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Inside this issue
NADA Chairman: Keep Automotive Retailing and Financing Competitive for Car Buyers
Fiat Says Merger with Chrysler Effective Oct. 12
Claims for Compensation From Faulty GM Ignition Switch Rise to 1,130
Mexico Auto Output, Exports Rise in September
AAA: Hands-Free Technology Distracts Drivers
U.S. Opens Steering Probe into 938,000 Ford Cars
Marine Gets Truck Back After Car Dealer Steps Up to Make Repairs
Click here for more auto industry news at NADAFrontPage.com. .
Top Stories
NADA Chairman: Keep Automotive Retailing and Financing Competitive for Car Buyers


NADA Chairman Forrest McConnell delivers remarks today at an event hosted by the Automotive Press Association in Detroit.

In an annual speech to the Automotive Press Association, NADA offered a solution to address the CFPB's fair credit concerns while preserving the robust competition for car buyers in indirect auto lending.
 
Competition in automotive retailing is the cornerstone of the franchised new-car dealer network, which benefits both car buyers and automakers, said NADA Chairman Forrest McConnell. “Competing with the dealer down the street or on the Internet benefits car buyers across the nation,” McConnell said today in remarks to the Automotive Press Association in Detroit. Dealers compete fiercely against each other on vehicle pricing, financing and service which reduces costs for consumers, he said.
 
As a percentage of total sales in the new-car, used-car and service/parts departments, net pretax profit at new-car dealerships was just 2.2 percent in 2013. “Our manufacturers benefit from a high return on capital in making vehicles, as opposed to the low margin of selling them, because dealers bear the cost and risks of these investments—at virtually no cost to the manufacturer,” he said.
 
McConnell, a Honda/Acura dealer from Montgomery, Ala., said there's a simple reason why manufacturers use dealers to sell new cars. “The franchised dealer network is the most competitive, the most cost-effective and most pro-consumer model for buying and selling new cars and trucks,” he said. “If manufacturers sold directly to customers, there would be zero competition in pricing vehicles, parts and service. Car buyers would be stuck paying the full sticker price—because there would be no ‘same brand dealership' to shop and compare prices.”
 
McConnell added that dealer-assisted financing, which is optional, increases competition for car buyers, and the retail finance rate offered by dealers is often more competitive than a bank or credit union. “We work with multiple lenders who compete for the dealers' business by offering us low financing rates,” he said. “The bottom line is this: dealer-assisted financing provides car buyers with the ability to get a discounted auto rate from the dealer. And low rates mean lower car payments for our customers. But the government is trying to take away a customer's right to get that discount.”
 
The controversy with the CFPB has been ongoing since March 2013 when the agency issued its ‘guidance’ on indirect auto lending, which took the wrong direction by attempting to eliminate the flexibility of dealers to discount financing rates offered to their customers by pressuring lenders to switch to a flat fee compensation system.
 
“We can all agree on one thing: we are all against discrimination. There's no room for it in this business or any other business. But what we can't agree on is the CFPB's insistence on a flat fee model—which eliminates a customer's right to get a discount,” McConnell said. “Right now, dealers are incentivized to select the lender that offers us the lowest available rate. The current system works because it forces banks to compete and offer dealers low rates to get their business. Next, dealers have to discount those rates to beat the competition or meet a customer's budget. Those two competitive factors drive rates lower for our customers.
 
“What happens to customers if the current system changes to flat fees,” McConnell asked? “Lenders will want to pay higher flats to get business. Not lower interest rates. That would give dealers the incentive to select the lender that offers the highest flat fee.” That doesn't help car buyers save money, he added.
 
Last January, NADA developed an optional Fair Credit Compliance Policy and Program for dealerships, which was released in partnership with the National Association of Minority Automobile Dealers and the American International Automobile Dealers Association. “We've come up with a solution to address all the risks the CFPB talks about—a dealer following the program sets a standard starting point for dealer reserve,” McConnell said. “This gives a dealer who adopts the program the ability to discount the finance rate when there is a legitimate business reason—like helping a customer fit a monthly payment plan into his or her budget.”
 
