Confirmed: Chrysler Kills "Double Ca$h" for Clunkers Because It Ran Out of Cars
The Wall Street Journal confirms TTAC’s report that Chrysler killed its “Double Ca$h” for clunkers ad campaign because they ran out of popular, qualifying vehicles. “The marketing change comes as Chrysler is struggling with low inventory of its most popular products because of prolonged factory shut-downs and after the success of the government program further depleted stocks at dealerships.” How’s this for a quote? “Unfortunately the problem that we face with Chrysler is the lack of inventory,” ChryCo dealer Bill Rosado told the WSJ. “I can’t believe I’m saying this, I need more Chrysler inventory. My goodness, I’ve got to rehearse that line a couple times.” This gives credibility to Ken Elias’ contention—as yet unreported by the MSM—that Uncle Sam’s entire Cash for Clunkers (a.k.a. C.A.R.S.) program fell afoul of low inventories, rather than limited funds. In other words, the program did not run out of cash. It ran out of cars. Which makes me wonder . . .
Chrysler Drops Its Double Cash for Clunkers Offer. Why?
AdAge reports that Chrysler is deep-sixing it’s “Double Ca$h” for clunkers ad campaign, some thirty days before the ads were due to expire. “We saw the spike in the interest and decided to change our direction,” a Chrysler spokeswoman told Ad Age. Chrysler is now switching to a “summer clearance” ad campaign. Huh? AdAge doesn’t explore the rationale behind the move, but here’s a couple of theories . . .
Whiskey Tango Foxtrot: Cash for Clunkers Website Spies on Your Computer?
TTAC Editor Jeff Puthuff warns:
“Before you play the video of Glenn Beck’s latest loony-tunes conspiracy theory, keep in mind that it’s totally nuts. Here’s the key information debunking it:
1. If you are a consumer visiting cars.gov (the “cash for clunkers” website) the Federal government cannot take control over your computer, nor will it ask permission to do so.
2. The “Terms of Use” statement to which Beck refers in this clip is not from cars.gov. Rather it is a login page for dealer transactions located at esc.gov.
3. The only people who can get login credentials for the esc.gov site are dealers who have been screened and registered for the “cash for clunkers” program.
4. To summarize: the page in question isn’t on cars.gov and can only be used by dealers who have already registered. Consumers won’t be impacted by any of this.”
Tapscott: Cash for Clunkers Will Become Permanent
When it comes to federal teat suckling, Mark Tapscott’s got the inside line. I don’t mean Edmunds and I don’t mean he does it personally; Mark knows a lot about how the beltway boys reach into the taxpayer’s trousers to play pocket pool. So, while Tapscott joins the MSM (and TTAC) in announcing the bogus Cash for Clunkers program’s pre-mature hiatus, he’s out in front re: the C.A.R.S. program’s long term fate. Mark says the bill was secretly written with permanent marker. In other words, the billion dollar (for starters) Cash for Clunker boondoggle’s a keeper. The writer gives five—count ’em five!— reasons for car dealers to be perpetually cheerful about automotive euthanasia . . .
Auto Alliance: Cash for Clunkers is NOT Dead. Yet.
The Alliance of Automobile Manufacturers’ Senior Director of Communications has informed TTAC via email that the CARS (AKA “Cash for Clunkers”) program has NOT been suspended. “All deals concluded before a suspension is announced (if that happens) will be honored,” promises Charles Territo. We’ve also heard that the President is urging Americans NOT to not buy a new car (i.e., go ahead and buy a car) under the program over the weekend.
The Truth About the Feds' Decision to Suspend Cash for Clunkers?
The federal government has put the Cash for Clunkers (a.k.a. C.A.R.S. program) on hold. Supposedly, they’ve run out of money. The MSM is all abuzz with talk of extending the program, allocating more funds and the bummer of a congressional recess (no action ’til after Labor Day). But there’s talk that the number of clunkers hitting car dealers’ lots or the logjam on getting paid isn’t the real reason for putting Cash for Clunkers on hold. Do the math. The program is good for about 200k to 250k rigs, depending on the average rebate qualification. No way there were that many clunkers traded in over the six days since the program went live (official D.O.T. stats after the jump). The real story is that C.A.R.S. over-stimulated the market for new cars (even without a clunker trade); dealers are running out of new vehicles to sell. Or, more to the point, cars that consumers want to buy.
