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Tuesday, Nov. 3, 2009 RSSSEND TO A FRIENDPRINT
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Top Stories
NADA Chief Economist Estimates Clunker Cost Per Incremental Vehicle Sold at around $4,600
Ford Stirs Hope of Car U-Turn
Congress Poised to Help Companies Turn Losses Into Tax Refunds
Dealers Dispute Customer's Suit Over Clunkers
Higher Limits Look Likely for SBA Guaranteed Loans
Committed to Community: Ford's Mulally and Toyota Motor Sales U.S.A. Become 'Ambassadors' of NADA's Charitable Foundation
NADA Marketplace
FTC Again Delays Enforcement of Red Flags Rule
Nov. 18 Webinar to Address New IRS Field Directive on UNICAP and What It Means for You!
Experient, Inc. is NADA's Official Housing Bureau for the NADA Convention
Top Stories
NADA Chief Economist Estimates Clunker Cost Per Incremental Vehicle Sold at around $4,600

Describes Edmunds.com Clunker Estimate of $24,000 as “Overstated and Misleading”
McLEAN, Va. – After a thorough review of the Cash for Clunkers program, the chief economist of the National Automobile Dealers Association (NADA), Dr. Paul Taylor, determined that the cost of each incremental vehicle sold was around $4,587. An incremental sale is a sale that would not otherwise have occurred without the Clunkers program.

His findings bring into serious question the methodology behind the $24,000 estimate promoted last week by the car-buying web site Edmunds.com.

“It’s really not that hard to determine a credible cost estimate for the Clunkers program,” says Taylor. “You subtract projected sales from actual sales for July and August when the Clunkers program was operating, and divide the program’s $3 billion by that number.”

Taylor says that, based on sales volume for previous months, a realistic projection of auto sales for July and August would be around 1,600,000. Actual sales for those two months totaled 2,253,963. The difference is 653,963. That’s the number of incremental sales generated by the Clunkers program. Divide the program’s $3 billion by that number and you get $4,587, the average cost per incremental Clunker sale.

Taylor says the methodology used by Edmunds.com in its analysis of the Cash for Clunkers program is “fundamentally flawed.”

“The analysis by Edmunds.com is wrong on the two main points that it tries to make. First, because of is flawed methodology, the study can’t form the basis for measuring the program’s impact or costs. Secondly, and more importantly, the analysis clouds understanding and misleads rather than clarifies the true state of auto sales and the economy,” Taylor added.

Edmunds.com says it came up with its estimates by examining the sales trend for luxury vehicles and others not in Cash for Clunkers, and applying the historic relationship of those vehicles to total SAAR (Seasonally Adjusted Annual Rate). Taylor says this method virtually assured that cost estimates would be “overstated and inflated.”

“Historically, over the past 20 years, auto sales have been lower in July and August than in June, in the absence of strong incentives. Edmunds ignores this,” says Taylor.

“The Dow Jones and broader market indexes made strong recoveries over the summer, assisting luxury light vehicle sales. But there is a fundamental difference between what drives luxury car sales and non-luxury sales,” says Taylor. “An improving stock market, for example, may boost luxury car sales but it has little effect on non-luxury sales. Job growth, income growth and housing affect non-luxury vehicle sales. And in each of those categories the numbers are not good. Unemployment is up. Income is down. And housing prices continued to fall through July. This has not been the kind of economic environment that encourages a purchase by the average car buyer.”

Taylor says that Edmunds.com also painted a too-rosy picture for auto sales for the rest of the year. He points out that the Conference Board’s Consumer Confidence Index actually dropped to 47.7 in October from 53.4 in September. “This does not support a dramatic increase in non-luxury car sales for the final months of 2009, as suggested by the estimates in the Edmunds.com analysis,” says Taylor.

