Automotive News - October 27, 2008 - (Page 34) 34 • OCTOBER 27, 2008 FRANCHISE States would decide dealers’ treatment continued from Page 1 Franchise players The U.S. retail networks operated by potential merger partners GM and Chrysler have lots of franchises and low sales per franchise. Franchises Jan. 1 2008 Sales per franchise Sept. 2008 brand — as opposed to going bankrupt — dealers have more rights. Dealers’ rights Jim Moors, a franchise attorney with the National Automobile Dealers Association, says franchise laws in several states address the discontinuation of brands. Such laws, Charapp says, “generally do not require a manufacturer to replace a brand that’s discontinued. That is the issue we had with both Oldsmobile and Plymouth.” But many state laws require the company to buy back from dealers their new vehicles, parts and accessories, and special tools and signs, Charapp says. GM and Chrysler franchise agreements with dealers include similar provisions, he adds. Some states, such as Virginia, require automakers that discontinue a brand to maintain parts inventories so dealerships can continue to make repairs, Charapp says. “good cause,” Charapp says. The laws generally require formal state proceedings when franchises are terminated, he says. At the same time, Charapp notes: “Bankruptcy law will trump state dealer franchise protection statutes. There is a legal basis in bankruptcy for a franchisor to turn its back on its dealer agreement obligations.” When GM bought most of Daewoo’s assets in 2000, the Korean automaker already had filed for bankruptcy. GM’s purchase did not include Daewoo’s U.S. distribution network. Daewoo’s 501 U.S. dealers were left without product. GM renamed Daewoo models and sold them at U.S. Chevrolet and Suzuki Chrysler Division Dodge Jeep Chrysler LLC Buick Cadillac Chevrolet GMC Hummer Pontiac Saturn GM 2,788 2,765 2,708 8,261 2,705 1,455 3,976 2,196 171 2,712 435 13,650 8 23 8 13 5 9 43 17 13 9 43 21 When a brand dies, automakers have adopted different compensation policies for dealers. GM paid Oldsmobile dealers when it eliminated that brand. Chrysler did not provide financial aid to dealers when it killed Plymouth. But Charapp notes that “nearly every Plymouth dealer was also a Chrysler dealer at the time of termination, so they had products made by that manufacturer to sell.” Likely casualties Still, says Dan Goldberg, a Boston lawyer who represents automakers, most state franchise laws recognize that automakers must be allowed to adapt to changes in the marketplace. “The purpose of the laws is not to freeze in place existing dealer arrangements and locations as they existed at the time the statutes were enacted,” Goldberg says. Some Chrysler LLC dealers say the Chrysler, Dodge and Jeep brands are Source: Automotive News Data Center, company sources dealerships. When an automaker eliminates a strong enough to survive a merger with GM. Others dealers are worried. “I’m very nervous,” says Brian Hamilton, who sells GM and Chrysler brands in Kearney, Neb. “There’s not much you can do when someone goes out of business. We’d all be faced with pretty major losses.” Carlos Hoz de Vila, CEO of Condor Auto Group, concedes that some dealers would go out of business if GM and Chrysler merge. Condor, of suburban Philadelphia, owns eight dealerships, two of which sell Chrysler brands. Hoz de Vila says a GM-Chrysler merger would warrant federal oversight. “The government should make sure that the motives are pure,” he says. “The merger should allow the companies to build better-quality product and serve the dealers better, not just allow GM to grab cash off Chrysler’s balance sheet.” Adds Hoz de Vila: “If the merger results in a stronger company, then it could be a positive.” c VIRGINIA Dealers turn to local credit unions continued from Page 1 Lender group: Fed rules too tight for auto companies Harry Stoffer hstoffer@crain.com three-day sales event, mainly by communicating with thousands of their members. Wright estimates that the four dealerships likely will pony up only $3,000 to $4,000 apiece for various costs. During the sale, credit union representatives will be on hand at Wright’s Gateway Hyundai in suburban Richmond, at Priority Toyota next door, at Colonial Honda next door and at Heritage Chevrolet two miles away. Colonial Honda is owned by Carter Myers III, past chairman of the National Automobile Dealers Association. Wright says the point is simply to get customers financed. Dealerships across the country are reporting a clampdown on lending by some of their traditional finance sources. But for members, credit unions continue to offer loan rates that typically are lower than the offerings of large private banks. Top-shelf customers who come into Wright’s year-old Hyundai store still can qualify for attractive captive finance programs such as Hyundai Motor Finance Co.’s current 0 percent, 36-month loan offer on the Sonata. Customers who don’t qualify for that might be picked up by Bank of America, whose best rate at the moment is running around 5.7 percent for 48 months. Through a credit union, the same low-risk customer is looking at a loan rate of about 4.5 percent now, Wright reports. JAY PAUL The credit crunch led four suburban Richmond, Va., dealerships to collaborate on a sales