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Lawmakers Reach Dealer Arbitration Compromise

Bill could offer reprieve to thousands of GM, Chrysler dealers.

by on Dec.09, 2009

Asst. Senate Majority Leader Dick Durbin has helped craft a compromise that could give a reprieve to some of the thousands of dealersv GM and Chrysler want to cut.

Asst. Senate Majority Leader Dick Durbin has helped craft a compromise that could give a reprieve to some of the thousands of dealersv GM and Chrysler want to cut.

Federal lawmakers have reached a compromise on a measure that could provide a reprieve for some of the thousands of dealers cut by General Motors and Chrysler as part of their bankruptcy reorganizations.

The two companies collectively cut more than 2,100 retailers, asserting that they needed to streamline their distribution systems and focus on high-volume showrooms that generated solid marks for customer satisfaction.  But those moves generated an immediate backlash among dealers, who make up of the most politically powerful lobbying forces in the country.

The new measure, which would require arbitrators to balance the economic interests of dealers, the two carmakers and the public, has been endorsed by both House Majority Leader Steny Hoyer, D-Md., and Assistant Senate Majority Leader Dick Durbin, D-Ill.

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“Closed dealerships across the country deserve a transparent review of their termination and the right to get back in business if they were terminated on faulty grounds,” said Durbin, adding, “GM and Chrysler have the right to determine the size and scope of their business. But Congress has a responsibility to protect taxpayer’s money when addressing the future of companies like GM and Chrysler.”

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Lack of Loans Pushing Buyers from New to Used

Delinquent loan rates continuing to creep upwards.

by on Jun.09, 2009

A new study finds a growing number of potential new car buyers can't find loans and are settling for used vehicles.

A growing number of potential new car buyers can't find loans and are settling for used vehicles.

The struggling economy, job losses and stricter lending criteria have pushed more consumers into loans for used vehicles, rather than new, according to a new report by Experian Automotive, which also found the number of delinquent loans continuing to creep upwards.

Experian’s quarterly analysis of the automotive credit market indicates that used vehicle loans accounted for 68.13% of all automotive loans in the first quarter of 2009, up from 64.3% of all automotive loans in the first quarter of 2008. Share of loans for new vehicles fell to 31.87% in the first quarter of 2009, compared with 35.7% in the first quarter of 2008, according to Experian.

“Banks, credit unions and captive finance companies appear to have tightened their lending criteria as they look to mitigate risk,” said Melinda Zabritski, director of automotive credit for Experian Automotive.

“Loans are still available, but lenders are changing terms. This is pushing some consumers out of the new vehicle market and into the used vehicle market. Some finance companies that specialize in subprime loans have seen their share increase as traditional lenders move away from riskier loans,” she said.

In addition, independent used vehicle dealers — those dealers not affiliated with a specific manufacturer — were the biggest winners in the first quarter, seeing their share of used vehicle loans rise from 31.58% in the first quarter of 2008 to 34.97% in the first quarter of 2009. Independent dealers typically serve customers with lower credit scores and are gaining share as traditional lenders tighten their loan criteria. (more…)

“All 3,181 Dealers…Face Elimination,” Chrysler Marketing Chief Warns

Meanwhile, GM facing Saturn dealer lawsuit.

by on May.21, 2009

Chrysler needs to cut 789 dealers, argues marketing chief Steve Landry, or all 3,100 retailers "face elimination."

Chrysler needs to cut 789 dealers, argues marketing chief Steve Landry, or all 3,100 retailers "face elimination."

Chrysler’s marketing chief is issuing a stark warning to those who insist it didn’t need to fire 789 of its dealers as part of its court-protected bankruptcy reorganization. 

“The stark reality is all 3,181 dealers will face elimination,” Steven Landry, executive vice president of marketing, asserts in a new posting on the automaker’s blog, TheFirehouse.biz.

The troubled automaker, which filed for Chapter 11 bankruptcy protection, late last month, has taken some sharp criticism for its decision to eliminate nearly a quarter of its retail body, but in his blog, Landry insists the process of choosing which retailers to drop was “thorough, rigorous” and fair, and was based on a “data-driven metric” that looked at factors such as sales volumes, customer satisfaction, and whether the dealer handled all or just some of Chrysler’s three brands.

“Chrysler began the process to consolidate dealerships and locate all three brands under one roof more than 10 years ago,” Landry explains in his blog entry. “The Company made the decision not to continue to manufacture and market overlapping products. It is critical the majority of our dealers offer customers all three brands under one roof.”    (more…)

Dealers, Suppliers Also Seeking Bailout

Another $10 billion in federal assistance needed

by on Feb.04, 2009

Thousands of dealers could soon close their doors

Thousands of dealers could soon close their doors

With January numbers taking a deep dive – the fourth month in a row with an automotive sales downturn greater than 30 percent – domestic and import automakers alike are struggling. But the biggest impact is arguably being felt off the assembly line. A growing number of auto partsmakers, as well as automotive retailers are facing collapse.

Scores of auto suppliers have already declared bankruptcy, in recent years. Some, like Tower Automotive, a major metal stamping firm, have been able to restructure and emerge from Chapter 11, others, like giant Delphi remain mired in bankruptcy, and a growing number of others, like the minority-run Plastech, have been forced to shutter their operations. Analysts like Joe Phillippi, of AutoTrends Consulting, believe the latter option is going to be seen more and more often before any recovery takes hold.

The situation isn’t much better on the retail side. As the Detroit News reports, in today’s edition, almost 1,000 dealers closed their doors in 2008. And the National Automobile Dealers Association finds the situation is only getting worse. Reportedly, dealers are struggling to pay back at least $10 billion in outstanding loans. Chrysler forced one Chicago-area dealer to close about half of his showrooms when it became clear he couldn’t cover more than $500 million in debt.

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