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Wednesday, March 18, 2009 RSSSEND TO A FRIENDPRINT
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Top Stories
Auto Dealers Say U.S. Must Tackle Credit Crunch
New Mexico Dealer to Testify Before Senate Committee on Need for Inventory Loan Credit
Fed's TALF Consumer Lending Program Starts With Nissan Debt Share
A Heap of Stimulus: 'Cash for Clunkers' Bill Could Jumpstart New Auto Sales
Higher Used-Car Prices May Prod Buyers to Consider New Vehicles
NADA Used Car Guide: Rate of Price Improvement Slows Down
Committed to Community: Donation Will Buy Defibrillator for Tigard Police
NADA Update
New NADA Training Video Helps Dealers Find Additional Profits
COBRA Subsidy Compliance Addressed in New Virtual Seminar
Seminar Takes 'Deeper Dive' into FTC Red Flags Rule
Top Stories
Auto Dealers Say U.S. Must Tackle Credit Crunch

DETROIT -- The heads of two U.S. auto dealership associations said on Tuesday that swift government action is needed to improve access to floorplan financing -- which funds inventory purchases -- for their members or more dealers will go bankrupt. "If we don't fix this wholesale credit issue, this whole thing (the auto industry) collapses," John McEleney, chairman of the National Auto Dealers Association, told Reuters in a telephone interview. "Every week there are more dealers that are being impacted and going out of business." McEleney said the NADA had hoped the Federal Reserve's Term Asset-backed Loan Facility -- which will provide $200 billion to finance new debt backed by auto, credit card, student and small business loans -- would help floorplan financing. But rating agency downgrades for auto finance companies like GMAC LLC have cut off access to TALF funds. "The floorplan financing problem affects everyone," McEleney said. "When we lose that, there's nowhere else to go." Thanks to a protracted slump in the U.S. auto industry -- industrywide sales fell nearly 40 percent in the first two months of the year to their lowest level in 27 years -- the NADA expects 1,200 dealerships will go out of business in 2009, up from 900 in 2008. "If we don't get the financing issue resolved by the second half of the year that number could be higher than 1,200," McEleney said. Earlier this month the heads of the NADA, the American International Auto Dealers Association and the National Association of Minority Auto Dealers called on U.S. President Barack Obama to improve funding for floorplan financing. The NADA's McEleney said the three groups have met with officials from the U.S. Treasury, Federal Reserve and U.S. government autos task force, and are to meet Federal Reserve Bank of New York officials this week to press their case. So far, government officials have been responsive to the associations' requests, but no official action has been agreed upon, he said. "I believe we'll be able to resolve this," McEleney said. "We're just not there yet." 
Source: Reuters

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New Mexico Dealer to Testify Before Senate Committee on Need for Inventory Loan Credit

Auto dealership's future and its employees threatened in the wake of credit crisis
WASHINGTON – Starting as a self-proclaimed “wash boy” at a Albuquerque dealership, Bob Cockerham rose through the ranks to become a successful entrepreneur and owner of an import dealership in New Mexico. Because of the lending industry collapse, he may lose the business that he and his wife fought so hard to build. Cockerham, who will share his story with the Senate Committee on Small Business and Entrepreneurship on Thursday, is losing much of the financing that both new and used car dealers need to purchase the inventory on their lots. “Without these loans, my business is done,” Cockerham said. “Despite the fact that we have never been late on a payment and have stellar credit, our inventory financing lender simply said that they could no longer provide us a loan to cover our entire inventory.” With more than 1,000 dealerships closing last year, the New Mexico dealer’s story is not unique. These mostly small, family run businesses are facing the incredibly difficult decision to cease operations because of a lack of affordable credit. On average, a dealer requires $5 million of inventory financing, or “floorplanning” loans. Cockerham and his wife Mary, Kia dealers in Santa Fe, N.M., have already made the difficult decision to downsize their dealership, making significant cuts in operations, staffing and reducing the number of vehicles on their lot. To survive, Cockerham has had to let go of more than 60 of his sales staff, service technicians and other employees and will try to run his dealership with only 17 people. On average, a dealership employs about 50 people, totaling more than one million jobs nationwide. “The most frustrating thing is that after eight years, I may have to consider closing my business -- not because of bad business decisions, but because the loans I need to run my dealerships have almost dried up,” Cockerham added.
Source: NADA Newswire

[Editor’s Note: Bob Cockerham, president of Car World of New Mexico in Santa Fe, will testify at 10 a.m., Thursday, March 19 before the Senate Small Business Committee to highlight the need for increasing the availability of credit to small business owners and the difficulties franchised dealers face in securing “floorplan” financing.]