event in which local credit unions will handle much of the marketing. Dealership representatives are, from left, Jay Burchell of Heritage Chevrolet, Mike Lorton of Colonial Honda, Mark Wright of Gateway Hyundai and Dave Perno of Priority Toyota. cent market share of vehicle loans in July 2008, according to Callahan & Associates, a credit union research and consulting form. That’s up from 13.1 percent in February. It remains a delicate proposition for the credit unions. Wright, a father of two who entered the car business after turning down a job with RitzCarlton, spent most of the past week on the phone with credit union managers working through unfamiliar proposals. One group — the giant, state-affiliated Virginia Credit Union — initially expressed enthusiasm for the event. But it chose not to participate after deciding it might appear to be endorsing a particular automaker. A marketing manager with another potential participant, the militarybase Fort Lee Federal Credit Union, declined to discuss its participation because details are not final. “We see this as a great opportunity,” says Kelley Parks, vice president of marketing and business development for Richmond’s 30,000-member Call Federal Credit Union. “It’s exciting to us to see car dealers collaborating like this. It’s great to be collaborating with them. We have a lot of money to lend.” Wright acknowledges that the credit union idea remains untested and still might fall through. “At least we’re looking for solutions,” he says. Perno called Wright to propose that the neighboring stores collectively explore ways to reduce operating costs. Their first meeting, with representatives from the Hyundai, Toyota, Honda and Chevy store sitting in the same room, “evolved into a lot of good ideas,” Perno says. The competitors resolved to have a single company mow their lawns, a shared service for snow removal and a common janitorial service. They also proposed a common security company. Myers owns Colonial Honda next door, as well an interest in the Hyundai and Chevrolet stores. But those stores, as well as the Toyota dealership, remain independent. “We’re all competitive guys,” Wright says, “but we’re playing in the same sandbox. We need to learn how to cooperate on a few things.” c Treading delicately Why haven’t dealerships flocked to credit unions before now? Dealers typically mark up loans from captive finance companies or banks. But dealers don’t add their own profit margin onto the credit union’s rates. Also, credit unions normally don’t endorse one auto brand over another. But they are beginning to take a new interest in auto loans. Credit unions collectively held a 15.8 per- Brainstorming Wright runs what he calls a laidback store. Employees typically wear khakis and a Hyundai company shirt. He quickly credits his neighbor and competitor, Dave Perno, general manager of Priority Toyota, with initiating the conversation that led to the credit union idea. WASHINGTON — Starting Monday, the Federal Reserve will help financial institutions and big companies raise money for daily operations by funding purchases of short-term notes called commercial paper. But a key association of financial companies argues that the program lacks adequate flexibility to benefit all worthy companies that could use the help — potentially including some automakers and auto lenders. The American Financial Services Association wants the Federal Reserve to ease some restrictions in the new program. The main hurdle is a requirement that eligible commercial paper achieve a prescribed credit rating, the organization says. Ford Motor Credit Co. spokeswoman Brenda Hines said Ford Credit has registered for the program. It “is available for us to use if we choose to do so,” Hines said. GMAC Financial Services issues very little unsecured commercial paper, said spokeswoman Gina Proia. But GMAC has capacity for $10 billion in asset-backed commercial paper that would qualify for the Fed program, Proia said. Chrysler Financial issues commercial paper and favors “any tool that addresses automotive credit liquidity,” the company said Friday. Among automakers, GM no longer issues commercial paper, said spokeswoman Renee RashidMerem. Ford Motor Co. said it does not use commercial paper. Chrysler LLC would say only that it supports efforts to bring stability to U.S. markets. Bill Himpler, executive vice president of the American Financial Services Association, said he agrees that Fed officials must be “good stewards” for taxpayers. But he argued that the Fed can meet that obligation without cutting out so many fundamentally sound companies from the commercial-paper program. c