“Edmunds.com has obviously underestimated just how much the Clunkers program stimulated car sales,” says Taylor. “The Clunkers program lit up the market. Auto showrooms went from almost empty to overflowing. It’s hard to imagine how anyone who takes an objective look at the Cash for Clunkers program can reach any conclusion other than it gave a dramatic boost to retail sales and manufacturing output.”
Source: NADA Newswire

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Ford Stirs Hope of Car U-Turn

Surprise Profit Is Driven by Finance Unit, Market-Share Grab; Focus Turns to Toyota
DETROIT -- Ford's unexpected profit -- the result of renewed strength at its credit arm, vastly improved North American operations and the weakness of its Detroit rivals -- suggests the company's efforts to slash costs and improve its vehicle lineup are beginning to have an impact on the bottom line. Last week, Honda Motor Co. raised its outlook for the current fiscal year, saying its cost-cutting measures are starting to pay off, too. Ford's affiliate, Mazda Motor Corp., boosted its forecast as well. "We believe that the world is starting to recover. Over time, with the fundamentals getting better, the economy and the automobile industry will recover," Ford Chief Executive Alan Mulally said in an interview.
Source: The Wall Street Journal

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Congress Poised to Help Companies Turn Losses Into Tax Refunds

WASHINGTON -- Large and mid-sized companies battered by the recession are on the verge of securing as much as $33 billion in refunds from the federal government for taxes paid as far back as 2003. The firms won support for the plan from Senate Majority Leader Harry Reid (D., Nev.), who added the tax refunds to legislation extending unemployment benefits and headed for Senate approval as early as (this) week. The tax provision would allow businesses to carry back losses incurred in either 2008 or 2009 to offset taxes paid up to five years before. Business groups say the cash would be timely since access to credit remains limited.
Source: The Wall Street Journal

Editor's Note: NADA strongly supports the Net Operating Loss (NOL) tax provision with a carryback period of five years for businesses of all sizes and is cautiously optimistic. The tax break is similar to an amendment included in the stimulus package earlier this year that was drastically scaled back to apply only to businesses with revenue of $15 million a year or less. NADA will continue to keep dealers updated on the status of this legislation.

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Dealers Dispute Customer's Suit Over Clunkers

Dealers say a New York judge should throw out a consumer's request for class-action status for a lawsuit accusing Penske Automotive Group Inc. of keeping $75 the dealership received from a scrappage company for a cash-for-clunkers trade-in. The law required a dealer to estimate for the customer what a salvage company would pay for the clunker trade-in. But the law did not say who should get any money in excess of $50. "It cost the dealer, in reality, way more than $50 to handle these claims," says (Deborah Dorman, president of the Eastern New York Coalition of Automotive Retailers.) "As long as the dealer made some rational effort upfront, and kept no more than $50 for administration, I don't see how this lawsuit can stand up."
Source: Automotive News

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Higher Limits Look Likely for SBA Guaranteed Loans

For the first time in a decade, Congress is poised to raise limits on federally guaranteed loans to small businesses, including auto dealers, in an attempt to stimulate the economy, lobbyists say. The only questions seem to be how far Congress is willing to go in easing loan restrictions and when it will have time to pass a bill. President Barack Obama is pushing to more than double the maximum loans under the Small Business Administration's 7(a) loan program to $5 million from $2 million. That would affect the SBA's new floorplan financing program for dealers, which has struggled to attract lender participation since its May launch. Obama also seeks to raise the amount of each loan that can be backed by the government to 90 percent from 75. "The goal here is to get credit where it's needed most: to businesses that support families, sustain communities and create the jobs that power our economy," Obama said in his Oct. 24 radio address. (Click here for the Automotive News editorial, "Dealers Need SBA Loan Program Improved Now," in this week's edition.)
Source: Automotive News

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Committed to Community: Ford's Mulally and Toyota Motor Sales U.S.A. Become 'Ambassadors' of NADA's Charitable Foundation

 

Annette Sykora, past-NADA chairman, takes time out at a dealer meeting last week in Dearborn, Mich., to recognize Ford's Chief Executive Alan Mulally for becoming an “Ambassador” of the National Automobile Dealers Charitable Foundation.

McLEAN, Va. – Ford Chief Executive Alan Mulally and Toyota Motor Sales U.S.A. Inc. have become “Ambassadors” of the National Automobile Dealers Charitable Foundation (NADCF). “Ford Motor Co. has always been a good corporate citizen, so it’s just fitting that Mr. Mulally become an Ambassador himself,” says Annette Sykora, an NADCF board member and past chairman of the National Automobile Dealers Association.