Since March 2013, the industry—from dealers to lenders—and Congress have worked to bring greater transparency and accountability to the CFPB. “There haven't been many issues lately where members of Congress have seen eye to eye,” he added. “But the CFPB's flawed position is one of them.” Last month, Reps. Ed Perlmutter (D-Colo.) and Marlin Stutzman (R-Ind.) introduced H.R. 5403, a bipartisan bill to nullify the CFPB's auto lending ‘guidance.’ So far, 69 Republicans and 40 Democrats in the U.S. House of Representatives support the dealer's ability to discount the rate for our customers, he said.
Source: NADA Public Affairs
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Fiat Says Merger with Chrysler Effective Oct. 12

Fiat said [Tuesday] that the merger with Chrysler will be effective as of Sunday, Oct. 12, after all conditions for the tie-up to go through are met. Fiat said no creditors had opposed the merger and the amount of money to be paid to shareholders that chose to sell their shares had not exceeded a 500 million euro ($631 million) cap set by the company. Shares in the new holding Fiat Chrysler Automobiles will start trading on the New York Stock Exchange on Monday, Oct. 13, Fiat said in a statement.
Source: Reuters
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Claims for Compensation From Faulty GM Ignition Switch Rise to 1,130

The number of claims of injury and death linked to a faulty ignition switch in General Motors cars rose 30 percent last week to 1,130, according to a report on Monday from the lawyer overseeing a program set up to compensate accident victims. Since Aug. 1, claims related to 24 deaths and 16 injuries have been deemed eligible for compensation by the program, which is being overseen by lawyer Kenneth Feinberg. The number of eligible deaths is up one from last week.
Source: Reuters

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Mexico Auto Output, Exports Rise in September

Mexican auto production and exports rose in September compared with the same month last year, the Mexican Auto Industry Association said on Monday. Mexico auto output was up 10.7 percent in September to reach 267,674 vehicles, while shipments grew 2 percent to 220,239 units, AMIA said.
Source: Reuters
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AAA: Hands-Free Technology Distracts Drivers

The AAA Foundation for Traffic Safety says new research released Tuesday shows hands-free systems such as Apple's Siri, GM's MyLink and Ford's Sync pose serious distractions to drivers. The new hands-free technologies, which are designed to be less distracting, may actually have the opposite effect, according to the AAA Foundation, the research arm of the motoring and travel organization. But it says it is possible to design hands-free technologies that keep drivers' attention more focused on the road. To assess "real-world" impact, AAA compared changing radio stations manually and voice-dialing to the voice-activated systems found in six automakers' vehicles. It found most systems were significantly more distracting.
Source: The Detroit News
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U.S. Opens Steering Probe into 938,000 Ford Cars

The National Highway Traffic Safety Administration said Monday it is opening an investigation into 938,000 Ford cars after reviewing more than 500 steering complaints and reports of four crashes. NHTSA said it is opening a preliminary investigation into the 2010-12 Ford Fusion, Mercury Milan and Lincoln MKZ cars with rack mounted Electric Power Assisted Steering.
Source: The Detroit News
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Marine Gets Truck Back After Car Dealer Steps Up to Make Repairs

Three months ago Marine Corps veteran Mitch Akin couldn't even start the engine on his prize Dodge Ram 2500 turbo charged pickup. The entire truck had been ripped apart and trashed by thieves who stole it and then abandoned it. After risking his life fighting for our country in Afghanistan, this was Akin's coming home present, his dream machine, and now it was destroyed. Akin's father called Local 2 News for help, and that's when Local 2 started working to get Akin's truck completely rebuilt like new, calling car dealers and sending out emails to find someone willing to do the job and donate all the work. That's when James Davis, the president of Gulfgate Dodge Chrysler Jeep, was found. Davis could not wait to help, and he immediately put together a team of more than 25 men from several different companies, including his own dealership, to do the work absolutely free.
Source: Click2Houston.com
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Quotable

"The franchised dealer network is the most competitive, the most cost-effective and most pro-consumer model for buying and selling new cars and trucks."

   
-- NADA Chairman Forrest McConnell, in remarks today to the Automotive Press Association in Detroit, NADAFrontPage.com, Oct. 7

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