Table of Contents Feed for the Digital Edition of Automotive News - October 27, 2008 Chrysler dealers under GM? States would rule Survey: Worried dealers flee GMAC Va. dealers turn to local credit unions Anxiety over Chrysler: Deal or no deal? Ford, GM execs join panels looking at eco-friendly options Big pickups, SUVs gain share Chrysler will cut 4,300 salaried jobs by year end BMW seeks joint vehicle electronics effort Runkle: Give tiny suppliers a chance VW goal: 80% N.A. content for Tenn. plant April Wortham China's BYD plans U.S. hybrids Lucky Icahn lost Lear Mahindra's U.S. launch to get $60 million ad drive Toyota may renew no-interest loans Hesterberg, Thomson will address congress Desperate industry begs feds for help Hyundai dealers want ads to pitch favorable loans Toyota, GM top global r&d spending After Detroit 3 take back design, supplier sitting pretty Germany's Preh supplies F-150 ventilation part Buehler is Volt supplier Freescale: New infotainment chip Are they too big to fail? A goal for GM: Buy back full control of GMAC Tax credit would move domestic cars GMAC loan bonus is a bad idea Take a good look: Toyota is losing its halo What flexibility is and what it isn't Toshiba joins battery battle Personnel Hyundai slows Ala. output of Sonata, Santa Fe Picture this LaNeve: GM marketing budget faces '09 hit Hyundai counts on luxury, hybrid hopes Keogh: Audi belongs with top luxury brands Dealers Court overturns class-action status in Blue Oval suit 2 major lemon-law lawyers lose right to practice in Md. Auctions offer more online for just-in-time dealers Used-truck prices higher in September Lack of used Minis limits certified program Wood trim maker expects to avoid worst of woes VW: U.S. may get Scirocco after all Ford's new F-150 is built for jobs, not jaunts Think of it as GPS for tools Feds look at China-made valves on Ford tires Shareholder value tumbles in 3rd quarter Shareholder value tumbles in 3rd quarter Ford truck marketing exec: Hybrid pickup 'publicity stunt' Survey: Ford Motor reliability improves Chrysler heir: Get back to basics Farley has bright idea to boost auction action Kerkorian speeds away from autos Names familiar? NADA leadership is a family affair Mitsubishi bucks trend on profits New trade debate in the works? Beware the 'vital' deal Automotive News - October 27, 2008 Automotive News - October 27, 2008 - (Page Intro) Automotive News - October 27, 2008 - (Page Bellyband1) Automotive News - October 27, 2008 - (Page Bellyband2) Automotive News - October 27, 2008 - Va. dealers turn to local credit unions (Page 1) Automotive News - October 27, 2008 - Va. dealers turn to local credit unions (Page 2) Automotive News - October 27, 2008 - Chrysler will cut 4,300 salaried jobs by year end (Page 3) Automotive News - October 27, 2008 - VW goal: 80% N.A. content for Tenn. plant April Wortham (Page 4) Automotive News - October 27, 2008 - VW goal: 80% N.A. content for Tenn. plant April Wortham (Page 5) Automotive News - October 27, 2008 - Hesterberg, Thomson will address congress (Page 6) Automotive News - October 27, 2008 - Hesterberg, Thomson will address congress (Page 7) Automotive News - October 27, 2008 - Toyota, GM top global r&d spending (Page 8) Automotive News - October 27, 2008 - Toyota, GM top global r&d spending (Page 9) Automotive News - October 27, 2008 - Freescale: New infotainment chip (Page 10) Automotive News - October 27, 2008 - Freescale: New infotainment chip (Page 11) Automotive News - October 27, 2008 - GMAC loan bonus is a bad idea (Page 12) Automotive News - October 27, 2008 - GMAC loan bonus is a bad idea (Page 13) Automotive News - October 27, 2008 - What flexibility is and what it isn't (Page 14) Automotive News - October 27, 2008 - What flexibility is and what it isn't (Page 15) Automotive News - October 27, 2008 - Hyundai slows Ala. output of Sonata, Santa Fe (Page 16) Automotive News - October 27, 2008 - Picture this (Page 17) Automotive News - October 27, 2008 - Picture this (Page 18) Automotive News - October 27, 2008 - Picture this (Page 19) Automotive News - October 27, 2008 - LaNeve: GM marketing budget faces '09 hit (Page 20) Automotive News - October 27, 2008 - Hyundai counts on luxury, hybrid hopes (Page 21) Automotive News - October 27, 2008 - Keogh: Audi belongs with top luxury brands (Page 22) Automotive News - October 27, 2008 - Keogh: Audi belongs with top luxury brands (Page 23) Automotive News - October 27, 2008 - Dealers (Page 24) Automotive News - October 27, 2008 - 2 major lemon-law lawyers lose right to practice in Md. (Page 25) Automotive News - October 27, 2008 - Lack of used Minis limits certified program (Page 26) Automotive News - October 27, 2008 - Lack of used Minis limits certified program (Page 27) Automotive News - October 27, 2008 - Lack of used Minis limits certified program (Page 28) Automotive News - October 27, 2008 - Lack of used Minis limits certified program (Page 29) Automotive News - October 27, 2008 - Lack of used Minis limits certified program (Page 30) Automotive News - October 27, 2008 - VW: U.S. may get Scirocco after all (Page 31) Automotive News - October 27, 2008 - Feds look at China-made valves on Ford tires (Page 32) Automotive News - October 27, 2008 - Ford truck marketing exec: Hybrid pickup 'publicity stunt' (Page 33) Automotive News - October 27, 2008 - Ford truck marketing exec: Hybrid pickup 'publicity stunt' (Page 34) Automotive News - October 27, 2008 - Survey: Ford Motor reliability improves (Page 35) Automotive News - October 27, 2008 - Survey: Ford Motor reliability improves (Page 36) Automotive News - October 27, 2008 - Survey: Ford Motor reliability improves (Page 37) Automotive News - October 27, 2008 - Beware the 'vital' deal (Page 38) Automotive News - October 27, 2008 - Beware the 'vital' deal (Page 39) Automotive News - October 27, 2008 - Beware the 'vital' deal (Page 40)
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