By on December 22, 2008

Well, someone had to do it. Automotive News [sub] reports that the Fed will use its $200b Term Asset-Backed Securities Loan Facility to provide new-car dealers floorplan loans. It’s been understood since its November 25th spawning that TALF would “secure” auto loans, but a Fed FAQ released today reveals that “for TALF purposes, auto loans include retail loans and leases relating to cars, light trucks, or motorcycles and auto dealer floorplan loans.” In news that won’t thrill the small-town dealerships, the minimum TALF loan size is $10m with a three year maturity. Sorry, credit card debt is not eligible. Suzuki Motor Company announced that it would discontinue floorplan financing precisely (if you believe Automotive News [sub]) four minutes after the announcement. Coincidence?

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13 Comments on “Bailout Watch 301: $200b Acronym To Provide Floorplanning...”


  • avatar
    kewells

    well…. I guess they want to reduce the amount of dealers anyway. 10M floorplan minimum will accomplish that.

  • avatar
    kaleun

    First we give the big 2.1 $17b so they can produce cars no one wants to buy, now we give dealers $200 b so they can store those cars no one wants to buy.
    didn’t loans get us into this mess in the first place?
    So, now I legally can go into a dealership with a copy of my last year’s tax statement and pick up the car I already paid for?
    The government should require those loans only to be used for cars that don’t sell well (Chrysler Sebring etc.) to boost the economy, or?
    After growing up in Communism I thought it would never happen in the US that the production of goods would be controlled by the government. I think all the regular people should be required to drive Detroit cars only. At a price set by the UAW. All big-wigs in party, government and secret service are allowed to drive imported cars (since they are important they need reliable cars, and for their service to the country).
    Sometimes I’m not sure if these news are real or just copies from http://www.theonion.com/content/index

  • avatar
    PeteMoran

    @ Edward Niedermeyer

    GMAC not required anymore??

  • avatar
    IOtheworldaliving

    I wonder, Is there a correlation between size and minority status for dealerships?

    btw, Nice picture–my favorite since Cookie Monster a couple weeks back.

  • avatar
    RedStapler

    Commissar Wagoner proclaims our glorious five-year plan for a return to profitability will be a great success!

  • avatar

    The Bailout is gonna happen. That’s why invested in stock.

    Ford doesn’t want its competitors to go out of business because of the obvious ripple effects that would have and right now – even once mighty toyota is having its ass kicked.

    PEOPLE FINALLY WOKE UP AND REALIZED THE POWER OF THE AMERICAN DOLLAR – because we buy all that crap from China, Japan and Korea, if we suddenly STOP SPENDING the entire system unravels.

    It really drives me nuts how these politicians and scum business men think they can make the middle class shoulder the majority of the tax burden, advertise to make us spend the little money we do have, steal whatever money they can steal from us and then think that that system won’t eventually fall apart.

    Its mind numbing.

  • avatar
    porschespeed

    GMAC not required anymore??

    Pete,

    None of these announcements happen in a vacuum, other than that of responsibility, but I digress…

    Everybody knew that if GMAC went under, the money to GM would be basically for naught, since over well over half the dealers would effectively have no product overnight.

    Not 100%, but it sure seems to indicate that GMAC deal did not get tied up. I still do not see Cerberus giving up 51% for nothing – there’s still some back deal. There’s just so much fog it’s hard to see the exact play.

    The 10M minimum will effectively kill off most of the small fry. But leave the multi-line dealers, which, from a chance-of-survival perspective, is a sound plan. More or less.

  • avatar
    Steven Lang

    Not exactly…

    http://www.npr.org/templates/story/story.php?storyId=97481380&ft=1&f=1003

    “the government is worried that consumers don’t have enough access to borrowed money in the form of credit cards, student loans and small-business loans. So it will give money to only the most highly rated, safest parts of the lending economy, which will eventually get money to consumers and small businesses.”

