Automotive News - November 3, 2008 - (Page 37)

NOVEMBER 3, 2008 • 37 Dealers squawk as GM ends used-car spiff Jamie LaReau jlareau@crain.com DETROIT — For the first time in years, General Motors is pulling the plug early on a certified used-car financing program, a GM spokesman confirmed Friday, Oct. 31. The company is doing so because of a lack of credit funding, said spokesman John McDonald. GM had announced a financing incentive program through GMAC Financial Services that would start Oct. 1 and run through Jan. 5. The program offered 3.9 percent consumer loans for 60 months on all used models of the Chevrolet Impala and Pontiac G6 sedans and Chevrolet Silverado and GMC Sierra trucks. But on Oct. 17, GM sent a notice that it would end the program Nov. 3, McDonald said. As a result, many GM dealers worry they won’t be able to move the inventory they built with the understanding that the program would run through Jan. 5. “It’s a tough situation for everybody,” McDonald said. “It really shows how pervasive the impact is for this credit crisis. If there’s no money to do this stuff, there’s no money to do this stuff.” McDonald said GM is studying future incentive programs. He said GM plans a different certified used-car incentive on Tuesday, Nov. 4, but he declined to give details. “Obviously, the dealers are our customers,” McDonald said. “We want them to be successful, but you can’t get to the point where you’re putting yourself in financial difficulty.” ‘Bait and switch’ One GM dealer in suburban Detroit said the Impala, G6, Silverado and Sierra make up 50 percent of his GM used inventory. He called GM’s move a “bait and switch.” “The market’s going to fall on those cars be- cause they’re no longer a featured vehicle, and we bought them to supply them through the end of the year. Now what?” he asked. At Thompson Sales Co. (Buick-Pontiac-GMCCadillac-Saab) in Springfield, Mo., the four nameplates make up about 18 percent of the GM used vehicles there. Owner Lynn Thompson bought the vehicles at auction for about $200 or $300 more than for what they might normally sell. That’s because their price rose when GM came out with the incentive program. “We pay more at auction for them,” Thompson said. “Then they drop the program. We’ll sell them, but it’ll be a much slimmer margin than it was before.” of these vehicles in stock. Still, one employee there, who asked not to be identified, said he has never seen GMAC cancel a program this early. He said he takes it as a sign of the severity of GM’s financial situation. “They haven’t given us a clue as to what they were going to do,” the employee said. “Anything GM does doesn’t surprise me right now. I hate to say that. We’re in a survival mode right now; everyone is.” ‘That’s a concern for me’ Said Thompson: “This is the first time that I can remember they stopped a plan before they said they would, and I just hope they’re coming out with a better plan. I’m surprised they announced it so early. That’s a concern for me.” He remains optimistic that GM will offer dealers either an early Red Tag program or some other incentive, he said, adding: “I don’t think they’ll leave us high and dry.” c Dealers concerned for GM At neighboring Springfield, Mo., dealership, Reliable Chevrolet, managers kept their usedvehicle inventory low, so they do not have a lot PLAN Mulally’s priority: Launch N.A. Fiesta continued from Page 1 Nissan, Mitsubishi, Mazda recast fiscal 2009 forecasts Hans Greimel hgreimel@crain.com down right now,” Mulally told Automotive News last week. “The most important thing we can do is have a full complement of small and medium-sized cars and utilities that complement our larger vehicles.” Think small His priority now is to launch the subcompact Ford Fiesta in North America in 2010, Mulally said. An array of subcompact, or B-segment, and Focus-sized compact cars will follow. Mulally said he even might bring the Ford Ka microcar to the United States. A redesigned Ka, which is smaller than the Fiesta, goes on sale in Europe early next year. Mulally said he hasn’t set a deadline for his decision on a U.S. Ka. Ford is even more committed to its small-car strategy than when it adjusted production in July, Mulally said. Company leaders think customers will demand fuel efficiency in their vehicles. “It will be really interesting to see how far down we go in size,” Mulally said. But the Ford CEO must find a way to achieve a decent profit margin on Ford last week released this photo of the 2010 Fusion Sport, part of CEO Alan Mulally’s car strategy. small cars. It will be tough to replace the $8,000 to $10,000-plus profit margins on big pickups and SUVs. “It takes a while to fill in that loss of revenue on the larger vehicles with the full portfolio of cars,” Mulally said. “But over time, our plan is to make money on them and make a reasonable return.” had $26.6 billion in cash at the end of June, down $8 billion during the first six months of 2008. Ford can tap an additional $11.6 billion in credit lines. Mulally