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Fed's TALF Consumer Lending Program Starts With Nissan Debt Share

A $1.3 billion package of securities backed by Nissan Motor Co. auto loans became the first small piece of what Federal Reserve officials say may grow into a $1 trillion effort to unfreeze business and consumer lending. Nissan’s planned bond sale marks the debut of the Fed’s Term Asset-Backed Securities Loan Facility, or TALF. The securities will likely price on March 19, the deadline for investors to apply to the Fed for loans to buy the debt, according to a person familiar with the sale ... The Obama administration is counting on the TALF plan to help end the credit crunch and recession, thawing the market for asset-backed securities so lenders can make new loans to consumers. The program, first announced in November, was hampered by delays as investors, dealers and issuers worked on details. “A number of people were concerned that some glitches might not have been ironed out this week” in time to meet the first deadline for investors to apply for the Fed loans, said Malcolm Dorris, a senior partner in the securitization group at law firm Dechert LLP in New York. “Getting a deal done in March is good for the program. We are still in the wait-and-see stage.” About $2.3 billion of debt backed by auto loans has been sold this year, compared with more than $9.6 billion in the same period of 2008, according to data from JPMorgan Chase & Co. The first phase of the TALF will finance the purchase of as much as $200 billion of AAA rated securities containing loans for autos, education, credit cards and small businesses. Officials eventually plan to include other assets, including commercial mortgage-backed securities.
Source: Bloomberg

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A Heap of Stimulus: 'Cash for Clunkers' Bill Could Jumpstart New Auto Sales

WASHINGTON -- A wide-ranging program that would give consumers turning in old clunkers cash vouchers worth up to $5,000 to buy new, more fuel-efficient vehicles was introduced Tuesday in Congress. The bill aims to boost car sales in the midst of the recession, help struggling consumers buy new cars and cut pollution by taking some of the oldest, dirtiest cars off the road. "It's good for Detroit and good for America," said Rep. Betty Sutton, D-Ohio. "There is a sense of urgency with car sales slumping." Sutton added that higher sales could keep jobs in the U.S. The bill proposes giving consumers vouchers to buy new, more fuel-efficient vehicles in exchange for turning in vehicles at least eight years old. The program is dubbed the Consumer Assistance to Recycle and Save bill, or CARS Act. To qualify, consumers would have to buy a vehicle more fuel-efficient than their current car or truck. The new vehicles also would have to be priced at $35,000 or less. The bill would offer a $7,500 cash voucher starting in 2010 for plug-in electric hybrids that get 100 mpg or more. Car owners also could turn in their vehicles in exchange for a mass transit voucher worth up to $3,000. GM chairman and CEO Rick Wagoner told reporters in Washington Tuesday that a bill to offer cash for older cars -- often dubbed "cash for clunkers" -- could benefit the auto industry. "These kind of programs can have a huge impact," Wagoner said, saying it could boost consumer confidence. "It would be very helpful to have something like that here in the United States." He pointed to a roughly 15 percent increase in auto sales in Germany last month over a year ago after they introduced a similar program. According to published reports, the German "scrappage" incentive boosted new-car registrations during February to the country's highest level in a decade.
Source: The Detroit News

[Editor's Note: "Rep. Sutton's bill is a step in the right direction," says David Regan, NADA vice president of legislative affairs. "It is enough of an incentive to get consumers to consider the purchase of a new vehicle in these difficult times." Getting "clunkers" off the road benefits the environment, stimulates the economy and helps struggling automakers and dealers. "We would like to see the proposal expanded to include all makes of vehicles, which would provide even greater economic and environmental benefits," Regan added.]

