Bailout Watch 205: GM Blackmails Dealers

Edward Niedermeyer
by Edward Niedermeyer

Detroit’s slow-mo meltdown has been rife with tipping points for years now. As bad decisions piled upon bad luck, we’ve seen the signs become increasingly ominous. The light at the end of the tunnel has become so faint now that each new misstep comes hard on the heels of the previous one, each taking on ever more existential significance. Perhaps though, we have reached a new low in the news coming out of GM today, as Automotive News [sub] reports that GM will delay incentive payments of $302.4m to its dealers for two weeks. If this decision was made based on GM’s liquidity crisis, it means that GM can’t come up with $300m until December 11: A stuffed stocking of not good. On the other hand, if it’s another twisted ploy to generate political support for a bailout, it’s some inspired stuff. Based on the letter (after the jump) sent by GM VP of Marketing Mark LaNeve, it’s looking like a little of both. After all, blackmail has always been a crime of desperation.

To All Dealers:

I am writing to you to update you on changes we are going to implement with regard to the incentive payment schedule.

As I discussed in the IDL last week, one of the biggest issues facing General Motors is our liquidity. That is the cash we have on hand to pay for our regular operating expenses.

In this cash crunch, we have examined every aspect of our business in an effort to improve cash flow, including our relationships with all of our key stakeholders, like suppliers, agencies, employees and dealers. In this regard, we are implementing minor changes to incentive payment timing. So, what does this mean for you? Basically we are delaying the payment of the incentives by two weeks. Here is the new schedule that will be in effect until further notice:

· Incentive applications previously scheduled to be paid on November 28th and December 4th will be delayed to December 11th and December 18th respectively. Please see the attached payment schedule.

· Weekly incentive payments will continue thereafter reflecting one week of dealer application activity. On average, payments will be made approximately 2 – 3 weeks after a valid dealer application has been processed by GM. Effectively this is a 2 week delay from the current schedule.

· As a result of this retiming you will not receive any incentive payments on November 28th and December 4th.

This liquidity crisis has an obvious effect on all of us. As you are aware we are asking the federal government for some temporary relief. I need your continued help in talking to Congress. There are three things you need to ask your congressional delegation for:

· First, ask the government officials to approve a new $25 billion loan package to help us deal with our current liquidity crisis.

· Second, while the rules for the distinctly separate and already approved $25 billion loan package for investments in technology and enhanced fuel efficiency have been issued, we’d like to see that program move as fast as possible, so we need to encourage the government to minimize red tape and act on loan applications as quickly as they can.

· Third, the automotive industry needs some additional government support to stimulate retail sales, like making interest on car loans tax deductible, etc.

We’ve set up a website that will assist you in making your voice heard in Congress and to help spread the message. Please visit If you have not already done so, please call and e-mail your congressional representative.

This is a critical time for our industry, your dealership, and General Motors. Please continue to do what you do best, selling vehicles one customer at a time. Please make every effort to integrate your promotions with the recently announced Red Tag sales event.

Together we can work through this crisis. As always, thank you for all of your hard work and effort.

Good Selling.

Mark R. LaNeve

Edward Niedermeyer
Edward Niedermeyer

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  • OldandSlow OldandSlow on Nov 18, 2008

    In reply to the topic - My guess is that the auto industry won't get a dime out of this lame duck session of Congress.

  • T T on Nov 18, 2008

    Isn't it also true that of the two $25B amounts being offered (one approved, one sought) the former is to upgrade plants and is qualified for certain plants that includes GM, Ford, Chrysler, and (I believe) some Honda or Toyota plants that meet the requirement. While the latter is a new request from one (GM) or more domestic manufacturers. The second $25B can't be solely for GM, though, right? Do we know what share of each amount GM would be seeking? Is there any indication which other manufacturers will seek funds from the first pool? Do we have any indication which auto makers will seek funds from the second pool? This is a constantly shifting story, and I think it bears more investigation to get to the truth.

  • Carson D I hadn't seen a second-generation Courier with a Mazda engine before. I've seen a few with Ford engines. There was one at the Cox Driving Range that they used to collect golf balls. Golf would definitely be more entertaining to watch if they used moving targets.
  • Tassos ooops, Tim, you missed this one. Would make a lovely "Tim's used car of the day". It satisfies all the prerequisites except the wildly overpriced bit.
  • Tassos ASTON AND BOND BY A MILE. While Aston Martin sells a TINY FRACTION of what even the rarified Ferrari and Lambo sell, it is unbelievably well known. Credit the idiotic, but hugely successful and sometimes entertaining James Bond Movies.
  • Tassos 1988? Too young for me. It's all yours, Tim... BAHAHAHAHA!
  • Gray Awesome. Love these. But, if I had the money for a Fox-body, there is a clean '84 GT 350 here for little more than half the price.