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Inside this issue
Commentary: The New York Times Editorial Got It Wrong
Falling Used-Vehicle Values Threaten Recovery
Ford Data Crunchers Help Dealers Fine-Tune Inventory
Aston Martin Stores May Shut on Crash Rule, Dealer Says
Why Automakers Will Build More Hydrogen Fuel Cell Vehicles
No Key Ring Tags, GM Tells Dealers
Ford CEO takes ALS Ice Bucket Challenge
Click here for more auto industry news at NADAFrontPage.com. .
Top Stories
Commentary: The New York Times Editorial Got It Wrong
By Jim Henry

An editorial in the Saturday, Aug. 9, issue of The New York Times made unreasonable demands on dealers and automotive lenders while grossly misrepresenting automotive lending. The Times editorial, titled "When a Car Loan Means Bankruptcy," argued that auto dealers, like mortgage lenders, "must" be made responsible for verifying "that borrowers have the ability to repay their loans and meet their other expenses." How far into household budgets would dealerships have to dig to do that? Would customers share such information? Imagine the added dealership paperwork such a requirement would create. It would be akin to requiring that realtors guarantee that home buyers can pay the mortgages they sign. Lenders already do that. Why should realtors or car dealers duplicate the task, especially when they aren't set up to do so?

The editorial also called on regulators to ban dealer reserve, although it didn't use the term. At least, dealer reserve is probably what the newspaper had in mind when it said "regulators should bar the dealers from gaining additional profit by manipulating interest rates." Manipulating interest rates? That sounds like dealers are trying to rig the market, not take a fee for helping car shoppers obtain loans regardless of their credit score.

Auto dealer and lender groups howled in protest, especially at the editorial's equating subprime auto loans with subprime mortgages. The groups insisted there's no comparison between the two. In a rebuttal, National Automobile Dealers Association President Peter Welch wrote: "Enforcement of existing laws against a small minority of bad players is in everyone's interest, but smearing an entire industry for the misdeeds of a few is just plain wrong." Welch said the editorial portrayed the auto lending industry "as a hotbed of deceptive practices and a harbinger of insolvency that could trigger another recession. Nothing could be further from the truth."

Bill Himpler, executive vice president of the American Financial Services Association, noted some key distinctions between subprime auto loans and subprime mortgages. For one, investors bought mortgages expecting underlying assets to appreciate. "In mortgages, people thought they were going to be flipping properties," he said. "There's no market for flipping used cars. Buying something that needs a new paint job and selling it for twice what you paid for it -- that doesn't happen in cars."

A subprime auto lender CEO ... noted that brokers sold mortgages with no stake in whether mortgage payments are made. But, he said, the subprime auto lenders that sell asset-backed securities typically agree to buy back loans if they don't perform. "It's called skin in the game," the executive said. "That's a big difference."
Source: Automotive News

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Falling Used-Vehicle Values Threaten Recovery

The long-awaited decline in used-vehicle prices has finally arrived, only it may turn out to be steeper drop and a bigger threat to the overall market than almost anyone expected. Prices have slipped for three straight months due to an influx of off-lease vehicles, just as analysts predicted. But other factors have led to new warnings that are substantially gloomier. “We see an alignment of forces that could drive the largest decline in used-car prices in history,” said Morgan Stanley analyst Adam Jonas. Others disagree — strongly — saying the decline will be within the traditional seasonal range. Either way a lot is at stake.
Source: Automotive News

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Ford Data Crunchers Help Dealers Fine-Tune Inventory

Ford Motor Co. is trying to take the guesswork out of dealership inventory ordering, using advances in big data technology to offer its stores sophisticated recommendations for their orders. Some dealerships, however, have been hesitant to embrace the data. "I order my own vehicles," said Ford Hall, fleet and commercial sales manager for LaFontaine Ford in Lansing, Mich. "I've been doing this for 16 years, and I know what I want in my parking lot. They don't." Other dealers use the system, which Ford supplies free, but the varied reception is not surprising to experts. Using big-data tactics to fine-tune inventory orders is in its infancy, they say. One analyst says effective use of big data could save $100 or more per car sold. Ford rolled out its Smart Inventory Management System in 2009, providing relevant regional data and inventory recommendations to dealerships in the United States and Mexico.
Source: Automotive News
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Aston Martin Stores May Shut on Crash Rule, Dealer Says

Aston Martin stores in the U.S. will be unprofitable and could close if the sports-car maker is unable to get an exemption from crash standards that take effect next month, a top dealer said. The average Aston Martin store will be loss-making if the carmaker can't sell the DB9 and Vantage, two models that don't comply with the new side-impact crash rule, said James Walker, chairman of the automaker's U.S. dealer advisory panel. Without convertible models, which won't meet the standard by September 2015, all the brand's dealers would be “in the red,” he wrote in a National Highway Traffic Safety Administration petition. “The financial viability of Aston Martin dealers is very much in question,” wrote Walker, who confirmed the contents of the letter by telephone. “If dealers make the decision to shutter the franchise, a very likely outcome, the impact on employment is significant.”
Source: Bloomberg
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Why Automakers Will Build More Hydrogen Fuel Cell Vehicles

Hydrogen fuel cell vehicles could soon gain ground on electric cars in the race to develop zero-emission cars, according to a new report. The auto industry is seeing a convergence of factors that make fuel cell cars more viable, according to the Institute of Transportation Studies at University of California, Davis. Major automakers are pushing the technology. Hyundai began leasing its Tucson fuel cell crossover in Southern California earlier this year, targeting the handful of communities that have hydrogen fueling stations. Toyota and Honda plan to bring out their first mass-market fuel cell vehicles next year.
Source: The Los Angeles Times
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No Key Ring Tags, GM Tells Dealers

Promotional knickknacks are a weighty matter

In Dearborn, the mantra is "One Ford." At General Motors, it seems to be "One Key." And in its recall-induced quest to strip customers' key chains of any dangling tchotchkes that could help jostle or bump the ignition out of position, GM has raised the alarm about something many dealerships have been giving customers for decades: promotional key tags. "GM is requesting that dealers no longer place rigid items, such as leather or plastic tags, on vehicle key rings," the automaker wrote in an "urgent" notice that it said applies to all vehicles.
Source: Automotive News
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Ford CEO takes ALS Ice Bucket Challenge

Ford Motor Co. CEO Mark Fields got a little wet for a good cause on Friday. The automaker's top executive took the popular ALS Ice Bucket Challenge, a social media phenomenon that is raising money and awareness to help fight amyotrophic lateral sclerosis, also known as Lou Gehrig's Disease. As part of the challenge, participants are supposed to donate money as well as videotape themselves dumping a bucket of ice water over their heads. They're then supposed to challenge other people to do the same. Fields was challenged by Tom Garfinkel, CEO of the Miami Dolphins, as well as Ford of Londonberry, an auto dealer in New Hampshire.
Source: The Detroit News
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Quotable

"The Times' editorial … is an unfair and unfounded attempt to portray the auto lending industry as a hotbed of deceptive practices and a harbinger of insolvency that could lead to another recession. Nothing could be further from the truth. Auto loan defaults are at historic lows (less than 1% in June)."

   
-- NADA President Peter Welch, in a rebuttal to the New York Times editorial on auto lending, F&I and Showroom, Aug. 14

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