Automotive News - November 17, 2008 - (Page 1) autonews.com ® NOVEMBER 17, 2008 Entire contents © 2008 Crain Communications Inc. All rights reserved. $155/YEAR; $5/COPY AN AUTOMOTIVE NEWS EDITORIAL DETROIT GETS COLD SHOULDER IN D.C. Harry Stoffer hstoffer@crain.com The high cost of GM’s death If Congress thinks a bailout of General Motors is expensive, consider the cost of a GM failure. Let’s be clear. The alternative to government cash for GM is not a dreamy Chapter 11 filing and reorganization that puts dealers and the UAW in their place, ensuring future success. No, even if GM could get debtor-inpossession financing to keep the lights on (which it can’t), Chapter 11 means a collapse of sales and a spiral into a Chapter 7 liquidation. GM’s 100,000 American jobs will die. Health care for a million Americans will be lost or at risk. Hundreds of GM’s 1,300 suppliers will die. Their collapse could take down Ford Motor Co. and Chrysler LLC, perhaps even North American transplants. Dealerships in every county of America will close. The government will face more people unemployed, without health insurance and even without pensions. Criticize Detroit 3 executives all you want. But the issue today is not whether GM should have closed Buick years ago, been tougher with the UAW or supported higher fuel economy standards. In two to four months, GM will run out of cash and turn out the lights. Only government money can prevent that. Every other alternative is fantasy. The $25 billion in loans that Congress approved to partially fund improvements in fuel economy? Irrelevant. Dead automakers do not invest in technology. The collapse of credit has crushed the American car market, dried up revenues for the Detroit 3 and highlighted their weaknesses. Each of the Detroit 3 is in crisis. But Ford, which borrowed big two years ago and thus has more cash today, may skip a bailout and the strings attached. Cerberus, which bought Chrysler last year, doesn’t deserve money. Government cash might help sell Chrysler to a strategic owner. Some Detroit critics want their pound of flesh: Throw the bums out and install a government czar. Treasury Secretary Henry Paulson won’t use any of his $700 billion bank bailout money to help manufacturers. In any case, he’d need a guarantee that a bailout would make Detroit “viable.” Well, not even AIG is insuring guarantees for viability. The taxpayer needs protection and an upside. GM’s top management may need to go. Government-asshareholder deserves a big voice. The Detroit 3 CEOs had better tell Congress this week what sacrifices they are prepared to make. But the stark fact remains: Absent a bailout, GM dies, and with it much of manufacturing in America. Congress needs to do the right thing — now. — Keith Crain and Peter Brown WASHINGTON — They lost this month’s election, badly. But Republicans in the White House and Congress are showing they still have clout. They are providing major — and potentially fatal — opposition to emergency federal aid to the Detroit 3 by year end. Legislation to be introduced this week by majority Democrats in the House and Senate would carve out $25 billion in low-interest bridge loans to General Motors, Ford Motor Co. and Chrysler LLC from the $700 billion bailout package for financial institutions. But last week Treasury Secretary Henry Paulson said he and other administration officials question the companies’ long-term prospects. The Detroit 3 CEOs return to Washington this week to testify they cannot wait for emergency aid until President-elect Barack Obama takes office in January. Senate Banking Committee Chairman Christopher Dodd, D-Conn., said he sees almost no Republican support for the proposed loans. Shelby: ‘A waste’ Sen. Richard Shelby of Alabama, ranking Republican on the Senate Banking Committee, said the loans would be a waste of taxpayer dollars. His state has MercedesBenz, Hyundai and Honda plants, but none from the Detroit 3. “The financial situation facing the Big 3 is not a national problem, but their problem,” Shelby said last week. “I do not support the use of U.S. taxpayer dollars to reward the mismanagement of Detroit-based auto manufacturers in such a way that allows them to continue and compound their ongoing mistakes.” Echoed House Republican Leader John Boehner of Ohio: “Spending billions of additional federal tax dollars with no promises see BAILOUT, Page 34 Golden goose to goose egg Some dealer groups value domestic stores at $0 Donna Harris dharris@crain.com Wagoner seeks aid as GM bleeds Industry in peril Rick Wagoner interview: GM needs liquidity now Page 23 How bailout