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Higher Used-Car Prices May Prod Buyers to Consider New Vehicles

Higher prices and falling inventories for used vehicles in the U.S. raise the possibility that more consumers may opt for new cars after sales fell to a 27-year low last month. “You can look for positive signs, and you can see the fact that used-car prices have not only firmed but actually risen,” Ford Motor Co. Chairman Bill Ford said in a March 9 interview. “The inventory of used cars is dwindling.” The timing of any increase in new-car sales is difficult to forecast because consumer credit remains tight and job losses are damping consumer confidence, said Patrick Archambault, a Goldman Sachs Group Inc. analyst in New York. “There is demand of some kind on the horizon,” said Archambault, who isn’t predicting a rebound. “It’s nice to see some sign that’s not red.” Auto demand in the U.S. has been running at a rate so far this year that would deliver full-year sales of less than 10 million, about 6 million fewer than the U.S. has averaged this decade. Higher used-car demand is a positive sign for sales of new models, Chrysler President Jim Press said in a March 3 call with analysts and reporters.
Source: Bloomberg

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NADA Used Car Guide: Rate of Price Improvement Slows Down

McLEAN, Va. — Although auction prices continued to climb through the first week of March, their rate of improvement is beginning to subside, according to the latest report from NADA Used Car Guide. That said, there is still a chance the price improvements could accelerate beyond their current rate of change, officials noted. "Week one sales for the month of March indicate that the rate at which prices are improving is beginning to slow," analysts highlighted. "Prices are showing improvement in all of the five major segments between (approximately) 2 percent and 4 percent." The reasons for the upswing in value stem largely from restricted supply and emerging demand in the secondary market, analysts noted. "When week one averages show a 3-percent change or less, it is more difficult to estimate how the rest of the month will turn out," analysts shared. "There is some degree of possibility that March could show larger improvement beyond the 2- to 4-percent we've seen in week one."
Source: Auto Remarketing

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Committed to Community: Donation Will Buy Defibrillator for Tigard Police

The Tigard Police Department will be able to buy another automated external defibrillator for its patrol vehicles as a result of a local automobile dealer's donation. Jim Corliss, president of Landmark Ford in Tigard, presented a $2,000 check to Tigard Police Chief Bill Dickinson during a meeting ... at the dealership. Corliss serves as a National Automobile Dealers Charitable Foundation ambassador. The foundation allows a directed donation by its ambassador every three years, and Corliss selected Tigard police for this gift. "The ability to purchase an additional AED will expand on the department's ability to be even more responsive to the needs of the community," Dickinson said.
Source: The Oregonian

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NADA Update
New NADA Training Video Helps Dealers Find Additional Profits

You can tell a lot about a person by the vehicle he or she drives. For many, a car or truck is more than just a way to get from point “A” to point “B.” It is an extension of the self. It is a way for everyone to express his or her individuality. Accessorizing is as much about passion as it is about product. NADA Management Education’s new training DVD, Accessorizing Your Way to Additional Profits, is designed to help dealers tap into this passion and add dollars to every sale. Dealers and managers can learn how to launch an accessories operation from dealers who have actually done it, examining staffing, displays, marketing, warranties, and more. The Specialty Equipment Market Association (SEMA) estimates that accessories sales top $38 billion, and that dealerships capture just 10–15 percent of this market. If this percentage were to increase significantly, U.S. dealerships as a whole could see billions in additional profits and build customer loyalty. Consumers who accessorize their vehicles spend, on average, up to $3,500 annually on accessories. This training package includes a four-part DVD and a 22-page study guide, complete with an accessories quiz and lists of established parts vendors. To order, visit www.nada.org/accessorizing or call (800) 252-6232, ext. 2. Order online to watch a free video preview!

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COBRA Subsidy Compliance Addressed in New Virtual Seminar

Dealers with former employees and certain beneficiaries eligible for continuing health insurance coverage may need to issue a new COBRA notice indicating that they may be eligible for a 65 percent reduction in premiums. The American Recovery and Reinvestment Act of 2009 (ARRA) provides temporary, taxpayer-funded premium relief for people otherwise eligible to elect to continue an employer's health plan coverage under the Consolidated Budget Reconciliation Act of 1985, known as COBRA.

As of Feb. 17, 2009, the ARRA program applies to people who become eligible for COBRA between Sept. 1, 2008 and Dec. 31, 2009. Those who choose to continue coverage may receive a 65 percent plan continuation premium discount. In other words, employees who normally would pay 100 percent of their COBRA plan premiums may need to pay only 35 percent, with employers or the health plan picking up the difference.