    This sure as hell doesn’t include new car dealers. Most of whom have been losing well into the six figures for this year.

    http://news.prnewswire.com/DisplayReleaseContent.aspx?ACCT=104&STORY=/www/story/11-25-2008/0004932575&EDATE=

    The NADA has been lobbying to use this money for wholesale floorplans… which is useful for many car dealers. Both new and used, smart and dumb. I doubt that it will ever see the light of day though.

    The retail dealership side of the business is shrinking because there are too many fucking cars out there that nobody wants. It’s not just a supply and demand problem. It’s a product problem. If the Feds are dumb enough to finance the activities of a marketplace that is absolutely saturated with mediocre cars, there is no real hope for this country.

    If this is in the scope that the article suggests…. I may just stop investing in cars within the next six months and start investing in overseas currencies. As it stands the car dealers will have to get in line behind the credit card giants, the big box retail establishments, and pretty much everything from academia to high tech and biotech start-up’s. I really can’t see more than 5% of that money going to this all too unworthy cause, which is really just a drop in the proverbial bucket.

    The dealer base is still going to shrink by the thousands. That much I can guarantee.

  • avatar
    jkross22

    Packard should never have gone away. I, John Q. Public, demand that the Feds give money back to Packard AND Tucker and get those companies back up and going. They deserve a bailout.

    So does Circuit City. Where will I ever get my plasma tv if they go under? And what about Mervyn’s? I gotta buy my underwear somewhere!

    And what about Linens n Things? Where will I get my linens n things?

  • avatar
    ronin

    Yayyy! For a minute there the price of cars would have had to come down to a point people could afford them.

    Now GM no longer needs to sell cars, cuz their source of revenue is now people of Soviet Union America.

    But wait, car prices would still have to come down, cuz lots were overflowing and floor plans were crushing dealers.

    But now the dealers don’t need to sell cars anymore either! Yayyy!

    And yayy for congress and the administration for propping up high prices at a point no one is willing to afford or finance! Take that, uppity middle class!

  • avatar
    kaleun

    Not to be questioning things, but isn’t it the issue that people (with not perfect credit rating and income) can’t get credit for a new car? How does the dealer getting a loan to have even more cars on the lot help that? When I see dealerships I’m not under the impression they wouldn’t have enough vehicles already that they need to borrow more money to buy more vehicles.
    And wouldn’t NOT giving them loans thin the herd even faster, especially the ones with low sales (exactly the brand-names that need to die)?
    Oh, right, free market is something like evolution with the survival of the fittest. The creationists can’t let that happen….
    What about the fact that the market has been saturated for years (with cheap loans, like the housing bubble) and there are so many more cars than drivers? Putting more vehicles on dealers’ lots will help that, how?
    I’m not an expert in economy, but neither are the people in charge.

  • avatar
    dougjp

    Its all part of a big shell game, and they think we aren’t smart enough to understand it. It has nothing to do with selling vehicles to end buyers.

    It has everything to do with artificially propping up the auto maker’s financial statements via “sales” of vehicles (delivered and paid for via loans of a different category) to give the illusion that the car makers have a viable business, in order to give the politicians the excuse to throw more money into the pit in a few month’s time. Obviously nobody is buying now and starting up the plants again will be like, “why bother” if there isn’t the means to complete the pyramid scheme.

    This is the stereotype of everything the “why deal with today what you can put off and make worse tomorrow” syndrome they have bought into. And once “in”, its all good money after bad.

  • avatar
    MikeInCanada

    This is a glaring example of the fundamental weakness of the the bailout activity that currently taking place. Government monies can only stimulate supply, but not so much demand.

    So, they throw money at the manufactures – and their sales channels (dealers) because it’s all they can do, quickly that is.

    Yes, it would be more effective (relatively speaking) if buyers were given a government rebate for buying a car, however it would take months for that money to get to through the sales channels and eventually manufactures and suppliers – and they have run out of time.

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