UK: Ford, Vauxhall, Nissan Price Hikes Kill Cash for Clunkers Discount
UK magazine Which? Car reports that automakers in the Land of Hope and Glory have hiked prices, effectively killing the advantages of the country’s cash-for-clunkers (a.k.a. scrappage) scheme. The mag cites three examples: “The price of a mid-range Ford Fiesta has jumped from £11,570 in October 2008 when the car was launched to £13,195 in July 2009—a massive 14% increase.” And “Vauxhall’s new Insignia looked affordable in January 2009, priced at £17,981 but
it has now broken the £20K barrier with a list price of £20,430 in July 2009, also a 14% jump.” And “Another chart-topping supermini, the Nissan Micra, was priced 11% higher in July 2009 (£12,395) than in September 2008 (£11,200), although its equipment has been improved.” Said the actress to the Bishop. Yes, well, the conclusion is inescapable. Ish.
Penske: Saturn Sale Complete By September, Compelling By 2012
Cash-for-Clunkers: $68,923,000 Down, $931,077,000 to Go (Minus Handling Fee)
Cash For Clunkers: Trade-Ins Get Lethal Injection
Three days before launch, the Department of Transportation has finally released the rules [PDF] for car dealers participating in the federal Cash for Clunkers program. Dealers must disable the trade-in’s engine [official powerplant-killing technique after the jump] and then send the clunker to an approved salvage auction or an authorized disposal company, which will kill, crush and destroy (not to mention recycle) the remaining bits. The doc also contains a word to the wise: “The CARS Act specifies that while many parts of the trade-in vehicle are permitted to be removed and sold, in the end the residual vehicle, including the engine block, must be crushed or shredded. Therefore, the trade-in value of the vehicle is not likely to exceed its scrap value. Purchasers should not expect to receive the same trade-in value as they might if the vehicle were to remain on the road.” I wonder how many consumers will make that calculation, or how many dealers will help them in that regard.
Bailout Watch 572: What Will It Take to Get You Out of a Dealership Today?
More testimony over the fate of GM and Chrysler’s culled dealers yesterday revealed possible compromises, although consensus is still elusive. Chrysler VP and Associate General Counsel Lou Ann Van Der Wiele told the House Judiciary Committee (via the NYT) to ignore the pleas of Chrysler’s 789 slashed dealers, explaining that dealer reinstatement would be the end of Chrysler as we’re getting to know it. “Legislation aimed at reversing some of the painful but necessary actions taken during Old Carco’s bankruptcy will simply take Chrysler back to the future that Old Carco faced not long ago—and this time, without the option of a purchaser for substantially all of its assets. Complete liquidation, with all of its dire consequences, could follow.” But then, “complete liquidation with all its dire consequences” could follow if The New Chrysler ate the wrong tuna sandwich.
TTAC Commentator Explains 90-Day Buick LaCrosse Inventory Over-Supply Promise
A TTAC Commentator emailed this about the what did she mean debate re: GM’s proposed inventory levels for the new Buick LaCrosse.:
Just an FYI, but the execs at Chrysler always looked at the dealer stock and total stock separately. Although the cause of this was as you pointed out – due to the sales bank where cars were being parked in overflow lot. The situation got so bad in 2008 that Chrysler had to track “unaccounted for and parked somewhere random” stock separately… but that’s a separate story. Hopefully New GM will never go the route of building thousands of unallocated cars (but I’m sure they’ll find a way). The two metrics were required because the various operating groups could be measured against the gap between dealer/total stock or the efficiency of the dealer stock. It just depended on what was being measured.
GM Plans 15 to 30-day Over-Supply for New Buick LaCrosse
What is Susan Docherty smoking? At the unveiling of the new Buick LaCrosse, the VP of Buick, Pontiac and GMC (which one of these things is not like the other) told Bloomberg that GM aims to keep a “75-day to 90-day” supply of the model on dealer lots. A 60-day supply is considered ideal. But, apparently, a 15 to 30-day overage would be OK, ’cause the supply would be “consistent with similar premium models such as Honda Motor Co.’s Acura TL.” And there we were thinking the LaCrosse was aimed at something in the Lexus portfolio (48-day supply). Docherty’s comparison to the Acura TL is, shall we say, invidious. The TL is a dog, with a 100-day supply on the ground. Also worth noting: Acura dealers have a 62-day supply of RLs and a 32-day supply of the TSX. And if you figure-in Acura’s SUVs, the wayward Honda brand’s total dealer inventory represents a 58-day supply.
