry bailout, decides to make THEM the scapegoats. They make a HUGE stink about the CEOs flying in on the corporate jets, and yet, in the contracts of those same CEOs it says they MUST use that form of transportation, for security reasons. Then they hem and haw about giving $25 or even $50 billion to them, and make them make business plans and humiliate them. Well, much of that IS JUSTIFIED. Only, what haoppens if congress lets the auto industry go under? Don’t kid yourselves into thinking bankruptcy would benefit any of these companies. These same banks who now don’t want to extend ANYONE credit are then supposed to give these companies money to operate WHILE THEY’RE IN BANKRUPTCY?? And, the American consumer is supposed to go out and buy cars from these companies…..not knowing if they’ll even be there to honor the warranties? And then, lets say GM and Chrysler have to shut their doors (and Ford wouldn’t be far behind). The entire state of Michigan and probably Ohio, would absolutely go bankrupt. Over 3 million people would lose there jobs and millions more would be directly affected. This country would go from recession, directly to DEPRESSION.
And then you say…..“well, Toyota, Honda, Nissan, and Hyundai could employ many of those people and take their places.“ Well, in a word…NO. None of those manufacturers will go into union areas and build new plants. They may employ a small number of those workers, but it wont be the same, for sure. Now, the labor unions are every bit as much to blame for this as the Big 3, but they’ll never see it that way. The legacy cost (the cost of retirement and healthcare benefits for union workers) on a Chevy Malibu is about $1800 per car. Your average Toyota’s legacy costs are about $300 per car…..and they aim to keep it that way. Those costs are part of the reason the Big 3 were trying to stuff high profit SUVs and Trucks down everyone’s throat for all those years. They couldn’t AFFORD to make economical cars.
As far as what these guys need to do to streamline their businesses, it’s pretty simple (but, of course, monetarily not simple). GM has the beginnings of a decent plan, but they need to go farther. They should sell or cut all brands except Chevy and Cadillac…period. Everything else is just wasteful copying and THAT obviously has not been working. Ford, likewise, should sell or cut all brands but Ford and Lincoln. Many times leaner IS stronger. Chrysler, a PRIVATELY OWNED company, is probably the LEAST deserving of assistance. However, if they morphed Chrysler and Dodge together (call them whatever you want) and sold Jeep, they could probably be saved. They need to get onboard with everyone else and start making some fuel efficient vehicles, because they by far the worst of the Big 3 where that is concerned.
Anyways, that’s my two cents…..I’ve been in the industry a while, and I’ve seen it from most sides, but I’m sure that smarter people than me can come up with EVEN BETTER solutions.
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Posted by ( BRANES ) on November 29, 2008 at 10:30 am
ONE OF THE BIGGEST PROBLEMS IN THE CVILLE CAR MARKET ARE THE HEAD PEOPLE AT THE AREA CHEV STORE….SANDY FOOL…..HE IS SUCH A CROOK…....CHEATS EVERYONE….
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Posted by ( BigAl ) on November 29, 2008 at 8:27 am
With regard to Carter Myers’ comments, it should also be noted that the Big Three have fought the CAFE standards for decades, and as a result were able to continue producing, marketing, and selling huge SUVs that guzzle gas, generate tons of profit for car manufacturers and dealers (which includes Carter Myers, in case anybody didn’t know that).
Detroit built and sold 9 million cars and trucks last year. Not bad. Not bad at all - but it is pretty bad to sell 9 million cars and trucks last year and come begging for ME to bail them out this year. How in the name of all logic can you defend a business model that sold 9 million cars and trucks yet LOST $38.7 Billion in 2007 - after losing $2 Billion in 2006???
The Detroit automakers no longer matters to the American economy. The natural selection of the free market has spoken, and they lost. We would be stupid to try to prop them up…AGAIN. Let them go bankrupt, let their warranties be declared null and void (bummer for all of those Escalade owners out there), and re-tool their factories and workers to produce wind turbines and solar panels.
It’s not surprising that a local car dealer is hoping for this bailout because they figure some of those tax dollars will end up in their pockets eventually. This isn’t altruism on their part. They see those fattened-with-profit SUVs sitting unsold in their lots and that’s got to be troubling. Of course, nobody forced them to buy them in the first place.
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Posted by ( Woodrowski ) on November 28, 2008 at 10:10 pm
That’s all we need, to forced by the government to be owners of yet another failing industry. I’m already part owner of grain farms and sugar farms, now they are forcing me to be an owner of 3 dinosaur auto companies. They want my hard earned money to pay high school dropout union workers who I might add make more than 2x what I make to do nothing. This bail out for the auto makers is just a joke. If GM is going through $5bil a month that $50bil will only prolong the inevitable. This is just a payoff to the terrorist auto union. Each car the 3 companies make has a hidden union fee included of more than $2000 each. So until they get rid of the union they will always be behind the Toy,Nissan, BMW and Merc. And I thought the new Leader said he would not give tax breaks to companies that ship jobs over seas. I guess over seas only means across the ocean because the 3 all have some of their products built in Canada and Mexico and shipped back to the USA. Isn’t that a contradiction. Of course not, because a portion of all UAW union dues goes to the Dems. Let them fail, it will be the only way they will survive. Something will come from the ashes. If not this will be OB’s Iraq. We’re winning we just need more money.
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Posted by ( BRANES ) on November 28, 2008 at 9:08 pm
Polcat needs a bailout…..
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Posted by ( Carter Myers ) on November 28, 2008 at 3:36 pm
With regard to BigAl’s comments, it should be noted that consumers voluntarily bought all of those vehicle that the domestic industry built in the last few years. GM did build and sell 9 million cars and trucks world wide last year. Not too bad.
It also might be worth reminding BigAl that it was Lee Iacocca that advocated a $.50 gas tax in the ‘80s to encourage consumers to buy more fuel efficient vehicles but Congress failed to support this suggestion from one of the Detroit Three leaders.
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Posted by ( BigAl ) on November 28, 2008 at 8:03 am
The last thing the United States ought to do is reward corporations that have made bad decisions on top of bad decisions on top of bad decisions for several decades. At some point, the natural selection of the marketplace needs to be respected.
The Big Three have done little but focus on large, gas-guzzling, expensive and highly-profitable vehicles. They have not innovated and have fought tooth and nail every effort by the government to try to encourage them to develop some high mileage cars and trucks.
But to their credit, they’ve come up with some really amazing places to hide cup holders.
The American economy’s need for new cars won’t go away if we let the Big Three die a quiet death. And we won’t lose most of those jobs. BMW, Honda, Toyota, Mercedes, and the other manufacturers in the USA will see their demand jump and will hire to meet that demand. That’s the way these things work - the poorly-managed companies die and the well-managed grow and thrive.
So when you hear the media talk about “bailing out the auto industry,“ translate that in your mind to mean “bailing out the United Auto Workers.“ And for good measure, insert the word “Temporarily” before “Bailing out.“ This isn’t the first time we’ve had to bail them out, and it won’t be the last.
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