doesn’t foresee industry sales rebounding in 2009, and he won’t say when Ford will return to profitability. But with his cash cushion, Mulally is betting Ford can make it through the downturn as an independent company. This year, Ford rejected merger overtures from GM and Chrysler. Mulally said he remains focused on integrating Ford’s global operations. He explained: The “most important merger that we (can) do is inside Ford.” c TOKYO — Three Japanese automakers last week slashed their outlooks for the current fiscal year, which ends March 31. Nissan Motor Co. said it will cut output and its work force to bring inventory in line with tumbling U.S. demand. In an earnings report last week, Nissan now expects operating profit to plunge 65.9 percent to $2.62 billion for the fiscal year. Meanwhile, Mitsubishi Motors Corp. returned to profit in the fiscal first half, but plummeting sales in the United States led the carmaker to trim its full-year earnings outlook. Mitsubishi now expects operating profit to fall to $471.7 million in the fiscal year, worse than its earlier forecast of $566.0 million. North America volume is seen sliding 17.5 percent to 132,000 vehicles in the current fiscal year. Mazda CEO Hisakazu Imaki: Costs will be trimmed to slow production in Japan. Finally, Mazda Motor Corp. now expects operating profit of $833.3 million for the fiscal year. The new goal represents a 44.5 percent plunge from last year. Mazda CEO Hisakazu Imaki blamed the revisions on the imploding U.S. market. He said Mazda will embark on a cost-cutting campaign in the second half of the fiscal year and reduce production in Japan to ease the pain. c See our Web site for full earnings reports. autonews.com Lean times That’s critical. Through September, Ford’s U.S. light-vehicle sales were down 18.4 percent. Through June 30, the automaker lost $8.6 billion. Ford will announce third-quarter results Friday; more losses are expected. While generally viewed to be in better shape than General Motors or Chrysler LLC, Ford is burning cash. It HEARD 4 bidders aim to rebuild stores continued from Page 8 Ford Credit seeks to tap $700 billion package Amy Wilson awilson@crain.com DETROIT — Ford Motor Co. wants to share in the $700 billion bailout package approved by Congress last month. CEO Alan Mulally acknowledged that Ford is talking to officials in Washington about whether Ford Motor Credit Co. could be eligible for assistance under the legislation. “I think that would be a really positive thing,” Mulally told Automotive News. “I think it would help the economy and help Ford. Yeah, absolutely.” One roadblock: Only banks qualify outright for assistance, and Ford Credit is not a bank. So Ford is looking into whether an industrial bank charter would give the company more standing, Mulally said. Ford has applied for an industrial bank charter from Utah, said Brenda Hines, a Ford Credit spokeswoman. Ford applied in 2006 and resubmitted its application in February after a moratorium on industrial bank approvals expired. An industrial bank, also called an industrial loan corporation, is a financial institution that loans money and can be owned by nonfinancial institutions. Industrial banks are insured by the Federal Deposit Insurance Corp. Ford intends to pursue the industrial bank charter regardless of whether it helps the company qualify for assistance from the $700 billion pool, Hines said. The bank would operate as a subsidiary of Ford Credit. Its deposits would come from brokered certificates of deposit, giving it a lower cost of funds, she said. Ford Credit could provide loans for auto dealers and other customers. Said Hines: “It’s part of our longtime strategy of diversifying our funding sources.” c Florida store, Steve Hurley, went to a high school 10 miles from the store. Hurley said he hopes to keep the Heard store’s business, parts, body shop and service staff but will hire new salespeople who share Durant’s sales approach. Carl Black Auto Group — which owns five new-vehicle dealerships in Florida, Tennessee and Georgia — has bid to buy Bill Heard Enterprises’ store in Kennesaw, Ga., where it has one GM store. Neither Black nor company President Mike Bowsher could be reached for comment. Mac Haik, who last week submitted a bid for Bill Heard Chevrolet in Sugar Land, Texas, knows what it’s like to have a bad experience at a dealership. The former college football AllAmerican and Houston Oilers wide receiver opened his first dealership in 1980 after what he has described as a “horrible” car-buying experience. “I thought, This is ridiculous. It seems like there’s got to be a better way,” Haik was quoted as saying in an April 2006 newsletter of the Houston Automobile Dealers Association. Haik, who owns five new-car dealerships in Texas, declined to talk with Automotive News about his bid for the Sugar Land store. The dealership holds the record for most complaints against a dealership ever received by the Better Business Bureau of Greater http://www.autonews.com