Buickman: New GM's Incentives Are Nuts. Again. Still. Only More So. Again.
House Passes Dealer Restoration
Your automotive industry bailout probably just became a little more expensive. Automotive News [sub] reports that the House of Representatives has passed a spending bill including provisions to reinstate dealers culled during GM and Chrysler’s restructuring. The measure now moves to the Senate, where 24 co-sponsors of a similar bill should have little problem rounding up votes (although Senate Majority Leader Harry Reid tells the NYT that the bill is not at “the top of the agenda in the Senate at this time”). The problem is that President Obama has urged congress to dump the reinstatement bill, indicating that he will almost certainly veto it. Meanwhile, a non-legislative “solution” to dealer grievances is still being touted as the ideal solution. Which indicates that GM and Chrysler will have to pay off dealers, a move that would likely cost taxpayers even more money.
Cash4Clunkers (a.k.a. CARS): Bait and Switch?
Last night, I watched a Flood Automotive Group TV ad touting “Cash for Clunkers.” The message was simple: Uncle Sam’s got $1 billion for clunkers. Come get $4500 for your clunker. Not a single word about which vehicles qualify for the money. It didn’t even refer viewers to a website for details— like this ad for C4C “designated” dealer Phil Fitts Ford. A quick ring ’round twenty dealers nationwide shows a definite “reluctance” to discuss the particulars of the CARS program over the phone. “I’m sure your vehicle will qualify,” a Chrysler dealer told me re: my theoretical 2005 Chrysler 300. “Bring it down and we’ll have a look.”
Buickman: New GM's Incentives Are Nuts. Again. Still. Only More So.
Buickman writes:
Today GM marketing announced another $1,000 rebate on old invoice units. To check eligibility the dealer enters the VIN into a website. A dealer who has properly managed his inventory will not have any units in stock that qualify, and is thereby less competitive and penalized. Dealer trades become difficult at best and the customer is confused when told that the car they want is more than the identical car sitting next to it that they don’t want.
Feds Set to Pay Billions to Axed GM and Chrysler Dealers
GM CEO Fritz Henderson: I'm OK, Our Dealers Are OK
New GM Taking Heat for Loyalty Oath
When TTAC received a copy of GM’s letter to dealers “asking” them to lobby against the dealer cull rollback bill, we blogged it as a “ loyalty oath.” More than a few commentators said pish-posh [paraphrasing]; H.R. 2743 was nothing more than an SOP lobbying campaign. The fact that the letter told dealers to cc GM’s National Dealer Council Chairman Duane Paddock left little doubt in our (OK my) mind that New GM’s dealers were being told in no uncertain terms to toe the New company line (i.e. shiv their former colleagues). Automotive News [AN, sub] reports that “General Motors executives have been pressuring individual dealers to sign a statement saying they oppose legislation that would restore terminated dealerships’ rights, according to a U.S. senator, a dealers group and dealer representatives.” Point counterpoint after the jump.
Quote of the Day: Maximum Bob's Capriciousness Edition
House Bill Wants to Reinstate Terminated Dealerships
The House Appropriations Committee has passed a provision in the 2010 financial services spending bill that would require GM and Chrysler to work through state courts—instead of the federal bankruptcy court—to terminate dealerships. Rep. Steven LaTourette, R-Ohio, sponsored the amendment. Ignoring the fact that federal bankruptcy law trumps state bankruptcy law, LaTourette explained, “Car companies have used bankruptcy to run roughshod over state bankruptcy laws.” In reporting this, Automotive News made what has to be the understatement of the month, if not of the year: “GM opposes the House bill.” Ya think???
SAAB Keeps on Slipping, Slipping
To many peoples’ surprise, SAAB was amongst the brands that made the cut when federal bankruptcy judge Robert Gerber cleaved GM in two. Saab was owned by GM Canada. It’s now part of New GM—which is busy negotiating with The Koenigsegg Group to offload the Swedish automaker. Very little has come out of the recent negotiations re: the sale and/or the European Investment Bank (EIB) loan that Saab, GM and Koeningsegg view as a prerequisite for the deal to go down. Meanwhile, last week, SAAB CEO Jan Åke Jonsson declared “we need a cash infusion so we can boost production.” Förlåt?
