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Wednesday, May 13, 2009 RSSSEND TO A FRIENDPRINT
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Top 10 Stories
Auto Dealers Head to Capitol Hill, CNBC Reports
Auto Dealers Are Urging Congress to Intervene with the Obama Administration to Oppose Drastic Dealer Cuts
Car Dealers Fight Rapid Closures; 180,000 Workers Could Lose Jobs
Expecting Cuts, Chrysler Retirees, Dealers Get Legal Help
AP Source: Chrysler to Cut 800 Dealers on Thursday
GM Will Notify 1,000 Dealers on May 15 of Franchise Expiration
Obama Auto Task Force Will Meet Thursday With Auto Dealers
Opinion: Obama's Auto Job Isn't Over
Opinion: Dealers Getting Ready for a War They Can Win
Chrysler Looks to Exit From Unexpired Leases on 10 U.S. Properties
Top 10 Stories
Auto Dealers Head to Capitol Hill, CNBC Reports

WASHINGTON – NADA Chairman John McEleney, appearing on CNBC’s “Squawk Box” this morning, said the “rapid, disorderly and drastic” plans of the auto task force to cut the dealer network would result in 200,000 job losses and further harm an already reeling economy.

“Our objective is to talk to members of Congress … who are familiar with dealerships and concerned about Main Street jobs,” McEleney said. “We’re not saying that there shouldn’t be consolidation. We have dealers … closing every day. The plan General Motors submitted [to the auto task force] was very aggressive.”

But accelerating the timetable for dealer cuts does nothing for the viability of manufacturers. "It just does not make sense,” McEleney added. "GM’s expenses will not be cut. In fact, it reduces revenue. It’s counterproductive to what they are trying to accomplish," he added.

McEleney warned of the unintended consequences that could affect the entire industry if dealer cuts were made too quickly and deeply. Hundreds of thousands of new vehicles from dealership closings will flood the market, he said.

“It will destroy the new car market, not just for GM and Chrysler, but for the whole industry,” McEleney said.

This will have a negative ripple effect on non-GM dealers. More than 40 percent of GM dealers, for example, have Toyota franchises, he added.

“Our loans are often intertwined,” McEleney said. “The loans that we have for inventory, for working capital [and] for mortgages are often cross-collateralized. So you’re going to have dealers that lose a Chrysler or GM franchise and … find their lending source call the loan on that other franchise.”

“Squawk Box” is anchored by Joe Kernen, Becky Quick and Carl Quintanilla. CNBC automotive reporter Phil LeBeau joined the program today. Click here for the full CNBC report.
Source: CNBC

[Editor's Note: Click here for the NADA fact sheet arguing against forced dealership closures.]

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Auto Dealers Are Urging Congress to Intervene with the Obama Administration to Oppose Drastic Dealer Cuts

More than 100 new-car dealers will meet face-to-face today with select members of the House and Senate to ask them to urge President Obama’s auto task force to slow down plans to rapidly reduce General Motors and Chrysler’s dealer networks.

“A rapid cut of dealers is a bad idea,” says John McEleney, chairman of the National Automobile Dealers Association, the trade group that organized the dealer fly-in. “This would have adverse effects on the auto industry and hurt an already struggling U.S. economy.

“It will result in another 200,000 Americans losing their jobs,” McEleney added. “State and local governments will lose millions of dollars in auto sales tax revenue that is essential for economic recovery.

“We’re not arguing against dealer consolidation,” McEleney says. “Our concern is with the accelerated timeframe. Keep in mind that dealers are not a cost center for their manufacturers. Dealers are an automaker’s main source of revenue.

“Cutting dealers at this time would do absolutely nothing to make either GM or Chrysler more viable,” McEleney says.

NADA leaders are also scheduled to meet with the President’s auto task force on Thursday, May 14, in Washington, D.C.

NADA launched an ad campaign in the form of an open letter from McEleney to President Obama questioning why his auto task force is demanding drastic cuts in the number of U.S. dealers. Full-page print ads were published in The Washington Post, Politico, Automotive News, Roll Call, Chicago Tribune and Chicago Sun-Times.
Source: NADA Newswire

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Car Dealers Fight Rapid Closures; 180,000 Workers Could Lose Jobs

DETROIT — John McEleney, chairman of the National Automobile Dealers Association, says he understands that fewer dealerships are needed. But since dealers are independent business owners and get little financial support from the automaker, he argues, they aren't adding to GM's financial problems. "We understand the realities of the marketplace, but we just think this is the worst time to be doing this," says McEleney, who says the delegation will include about 150 dealers. "By forcing the issue, it's going to have some real negative consequences in many communities, where dealers are the biggest private employers and are involved in the local communities supporting charities."
Source: USA TODAY

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Expecting Cuts, Chrysler Retirees, Dealers Get Legal Help