Table of Contents Feed for the Digital Edition of Automotive News - November 3, 2008

Credit? Come and get it, industry groups say GM's product delays signal dire health Ford sticks with small-car plans Mitsubishi CEO: Let's halt Galant production in U.S. A dealer â and his reputation â on the ballot Help vehicles shed pounds American Axle posts loss UAW hires bailout adviser Ford to spend $200 million to upgrade 2 Ky. plants No off-lease cars? Certified will find others Arlena Sawyers China's stock market plunge has spooked car shoppers Advantage, Ford: Mulally likes owning Ford Credit Supplier execs join innovation panel at congress Quietly, Mini seeks 500 drivers to lease electric car for a year Reynolds bolsters document business Winterkorn: Audi needs to build in U.S. The great revenue drop of 2008 Bidders bet they can rebuild Heard 1 size fits all NADA: Give us tax incentives, dealer loan guarantees Campaigns' climate, energy plans hit economic wall Detroit 3 need and deserve U.S. help now Chrysler needs a buyer, but not GM Dealers pay fair share of taxes Washington hurts, not helps, electrics Compressed natural gas is the best fuel New ads aim to raise Suzuki's low profile Suzuki's new ad strategist: This brand has soul Fuel efficiency is coming â it just takes time Electrics edge closer by 2010 Tougher CAFE standards loom R&d chiefs shift gears for an electric future Japan carmakers lead charge into electrics Buffett backs BYD's sketchy plan for U.S. electric car Q&A: BYD envisions 2010 exports to U.S., Europe Girding the power grid for an electric fleet Hype powers plug-in vehicles Coachbuilders see salvation in electric cars Electric vehicles are charging into Europe Expect stop-start's big start to arrive in 2010 Flexibility will help Honda survive the storm Nardelli: Bailout not perfect â but needed Audi goes high-tech to boost service Acura offers quick service to win business Toyota's fashion fan Picture this Hondaâs N.A. operating profit falls 80.6% in quarter Aug. RV shipments fall 44% VW drops hints about car for new Tenn. plant Mexico sales fall 10.7% in September Honda to boost CR-V, end Civic output in Ohio Ford and GM jockey for steel discounts Dealers Ford Credit seeks to tap $700 billion package GM will end a used-car incentive early Nissan, Mitsubishi, Mazda recast fiscal 2009 forecasts Metaldyne to bondholders: Take 30% or Chap. 11 looms Detroit 3 ties hurt profits of dealer groups GM takeover would eviscerate Chrysler ranks, model lineup Mitsubishi plans electric hauler To match Toyota, Nissan offers 0% loans Sticker, sticker at the mall, what's the cheapest of them all? The Versa Waiting is what it's all about, Alfa Buy Chrysler? GM should sell Buick to SAIC Pickups pumped up by pump price plunge Chrysler hybrids, we hardly new ye Ghosn: Your best partner is a president in your pocket Sonic wins, but Mercedes wants last word

Automotive News - November 3, 2008

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