GM: New GM Dealers Must Sign Loyalty Oath
You may not be familiar with H.R. 2743. The Automobile Dealer Economic Rights Restoration Act of 2009 tells New Chrysler and New GM that they “may not deprive an automobile dealer of its economic rights and shall honor those rights as they existed, for Chrysler LLC dealers, prior to the commencement of the bankruptcy case by Chrysler LLC on April 30, 2009, and for General Motors Corp. dealers, prior to the commencement of the bankruptcy case by General Motors Corp. on June 1, 2009, including the dealer’s rights to recourse under State law.” In other words, it would reverse New ChryCo’s and New GM’s dealer cutbacks—or at least force Uncle Sam to spend taxpayer billions to dump them. The bill is doomed. But that’s not stopping GM from asking its post-cull dealers to show their fealty and help twist the knife into their former colleagues. Text of the “loyalty oath” after the jump. [thanks to you-know-who-you-are]
GM's Inventory Woes
For years GM’s inventory levels have been a major cause for concern. Falling market share lead to overproduction which lead to incentive addiction and falling profitability as GM tried to help its dealers clear their lots. But now that GM has cut production to the bone during its bankruptcy, dealers are beginning to complain to Automotive News [sub] that “right-sizing” is leaving them short on crucial truck and CUV models. GM’s summer shutdown ends on the 13th of July, but a rolling restart means some production won’t come back online until August. In the meantime . . .
Ford Builds CARS
Ford is jumping on the recently-signed Car Allowance Rebate System (a.k.a. Cash for Clunkers) to lure customers into the showroom. Ford’s home page includes a highlighted link to the “ Recycle Your Ride” program. A prospective Ford buyer can enter details about their current vehicle into a drop-down menu system and quickly see if it qualifies for scrappage. They can also discover which Ford models earn the $4500 or $3500 federal voucher against the crusher candidate. So far the Dodge, Chevrolet, Honda and Nissan websites have nothing. Toyota and Volkswagen both offer primitive informational pages, but nothing to match the sophistication of Ford’s effort. You would think the government-owned auto companies would be all over the government-run incentive program. But no. And get this: KBB’s man tells the New York Times that the consumers might be better off without the vouchers . . .
Clunker Plan Enters Regulatory Hell
Or is that regulatory purgatory? Automotive News [sub] screams “Dealers decide who gets discounts,” confirming that America’s very own scrappage scheme is not going to be the quick eco-nomic (geddit?) stimulus the fans predicted. Of course, AN was getting a bit histrionic; the headline was just their wacky way of explaining that NADA is advising dealers to wait for regulations to publicly endorse the deal. The big news is the regulations. Now that the congressional pomp is over, the folks behind Government Motors are finding that the incentive game isn’t always easy. In fact, “It’s complex and not like anything we’ve ever run before,” admits the NHTSA’s Rae Tyson. “We’re starting from scratch.” What could possibly go wrong?
GMAC Rubbing Out Chrysler Dealers
We’ve said it before: both Chrysler and GM have been using GMAC as their “bag man”: withdrawing credit from dealers to kill them without messy political blowback. This despite the Small Business Administration’s new federal loan guarantee program for beleaguered car dealers. The Wall Street Journal reports that where the feds giveth, GMAC is still taking away. “GMAC LLC is suspending wholesale financing for certain Chrysler Group LLC dealers it considers to be too risky to lend to, GMAC and Chrysler confirmed Wednesday. The move could ultimately push more Chrysler dealers out of business and hurt the company’s ability to sell vehicles.” That last bit’s pretty funny—providing you’re not a Chrysler dealer. Anyway, the WSJ runs the numbers or at least tries . . .
Cashforguzzlers.net Cleans Up Its Site
Robert,
Thank you for taking the time to speak with me today. Our website www.cashguzzlers.net has been following the story for months and of course we were concerned when our site was referenced along side of a website that looks like a phishing scam. Our website was created to provide information and clarity to consumers and also to help create a greater awareness of the program to sell more cars.
