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Wednesday, June 3, 2009 RSSSEND TO A FRIENDPRINT
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Top 10 Stories
GM, Chrysler to Face Senate Scrutiny on Dealers
GM Offers Dealers up to $1 Million to Wind Down Stores
GM Wants Agreements to Weed Out Low Performing Dealers
Senate Set to Consider Plan to Boost Auto Sales
New-Vehicle Sales Reach a 2009 High
Chinese Buyer Will Expand Hummer Lineup, Keep Dealers, Hummer CEO Says
Circuit Court Agrees to Hear Chrysler Sale Appeal
GM Dealers Seek Representation In Chapter 11 Proceedings
States Feel the Pain on Auto Dealer Row
GM Bankruptcy Details Closure Plans
Top 10 Stories
GM, Chrysler to Face Senate Scrutiny on Dealers

WASHINGTON – General Motors Corp and Chrysler LLC, both bankrupt, will try [today] to ease congressional concern, and in some cases anger, over their plans to slash more than 2,400 dealerships. Members of the Senate Commerce Committee plan to grill GM Chief Executive Fritz Henderson and Chrysler President Jim Press about the lone aspect of restructuring that has triggered a broad response from Congress since dealers are nationwide. "Rapid dealer reductions increase unemployment, threaten communities and decrease state and local tax revenue without any material corresponding decrease in an automaker's costs," said John McEleney, chairman of the National Automobile Dealers Association who sells vehicles made by GM, Toyota Motor Corp and Hyundai Motor Co in Iowa. In his testimony, McEleney will emphasize the need for government to provide new financing to Chrysler so the company can buy back unsold inventory, parts and other assets, and give dealers more time to close their businesses.
Source: Reuters

[Editor's Note: NADA Chairman John McEleney appeared on CNBC's "Squawk Box" this morning expressing concern over the treatment of terminated Chrysler dealers and GM's plan to have its surviving dealers sign "participation" agreements. McEleney and two dealers whose dealerships were terminated will testify beginning at 2:30 p.m. EST, along with company executives. To watch the hearing live online, click here.]

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GM Offers Dealers up to $1 Million to Wind Down Stores

General Motors is offering some dealerships $100,000 to $1 million to wind down their businesses over the next 17 months, according to three sources familiar with the proposals. The money is intended to help dealers sell their remaining inventories. But if the dealer accepts the payment, GM will not buy the unsold inventory. In addition, the dealer must agree not to sue GM until their franchise agreement expires.
Source: Automotive News

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GM Wants Agreements to Weed Out Low Performing Dealers

Saturn has 16 potential buyers, Young says
DETROIT -- The participation agreements that surviving GM dealers sign will be used as a tool to reward dealer performance and weed out underperforming stores. "If they don't perform to those performance levels, it will be cause for us to seek termination," CFO Ray Young said in a conference call [Tuesday] with media and stock analysts. Dealers signing the agreements will have contracts with the new GM, which is buying most company assets out of Chapter 11 reorganization. Others will remain with the old company, which will be liquidated.
Source: Automotive News

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Senate Set to Consider Plan to Boost Auto Sales

A bipartisan plan authored by Sens. Debbie Stabenow of Michigan and Sam Brownback of Kansas comes into focus a day after General Motors followed Chrysler LLC into bankruptcy. The Senate proposal, known as "cash for clunkers," would provide up to $4,500 in vouchers to car buyers who trade in their older, less fuel efficient models for vehicles that get better gasoline mileage. President Barack Obama encouraged Congress on Monday to approve the voucher program.
Source: Reuters

[Editor's Note: On Tuesday, NADA endorsed the amendment being offered by Sens. Stabenow and Brownback. It is expected to be offered to the Food and Drug Administration (FDA) reauthorization bill this week on the Senate floor. NADA believes that passage of the amendment would allow for quick passage in the House and a signature by the President. NADA's Legislative Office issued an action alert Tuesday, urging members to contact their senators through the Capitol switchboard at (202) 224-3121 and ask them to vote for the Stabenow-Brownback "cash for clunkers" amendment to the FDA bill. NADA members with questions on the proposed "cash for clunkers" program may contact NADA's legislative office at legislative@nada.org.]