Earlier this year, NADA President Phil Brady accepted a $20,000 gift on behalf of NADCF from Toyota Motor Sales U.S.A, of which $10,000 was donated to the foundation, thus making Toyota Motor Sales U.S.A an Ambassador of the program. And the remaining $10,000 was donated to Northwood University. Peter Blackstock ... a foundation board member and Ambassador, says he hopes Toyota’s ambassadorship will make more industry leaders aware of the program and its many benefits to organizations in need all over the country.
Source: NADA Newswire

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NADA Marketplace
FTC Again Delays Enforcement of Red Flags Rule

On Oct. 30, the Federal Trade Commission announced that it is delaying its enforcement of the Red Flags Rule until June 1, 2010. For more information, see the FTC Press Release.
Source: NADA Newswire

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Nov. 18 Webinar to Address New IRS Field Directive on UNICAP and What It Means for You!

NADA will present IRS Motor Vehicle Technical Advisor Terri Harris in a Webinar on the Uniform Capitalization Rules (UNICAP) directive on Wednesday, Nov. 18, from 1-3 p.m. EST. Here’s the background: On Sept. 15, the IRS Director for the Heavy Manufacturing and Transportation (HMT) Industry issued a memo that provides direction to IRS field examiners on how to conduct UNICAP audits at car and truck dealerships. The unofficial directive contains an audit toolkit and announces the suspension of new UNICAP audits through Dec. 31, 2010 to provide dealers with an opportunity to change their accounting methods in order to comply with a September 2007 Technical Advice Memorandum [TAM 200736026] that involved a franchised car dealer. The Industry Director issued the field directive to address the "high level of taxpayer noncompliance on this issue" and because it represents "the highest compliance risk" to the industry. So what does this mean for dealers?

NADA will tackle this issue in an interactive Webinar that will feature a powerpoint presentation by the IRS' Terri Harris. The program will be moderated by Paul Metrey, director of NADA's Regulatory Affairs. Thirty to 60 minutes of the Webinar will be devoted to Q & A. Cost of the Webinar is only $199 per computer connection. Registrants will have access to the Webinar recording for up to six months. Register online at www.nada.org/seminars or call (800) 248-6232, ext. 7273.
Source: NADA Newswire

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Experient, Inc. is NADA's Official Housing Bureau for the NADA Convention

NADA has made arrangements with Experient, Inc. to book hotel rooms for the upcoming NADA Convention & Expo in Orlando. NADA has NOT authorized any other organization or company to make hotel reservations for the convention. E-mails, phone calls or other communications from “Expo Marketing” or “Expo Housing” or any other third party are not being sent by NADA or on behalf of NADA. To register and reserve a hotel room for the convention, visit www.nada.org/convention.
Source: NADA Newswire

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Quotable
 
"Edmunds.com has obviously underestimated just how much the Clunkers program stimulated car sales. The Clunkers program lit up the market. Auto showrooms went from almost empty to overflowing. It’s hard to imagine how anyone who takes an objective look at the ... program can reach any conclusion other than it gave a dramatic boost to retail sales and manufacturing output."

   
-- NADA Chief Economist Paul Taylor, Ph.D., describes the Clunkers estimate of $24,000 per incremental vehicle sold as "overstated and misleading," NADA Newswire, Nov. 3
Video Highlights
 

Crisis Timeline: NADA in High Gear (NADA-TV)


Media Coverage: The Tragedy of Dealer Closings (NADA-TV)



NADA's New Buy Now Campaign


 Senate Testimony on Floorplan Loans (NADA-TV) 
 NADA Tackles Industry Crisis (NADA-TV) 
NADA on the Front Lines  (NADA-TV)

Click here for more video reports.
2010 Convention
 


NADA Chairman: Convention is the 'Must-Attend Event'

Did you know?

As a bonus for attending the NADA convention, you’ll receive Steve Miller’s Marketing Stimulus Package, which includes the seven-part video series, “Introduction to the Seven Foundational Concepts for a Successful Marketing Strategy” and once a week for 12 weeks you’ll also receive valuable marketing tips, tactics or tools designed to help generate more prospects and customers.

Already registered? Check your e-mail for instructions to access these marketing tips. For more information or questions, contact
expo@nada.org.


Be in the know
at the NADA convention Feb. 13-15.


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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.