Your suggestions were very helpful because the goal of the website is to provide good information about the CARS program and to allow consumers to have the choice to have a local dealer contact them about buying a new car. We also have been answering hundreds of emails and calls for free to help consumers and also to help our automotive clients have a successful launch of this program. We are taking the following steps to ensure that the public is aware that our site is a consumer website and not a government website:
DOT Builds CARS
The Department of Transportation (DOT) has fired-up its Cash4Clunkers website. I would have thought the bill’s nickname would have been ideal for the job, but then I’m not a public servant. And so the feds present its brand new website with a new name: CARS (Car Allowance Rebate System). Definitely a case of not leaving well enough alone. To wit: a button on cars.gov asking “How will CARS work”. Apropos of nothing, the site also has a strange FAQ: “I don’t drive an American car but I would like to trade in my old car for a newer, more fuel efficient one. Is this program only for American cars?” Now why would anyone think that? More CARS after the jump.
Hammer Time: Witch Croft?
Cory02 writes:
Something interesting happened with my nearest former Chrysler/Dodge/Jeep dealer (Dave Croft Motors in Collinsville, Illinois): they appear to be selling new Chrysler products again. In the days approaching the “drop-dead” date for the culled dealers, I thought it was odd that they not only kept the large “Chrysler/Dodge/Jeep” signs on their building but also kept them lit at night (I would have personally taken them down out of spite). The owner went through the motions of crying to the media, proclaiming that he would stay in business as a used dealer, and then moved all the new cars to the very back of the lot and put them in neat rows to await pickup and delivery to another dealer after June ninth.
Welcome Back, My Friends . . . NE AG in Car Dealers' Pockets
Nebraska Attacks! NE AG Sues GM for Dealer BS
GM’s dealer cull is taking flak from its flanks, as Nebraska Attorney General Jon Bruning has launched a lawsuit to stay the bankrupt automaker’s quivering, zombie hand [download press release here]. In his letter to other state AGs asking for their support, Bruning is not happy with GM’s request that its dealers waive their rights under state law. Specifically, the bit that says “No law of any state or other jurisdiction [go Puerto Rico!], including any bulk sales law or similar law, shall apply in any way to the transactions contemplated by the 363 Transaction, the MPA, the Motion, or this Order.”
Automobile Dealer Economic Rights Restoration Act of 2009
HR 2743 IH
111th CONGRESS
1st Session
H. R. 2743
To restore the economic rights of automobile dealers, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
June 8, 2009
Mr. MAFFEI (for himself, Mr. KRATOVIL, Mr. VAN HOLLEN, Mr. HOYER, Mr. MCMAHON, Ms. SUTTON, Mr. BARTLETT, Mr. HALL of New York, Mr. POSEY, Mr. HEINRICH, Mr. PAULSEN, Ms. SHEA-PORTER, Mr. MANZULLO, Mr. DEFAZIO, and Mr. DAVIS of Alabama) introduced the following bill; which was referred to the Committee on Financial Services
A BILL
To restore the economic rights of automobile dealers, and for other purposes.
GM Veep LaNeve: "Nearly" 60 GM Dealers Get Reprieve
Hmmm. One wonders about the veracity of LaNeve’s excuse for allowing “nearly” 60 dealers to avoid termination. Who created the “incorrect or inaccurately reported dealership financial data” upon which their second lease on life was—allegedly—based? Given that dealers fighting for their survival wouldn’t under-report their financial data, common sense suggestd GM’s auditors are responsible for the, dare I say it, mistake. So, how did GM screw it up for “nearly” 60 dealers? And surely that boner throws doubt on the rest of the dealer appraisals ( view criteria here). Fuel for the fire for H.R. 2743. In short, GM is still run by the Gang That Couldn’t Shoot Straight. Make the jump for official dealer com from Dr. Death. [Thanks to you-know-who-you-are for the email.]
GM Spokesman Defends Dealer Agreement on TTAC
Robert — If dealers do not sign the wind-down agreements, their sales and service agreement will not be renewed in 2010, and they will not be eligible for GM assistance. However, to date, we have 99% completion of these agreements.
–John McDonald
GM Spokesman
Detroit
However?