To help dealerships comply with the Act, NADA has asked Penny Wofford, an employment law specialist and partner in the law firm Ford & Harrison, LLP, to conduct a virtual seminar on Thursday, March 19, from 1-2:30 p.m. EST. In “Employer Requirements for New COBRA Subsidy,” Wofford will discuss Assistance-Eligible Individuals (AEIs), employer notices and their timing and the payroll tax credit. She will outline the steps dealerships need to take to comply and to coordinate the subsidy administration with COBRA administrators, insurers and other service providers. Participants’ questions will be addressed during the final 15 minutes of the seminar.

The fee for this timely virtual seminar is $50 per computer connection. To register, visit www.nada.org/seminars or call (800) 252-6232, ext. 2.

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Seminar Takes 'Deeper Dive' into FTC Red Flags Rule

Attorneys from the FTC’s Division of Privacy and Identity Protection—which drafted and enforces the Red Flags Rule—will present a virtual seminar “A Deeper Dive into the FTC Red Flags Rule” on March 26 from 1 to 3 p.m. EST.

With the revised May 1 enforcement date approaching, dealers should ensure that their required Identity Theft Prevention Programs incorporate all of their covered accounts, include all relevant Red Flags, contain effective response and detection procedures, address all the Rule’s other requirements, and are tailored to their particular operations. It's a daunting task in view of the Rule’s general provisions that encompass all types of financial institutions and creditors.

To assist dealers in understanding how the Rule applies to dealership operations, FTC attorneys will join NADA Regulatory Affairs Director Paul Metrey to recap the required elements of the Red Flags and Address Discrepancy Rules and examine implementation considerations for dealers—and then, we’ll open the phone lines so dealers can present their questions directly to the FTC attorneys. Dealers should consider attending the “Deeper Dive” seminar even if they attended one of the previous Red Flags Rule virtual seminars. If you still have any questions, now is the time to ask. We’ll have a great team to answer your questions. And be sure to bring your copy of NADA's A Dealer Guide to the FTC Red Flags and Address Discrepancy Rules.

The fee for this important virtual seminar is $199 per computer connection. To register, visit www.nada.org/seminars or call (800) 252-6232, ext. 2.

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Quotable
 
"If we don't fix this wholesale credit issue, this whole thing (the auto industry) collapses. Every week there are more dealers that are being impacted and going out of business."

    -- John McEleney, NADA chairman, Reuters, March 17
Video Highlights
 
 

NADA-TV: McEleney Says Meeting With Obama Auto Task Force Was Productive

 

NADA-TV: McEleney Testifies at EPA Hearing on Fuel Economy Rules

 NADA Tackles Industry Crisis


NADA Chairman Speaks at the Convention in New Orleans
NBC: "Demise of Local Dealerships Leaves Big Dent"
2009 Convention in New Orleans
NADA on the Front Lines


Click here for more NADA-TV reports.

Member Products & Services
 

Lenovo Madness Sale

Lenovo is offering all NADA members up to 35 percent off select notebooks. Enter eCoupon USXTHINKMADNESS at checkout. Great savings are available on all ThinkPad and IdeaPad notebooks along with all computing accessories. Free shipping is available on all Web orders. This offer ends March 31. To take advantage of these savings, visit NADA's PC Purchase Program online (login required).

NADA Used Car Guide Unveils Used-Vehicle Appraisal Product for Dealers

NADA Used Car Guide is introducing a unique and affordable new appraisal product called NADA AppraisalPRO, which provides a complete picture of the used-vehicle market in one location. The online tool provides dealers with the flexibility to define the market area and customize each appraisal by making adjustments to determine the best number for each and every trade-in. NADA AppraisalPRO is available at a low introductory monthly subscription rate of $150 for unlimited lookups per location. For more details, visit www.nada.com/appraisal. To order, call (866) 974-6232.

 
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NADA For more information on NADA, visit www.nada.org or contact NADA, 8400 Westpark Drive, McLean, VA 22102. This email may contain an advertisement of NADA products and services. Any opinions or statements contained herein do not necessarily reflect the views of NADA. Factual errors are the responsibility of the listed publication. If you are a franchised new-car or -truck dealer and would like to become a member of NADA, please visit the Join NADA section of www.nada.org. Questions or comments concerning NADA Headlines content may be directed to media@nada.org.