Chrysler's National Dealer Council retained Arnold & Porter LLP in Washington, D.C., and they are expected to represent dealers likely to stay with the company. Dealers on the outs, such as those who don't have Dodge, Chrysler and Jeep brands under a single roof, have formed the Committee of Chrysler Affected Dealers and hired Squire Sanders & Dempsey LLP of Cleveland. The National Automobile Dealers Association sent memos to dealers Friday urging contributions to the firms' legal funds.
Source: The Detroit News

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AP Source: Chrysler to Cut 800 Dealers on Thursday

Chrysler LLC plans to fire up to 800 of its 3,200 dealers on Thursday, a lawyer seeking to represent the dealers said on a conference call. Spokeswoman Kathy Graham said the 800 number was just speculation. "We do not have any finalized list as of this point in time," she said. "This is craziness,"  [said David Kelleher, who owns two Chrysler dealerships in the Philadelphia area.]
Source: The Associated Press

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GM Will Notify 1,000 Dealers on May 15 of Franchise Expiration

General Motors Corp. ... will notify 1,000 to 1,200 auto dealers on May 15 that they fail to meet franchise agreements. GM will deliver letters to dealers whose stores fail to meet criteria such as sufficient working capital, sales or customer-satisfaction levels, explaining that GM will not renew their franchise agreements when they expire this year or in 2010, GM spokeswoman Susan Garontakos said.
Source: Bloomberg

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Obama Auto Task Force Will Meet Thursday With Auto Dealers

WASHINGTON -- The Obama administration's auto task force will meet with the National Automobile Dealers Association on Thursday -- the same day Chrysler is to announce it is closing at least 800 dealerships. ... The administration has insisted that both Chrysler and General Motors Corp. have too many dealers, noting they have lost significant market share and have far more dealers proportionally than foreign automakers.
Source: The Detroit News

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Opinion: Obama's Auto Job Isn't Over

... the members of the automotive task force must not pretend to be experts on the size and location of Chrysler's distribution network and ram a counterproductive plan through the court. Just because General Motors' management wants to eliminate 2,600 dealerships, that doesn't mean Chrysler ought to decimate its dealer body as well. Eliminating dealerships will reduce unit sales and revenue. That could undermine the Chrysler that emerges from bankruptcy. It also could cause hardships for consumers when they have their current vehicles serviced or shop for new ones. In this case, doing nothing is better than doing the wrong thing.
Source: Automotive News

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Opinion: Dealers Getting Ready for a War They Can Win
By Edward Lapham

Some people think the tough dealer protection law signed May 6 by New Hampshire Gov. John Lynch and the one waiting to be signed in neighboring Vermont by Gov. James Douglas are mostly symbolic. Not so fast, says Roger Groux, a Nissan and Honda dealer in Stratham, N.H. The new laws are about fighting the next war, when Chrysler and GM come back with new franchise agreements they'll expect dealers to sign.
Source: Automotive News

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Chrysler Looks to Exit From Unexpired Leases on 10 U.S. Properties

On the same day last month that the 84-year-old company filed for Chapter 11 protection, Chrysler asked the court to allow it to reject 10 unexpired leases with a total of more than $30 million in rent remaining to be paid on them. The properties are mostly shuttered dealerships ... The news angered some landlords who said they will struggle to handle their financial obligations without Chrysler. More closed dealerships also could spell trouble for major retail strips in many communities.
Source: The Wall Street Journal

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Quotable
 
"We understand the realities of the marketplace, but we just think this is the worst time to be doing this. By forcing the issue, it's going to have some real negative consequences in many communities, where dealers are the biggest private employers and are involved in the local communities supporting charities."

    -- NADA Chairman John McEleney, on NADA's push to let the economics, not the government, decide which car dealers should shut down, and when, USA TODAY, May 12


"Most of these sites are going to languish."

    -- Bernard Haddigan, managing director of national retail for Marcus & Millichap Real Estate Investment Services in Atlanta, on the thousands of dealerships that could be vacated over the next 12 months, The Wall Street Journal, May 13


"I don't know that there is any good news whether you're on the list or not on it."

    -- Jack Fitzgerald, who operates dealerships in Maryland, Pennsylvania and Florida, on Chrysler's plans to file a list of dealers it wants to retain with the U.S. bankruptcy court on Thursday, Detroit Free Press, May 12

Video Highlights
 
 
Dealers Head to Capitol Hill (CNBC)


The Case Against Closing Dealerships (CNBC)



NADA and the Obama Auto Task Force (PBS, NewsHour with Jim Lehrer)


 
NADA on Cash for Clunkers (NADA-TV)



NADA on Floorplan Credit Crisis (NADA-TV)


 
Senate Testimony on Floorplan Loans (NADA-TV)


 
Banks Turning on American Car Dealers? (WTNH-TV)


 
EPA Hearing on Fuel Economy (NADA-TV)


 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 video reports.

 
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