GM Dealer Jack Fitzgerald: "What the Task Force Missed"
GM dealer Jack Fitzgerald is not happy about losing some of his franchises. Unlike GM CEO Fritz Henderson, Fitzgerald has set forth a graphic-laden argument (PDF viewable online here) defending his position on the dealer cull. Here’s why Jack reckons we need H.R. 2743, mandating car dealer-protection:
As Congress and the Administration consider various proposals to restore the rights of affected auto dealers, I want to share with you the context for making such decisions. We believe that there was a fundamentally flawed analysis of the domestic auto industry that led to a misguided decision to close numerous dealerships and which will add to the nation’s unemployment misery.
Right now, Congress has before it a legislative proposal that would restore dealers’ economic rights and permit a case-by-case assessment of our dealerships. It is the best way to correct what has occurred and to put our industry on a path to growth and employment opportunities instead of the path of cannibalism, economic dislocation, and a downward spiral for the U.S. auto industry as a whole as consumers react to being abused.
GM's LaNeve to Dealers: "Contact Politicians to Support Dealer Cull"
Why would GM’s VP of sales and marketing for North America expect his company’s [remaining] dealers to contact their elected representatives to support Government Motors’ dealer cull? Times two when you consider that GM is planning on making another round of dealer cuts in the future. “Hey. It’s Mark LaNeve. Thanks for lobbying for our downsizing. Oh, by the way, you’re next.” No, I’m not making this up. Here’s the e-mail, complete with fill-in-the-blanks phone script. [Thanks to you-know-who-you-are.]
GM to Lose 520 More Dealers Through "Attrition"
Underfunded Cash for Clunkers Program Attached to War Spending Bill
The Cash for Clunkers (C4C) program is on its way to Senate approval, as your elected representatives have attached the bill to the $106 billion military spending bill. As the Detroit News reports, the C4C rider sallies forth into legislative battle in the same form as the House version: “Under the program, owners of cars rated at 18 mpg or less in combined highway and city mileage could turn them in for a cash voucher. Buying a new car rated at least 4 mpg higher would earn a $3,500 voucher; a 10 mpg improvement would earn a $4,500 voucher. Pickups would be eligible as long as the new vehicle has a mileage rating of at least 18 mpg and is at least 2 mpg higher than the old vehicle. A new truck rated at least 5 mpg higher than the turned-in vehicle would earn a $4,500 voucher.” One problem: the feds are not planning (i.e., budgeting) for success . . .
Mark LaNeve's Letter to New GM Dealers Re: The New Deal
GM LETTERHEAD
June __, 2009
VIA Federal Express
[DEALER ENTITY CORPORATE NAME]
[DEALER ADDRESS]
To All GM Dealers in the US Who Received a Participation Agreement:
First and foremost, thank you for your continued support and efforts on GM’s behalf in these difficult times. As we indicated when we sent you the June 1, 2009 letter agreement (the “Participation Agreement”), GM wants your dealership to be part of GM’s future and our whole focus is to try to improve, together, the GM dealer network. We are gratified that, through Monday, June 8, we have received ______ signed Participation Agreements, indicating broad dealer support of our objectives for the dealer network.
We have, however, received thoughtful and insightful questions and comments from individual dealers, the NADA and the National Dealer Council (the “NDC”) regarding the Participation Agreement. In response, we have had discussions with the NADA and the NDC. As a result of those discussions, we are writing to provide clarity on several points addressed in the Participation Agreement, as well as to amend certain terms and conditions of the Participation Agreement. Again, our whole focus here is to work with GM dealers to insure that both GM and the dealer body are best positioned to compete in this challenging environment and more importantly in the future.
Download New GM New Dealer Agreement(s) Here
An anonymous reader sent us the before and after agreements sent to GM dealers by the post-bankruptcy corporate mothership. Here’s the controversial post-bankruptcy GM dealer agreement before the National Automobile Dealers Association intervention (and media condemnation). And here’s the controversial post-bankruptcy GM dealer agreement after they faced the dealer revolt. The differences between these two documents are not as profound as their similarities. As Casey Raskob (a.k.a. Speedlaw) points out in a comment below, “In short, Dealer agrees to let GM dictate cars purchased, the buildings they are sold in, and this deal is subject to change at the whim of GM. Now GM dealers know how we normal folks feel signing a car lease.” Make the jump to read the analysis provided by our sharp end tipster.