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New-Vehicle Sales Reach a 2009 High

DETROIT — New-vehicle sales in the United States climbed to their highest levels of the year in May, despite rising gas prices and the bankruptcies of General Motors and Chrysler. The Ford Motor Company, the only Detroit automaker that has not taken federal aid or entered bankruptcy, said its market share rose to the highest level in three years. The seasonally adjusted annualized selling rate for the industry was 9.91 million, the highest so far this year.
Source: The New York Times

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Chinese Buyer Will Expand Hummer Lineup, Keep Dealers, Hummer CEO Says

DETROIT -- The Chinese manufacturer planning to buy General Motors' Hummer will expand the brand's lineup -- including alternative powertrains -- and retain its U.S. dealers, Hummer CEO Jim Taylor said today. The preliminary agreement means Hummer's 150 U.S. dealerships will be safe as long the sales goes through, Taylor said. "This is good news for them," Taylor said. "Nothing happens to them, and in a good way. They're saved."
Source: Automotive News

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Circuit Court Agrees to Hear Chrysler Sale Appeal

NEW YORK -- A U.S. Court of Appeals ... granted a request by a group of Indiana pension funds that hold a small portion of Chrysler's secured debt to "stay" the sale [of Chrysler's assets to Italian automaker Fiat] to allow the circuit court to hear the expedited appeal. Chrysler's lawyers argue that the company needs to complete the sale immediately to avoid liquidation. Fiat is allowed to walk away from the deal after June 15.
Source: Reuters

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GM Dealers Seek Representation In Chapter 11 Proceedings

NEW YORK -- Former U.S. Attorney G. Douglas Jones is asking the judge overseeing GM's bankruptcy case ... to enlist a committee to represent the interests of hundreds of auto dealers the auto maker seeks to close, he said in a statement [today]. Jones was retained by Alabama auto dealer Abercrombie Chevrolet, Inc. "It is important to note that these dealerships are wholly-owned and separate operating entities apart from General Motors," Jones said in the statement.
Source: Dow Jones Newswires

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States Feel the Pain on Auto Dealer Row

The decline in auto dealerships, coupled with the drop in car sales, is costing states and municipalities millions of dollars in lost sales taxes, not to mention lost income and property taxes and other fees. The drop in sales taxes are the worst since World War II, and the plunge in car sales are a major reason for it, said Donald Boyd, senior fellow at the Nelson A. Rockefeller Institute of Government, a public policy group. "The declines have been devastating," he said. "It comes at a time when the states can't afford it."
Source: CNNMoney.com

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GM Bankruptcy Details Closure Plans

Michigan will be hit hardest by GM's plans, with the closing of two assembly plants, two stamping plants, and three powertrain plants. The Iowa auto dealer who leads the National Auto Dealers Association, John McEleney, said ... the NADA does not agree with the mass dealership cuts already announced by GM. "It is the GM dealer who purchases GM vehicles to sell to the public," McEleney said in prepared remarks. "By cutting its dealers, GM is cutting its own customer base."
Source: The Gazette (Cedar Rapids, Iowa)

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Quotable
 
"The bankruptcy judge has a lot of latitude, but in General Motors' case ... they're taking it beyond that. They're requiring the dealers being affirmed ... to sign an agreement that would basically strip franchise rights that have been state laws for decades. And it's an over-reach. It has nothing to do with their success or failure in bankruptcy. And they're taking advantage -- we're fearful -- of the situation that will damage the partnership between dealers and GM going forward."

    -- NADA Chairman John McEleney, expressing concern in a live interview this morning over GM's plan to have its dealers sign "participation" agreements, CNBC's "Squawk Box," June 3



"Rapid dealer reductions increase unemployment, threaten communities and decrease state and local tax revenue without any material corresponding decrease in an automaker's costs."

    -- NADA Chairman John McEleney, Reuters, June 2



"It is important to note that these dealerships are wholly-owned and separate operating entities apart from General Motors. Many of these dealerships are operating companies that have successfully been in existence and turning a profit for years."


    -- Former U.S. Attorney G. Douglas Jones, who is asking the judge overseeing GM's bankruptcy case to enlist a committee to represent the hundreds of auto dealers the automaker is trying to close, Dow Jones Newswires, June 2



"It is still a very fragile industry. This isn’t any time to rejoice. It's just a slight uptick."

   
-- Ken Czubay, Ford’s vice president for sales and marketing, responding to news that Ford's market share rose to the highest level in three years in May, The New York Times, June 3



"The declines have been devastating. It comes at a time when the states can't afford it."

   
-- Donald Boyd, senior fellow at the Nelson A. Rockefeller Institute of Government, on the drop in sales taxes, which are the worst since World War II, due in large part to poor auto sales, CNNMoney.com, June 2

Video Highlights
 

Fighting the Dealers' Fight
(CNBC) 

 
Cutting Dealers a Mistake (Fox Business Network)



Vice Chairman Tonkin on Chrysler Closures (Bloomberg)


 
Should Government Decide Dealers' Fate? (CNBC)



The Case Against Closing Dealerships (CNBC)



In-Depth Look - Pent Up Auto Demand (Bloomberg)



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)
 NADA Tackles Industry Crisis (NADA-TV)
 McEleney Speaks at NADA Convention (NADA-TV)
 Demise of Dealerships Leaves Big Dent (NBC)
NADA on the Front Lines  (NADA-TV)


Click here for more video reports.

 


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