money would change GM Page 34 Detroit crash could topple transplants Page 8 Crisis talk: A wild mix of opinion Page 38 TIM SHAFFER/REUTERS Huge write-downs of franchise values by public dealership groups show that auto dealers — especially Detroit 3 dealers — are losing value and face a difficult future. AutoNation, the No. 1 publicly traded retail group, wrote down the value of its domestic franchises to zero. “The amount of good will that’s left for the domestic stores is the minimum,” says AutoNation CEO Mike Jackson. But even desirable Japanese and luxury import brands are seeing store values wilt. The public groups say they have stopped paying top dollar for those dealerships. Investment banker Sheldon Sandler cited two recent cases in which public groups backed out of deals to purchase attractively priced, high-volume Honda stores. AutoNation Inc., Group 1 Automotive Inc. and Sonic Automotive Inc. posted third-quarter net losses because of huge charges against earnings. The charges covered the declining value of mostly Detroit 3 franchises, plus expensive store upgrades and see VALUE, Page 33 Chrysler’s plea to dealers: Buy, buy, buy by year end Bradford Wernle bwernle@crain.com For up-to-theminute coverage of the turmoil in the auto industry, go to www.autonews.com. @ DETROIT — Chrysler LLC is pleading with its dealers to buy more cars by year end and is offering $150 million in extra incentives to persuade them. That will boost Chrysler’s fourth-quarter incentive spending to $650 million, Chrysler executives told dealers. In exchange for buying more cars, dealers will get a cut-rate floorplan interest rate next year. Chrysler also will continue cash rewards for dealers who partici- NEWSPAPER pate in a wholesale incentive program. “What we’re doing is fighting for survival,” said an emotional Jim Press, Chrysler’s co-president, during a teleconference with dealers last week. “We recognize it’s a hand-to-hand combat situation where we’re digging for every sale.” He urged dealers to ignore speculation about Chrysler’s fate and to concentrate on selling cars. At the same time, he imsee CHRYSLER, Page 33 http://www.autonews.com http://www.autonews.com
Table of Contents Feed for the Digital Edition of Automotive News - November 17, 2008 Automotive News - November 17, 2008 Automotive News - November 17, 2008 - (Page Intro) Automotive News - November 17, 2008 - (Page BB1) Automotive News - November 17, 2008 - (Page BB2) Automotive News - November 17, 2008 - (Page 1) Automotive News - November 17, 2008 - (Page 2) Automotive News - November 17, 2008 - (Page 3) Automotive News - November 17, 2008 - (Page 4) Automotive News - November 17, 2008 - (Page 5) Automotive News - November 17, 2008 - (Page 6) Automotive News - November 17, 2008 - (Page 7) Automotive News - November 17, 2008 - (Page 8) Automotive News - November 17, 2008 - (Page 9) Automotive News - November 17, 2008 - (Page 10) Automotive News - November 17, 2008 - (Page 11) Automotive News - November 17, 2008 - (Page 12) Automotive News - November 17, 2008 - (Page 13) Automotive News - November 17, 2008 - (Page 14) Automotive News - November 17, 2008 - (Page 14a) Automotive News - November 17, 2008 - (Page 14b) Automotive News - November 17, 2008 - (Page 15) Automotive News - November 17, 2008 - (Page 16) Automotive News - November 17, 2008 - (Page 17) Automotive News - November 17, 2008 - (Page 18) Automotive News - November 17, 2008 - (Page 19) Automotive News - November 17, 2008 - (Page 20) Automotive News - November 17, 2008 - (Page 21) Automotive News - November 17, 2008 - (Page 22) Automotive News - November 17, 2008 - (Page 23) Automotive News - November 17, 2008 - (Page 24) Automotive News - November 17, 2008 - (Page 25) Automotive News - November 17, 2008 - (Page 26) Automotive News - November 17, 2008 - (Page 26a) Automotive News - November 17, 2008 - (Page 26b) Automotive News - November 17, 2008 - (Page 27) Automotive News - November 17, 2008 - (Page 28) Automotive News - November 17, 2008 - (Page 29) Automotive News - November 17, 2008 - (Page 30) Automotive News - November 17, 2008 - (Page 31) Automotive News - November 17, 2008 - (Page 32) Automotive News - November 17, 2008 - (Page 33) Automotive News - November 17, 2008 - (Page 34) Automotive News - November 17, 2008 - (Page 35) Automotive News - November 17, 2008 - (Page 36) Automotive News - November 17, 2008 - (Page 37) Automotive News - November 17, 2008 - (Page 38) Automotive News - November 17, 2008 - (Page 39) Automotive News - November 17, 2008 - (Page 40)
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