Saturn Sold to Penske
Bailout Watch 545: GM Dealer Kiss Off Could Cost Feds $1.3 Billion
Chrysler Co-Prez Jim Press and GM CEO Fritz Henderson faced congressional opprobrium this afternoon, as our duly elected representatives lamented the fact that the two zombie automakers are pulling the rug from under the pols’ financial backers—I mean, cutting car dealers. Never mind the bollocks; the bailout bonanza just got a big bigger. Detroit News reports that Henderson told the Senate that “GM could have 3,500-3,800 dealers by the end of next year, a reduction of 2,300-2,600 dealers. He said the reductions were painful but unavoidable.” Applying this morning’s pay-off formula (an average of $500,000 per dealer), that raises the price of the federally-sponsored sayonara to $1.1 billion to $1.3 billion. But don’t worry, ’cause Fritz feels their pain and promises this is the last last time GM will downsize.
Chrysler Dealer Cull Not a Done Deal
Although Judge Gonzalez has so far given Chrysler-Fiat just about everything it has asked for, approval of the dealer cull still isn’t a done deal. The AP reports that: “U.S. Judge Arthur Gonzalez will hear arguments Thursday on the Auburn Hills, Mich.-based automaker’s motion to eliminate the franchises. Chrysler executives are also expected to testify. The motion was expected to be heard Wednesday.” In parallel actions, the Senate is holding hearing today on the very same issue. Again from the AP : “Lawmakers contend the dealership closings will put thousands of people out of work and offer few savings to GM or Chrysler, which have received billions in federal aid as they attempt to restructure and return to profitability.”
GM to Dealers: Upgrade or Die
Automotive News [sub] reports that GM will force its remaining dealers to sign “participation agreements” requiring them to complete any upgrades GM requires. If they don’t sign on the dotted line by mid-June they face having their franchise agreements “yanked” says GM’s Mark LaNeve. “They get put into the old company and get a fairly quick termination, like the Chrysler dealers did,” LaNeve said. “Their sales and service agreement will be rejected and put into the old company.” GM will send out letters to its dealers tonight, according to AN, which will detail the requirements to remain a part of GM’s happy family.
Four Reasons Why 2000+ Domestic Car Dealers Had to Go
Ford: Dealer "Consolidation" Not Cuts
Ford is basking in its “last man standing” status this week as it holds its annual shareholder meeting. Automotive News [sub] reports that Ford expects to break even or turn a profit by 2011 without the help of government bridge loans. So confident are stockholders in the success of Ford’s current strategy that they have voted down reforms that would wrest voting control from Ford family preferred stockholders for the fifth time in as many years. This despite a $14.7 billion loss last year, and a $1.43 billion loss in Q1 of 2009. The good news? Ford has restructured its debt, reached a deal with the UAW’s VEBA fund, raised $1.6 billion in its recent stock offering, and its retail market share has “stabilized.” But there’s still plenty of work to be done.
Dealers Gone Wild
The Wall Street Journal reports that (suprise!) transaction prices on new vehicles have fallen over the last six months. The average transaction price for a new vehicle is now $27,941. Why so slumptastic? With American consumers perceived to be in value shopping mode and the automobile industry in disarray, incentives are starting to pile up on new cars. And it’s not just OEMs offering factory cash. Dealer incentives are up as well. The WSJ cites TrueCar data showing that a full quarter of all 2009-model vehicles are being sold below dealer cost. And those aren’t all coming from troubled Chrysler dealers.
GM: "Scrapping ACDelco Parts Under Warranty Will Cease"
We’ve received this heads-up letter to GM dealers from one our sources on the front line. [Thanks to you-know-who-you-are.]
IMPORTANT BULLETIN: Parts Order Management Update
Paul Copses, Executive Director — GM SPO Sales and Marketing, and Charlie Hyndman, Executive Director– GM SPO Global Warehousing and Operations
05/06/2009
To: All ACDelco Customers, GM Dealers and Saturn Retailers (US, Canada, Mexico, Middle East, Other)
Please be advised that GM Service and Parts Operations have been working on supply plans for all of our suppliers over the past few months to ensure adequate inventories of service parts for our customers. However, in order to carefully manage inventories for our key supplier, Delphi, it is necessary to take some near-term actions.
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