WANADA Bulletin # 29-09 July 24, 2009
Headlines… House Panel Hears From Proponents and Opponents of Chrysler and GM Actions Cash-for-Clunkers and All Its Confusion Arrives WANADA’s ADEI has Qualified Pool of Tech Trainees Bandwagon Rolling on Green Vehicle Subsidies
New Chrysler Needs Industry to Do 13 million Sales per Year for Healthy Profits MINIMUM WAGE Reminder It Pays To Be A Hyundai Dealer Thought for the Week….
House Panel Hears From Proponents and Opponents of Chrysler and GM Actions in Bankruptcy to Cut Dealer Ranks Heavily Co-Sponsored Bills Start To Make Their Way Through Congress
A subcommittee of The House Judiciary Committee chaired by Rep. John Conyers (D- Mi) held hearings this week on the legislation that has picked up remarkable support in the House and Senate to Restore Dealer Rights as a result of the bankruptcy reorganizations of Chrysler and General Motors.
House members on the subcommittee, many of whom are co-sponsors of the dealer rights legislation (HR. 2743), asked pointed questions of proponents of the actions taken by Chrysler and GM in bankruptcy court when they divested themselves of substantial numbers of their dealer franchisees. A lead-off witness and proponent of the dealer cuts was Ron Bloom, the newly appointed chairman of the Auto Industry Task Force who told lawmakers that the federal bailout of the companies “saved” the companies from going out of business and “literally hundreds of thousands of jobs.” Moreover, he said, “the creditors and dealers have received more under the bankruptcy reorganization than they would have if the companies had been liquidated.”
House Panel members countered Mr. Bloom and other witnesses who defended the dealer cuts by pointing out that dealer franchisees don’t cost automakers anything, and thinning dealer ranks puts recovery of Chrysler and GM at risk.
Lawmakers joined by dealer witnesses also put on the record the inequities of the divestiture process utilized by Chrysler and GM, no less than and the additional recession stress caused by the unemployment of dealership personnel.
Presently HR 2743 has 263 co-sponsors in the House and 31 senators co-sponsoring the companion bill, S 1304, in the Senate (Sen. Max Baucus, D-Mont., chairman of the powerful Senate Finance Committee, and House Minority Leader John Boehner, R-Ohio, recently signed
WANADA Bulletin # 29-09 July 24, 2009 Page 2
on to their respective bills). Chrysler and GM have said they’re interested to meet with dealers to explore an alternative to the dealer rights legislation. Correspondingly, there is no signal from NADA or other dealer groups pushing the legislation that they won’t continue to do so.
Meanwhile, Sen. Jay Rockefeller, D- (WV), is requesting an independent inquiry on why General Motors and Chrysler decided to close more than 2,000 automobile dealerships across the nation. Rockefeller wrote to Neil Barofsky, special inspector general for the Troubled Asset Relief Program, on Thursday, telling him that, "taxpayers deserve a thorough review of these decisions. On June 3, Rockefeller held a hearing about auto dealer closings before the Senate Committee on Commerce, Science and Transportation, which he chairs."Based on the testimony before the committee," Rockefeller wrote, "it is clear that there is substantial confusion, even among dealers themselves, as to how GM and Chrysler selected dealerships for termination and what benefits, if any, the companies will incur by eliminating dealerships.”
And lastly, Susan Eckerly, senior vice president of public policy for the National Federation of Independent Business (NFIB) has sent a letter to all senators asking them to support S1304, which dealer rights advocates received as another positive development with the legislation.
Cash-for-Clunkers and All Its Confusion Arrives Rules of Engagement Webinar from NHTSA & NADA Monday, July 27, from 1-3 p.m. (ET)
• WANADA Secures List of “Approved” Recycler Participants • Md MVA Issues Dealer Guidelines The launch date for the federal government’s plan to jump start auto sales has arrived but all WANADA dealer members planning to participate in the Cash-for-Clunkers program are urged to sign up for the NHTSA & NADA webinar that has been organized, because the agency rules being released today by NHTSA are complex and hold significant liability pitfalls if you do not follow them exactly. Follow this link for answers to frequently asked questions www.nada.org/cashforclunkers.
Make no mistake about it: NHTSA has said it will enforce the law vigorously, which can come back on sponsoring dealers in terms of liabilities for lost credits to consumers and civil penalties.
The NADA/NHTSA webinar, set for Monday, July 27, 2009 at 1 PM, will layout the rules of engagement of the Cash for Clunkers program. It will be conducted by Daniel Smith, NHTSA associate administrator for Enforcement, and Michael Harrington, NADA chief legislative counsel, along with Douglas Greenhaus, NADA director of environment, health and safety, and Scott Addison of Fitzgerald Auto Malls.
Visit www.nada.org/seminars or call (800) 252-6232, ext. 2 to register.
Meanwhile, WANADA, working with the Institute of Scrap Recycling Industries, Inc., (ISRI) has secured a list of “approved” recyclers prepared to take eligible clunkers. This list includes the location and contact information for all the recyclers and specifically includes those who are participants in the National Vehicle Mercury Switch Recovery Program and registered with both WANADA Bulletin # 29-09 July 24, 2009 Page 3
EVLSolutions.org and the National Motor Vehicle Title Information System (NMVTIS) as required by the Cash-for-Clunkers program. Recyclers appearing on the ISRI list are presented as reliable companies with the equipment and expertise to “crush” the vehicle in accordance with all applicable laws. Click here http://www.isri.org/cars/list for the complete list of “approved” recyclers.
WANADA has also received from the Maryland Motor Vehicle Administration, dealer guidelines on how to apply the Cash for Clunker credits and other relevant matters in the state of Maryland. The full details are here, but most important, MVA says the “credit” may NOT be used to reduce the excise tax due on the vehicle.
WANADA’s ADEI has an Ambitious, Qualified Pool of Tech Trainees Ready to join Your Service Department Team Improve the Productivity of Your Service Department Today
WANADA’s Automobile Dealer Education Institute (ADEI) regularly recruits high school grads with demonstrable ambition to become line technicians in dealerships. ADEI hedges the bet with its NATEF Certified Technician Training Program. This year’s pool is an especially good one and WANADA dealer members in Virginia and Maryland looking to boost the profitability of their service operations and add quality performers to their staff are encouraged to give us a call to arrange an interview with our candidates. ADEI has successfully placed more than 200 student technicians with WANADA dealers over the years and we guarantee the success of every one of them. It’s all quite simple. We send you a qualified candidate, you agree to hire them on a full time basis and fund their one-day-per week participation in our classroom education program at a nearby college (Montgomery College in Maryland, or Northern Virginia Community College). ADEI assures that your investment in this student will be realized in less than two months. Give Bill Belew or Jake Kelderman a call at WANADA headquarters (202-237-7200) for more information or visit the ADEI website (www.adei.org) for more details on the program.
Bandwagon Rolling on Green Vehicle Subsidies Automakers Get the Message
Another piece of legislation was passed by a House panel last week to boost federal funding for research into advanced technology vehicles and component parts, including those for medium-to-heavy-duty trucks.
This time it was the House Science and Technology subcommittee on energy boosting U.S. Department of Energy funding by over 50 percent to $550 million to look at batteries and storage devices, hybridization and electrification, hydrogen fuel cells, engine systems and components.
The bill is scheduled to go before the full committee next week, and if it is eventually passed by Congress and signed by the President, it would be in addition to a $25 billion program already in WANADA Bulletin # 29-09 July 24, 2009 Page 4
place that car makers and suppliers can tap to retool their facilities to make advanced technology vehicles.
Several weeks ago the House passed a climate-change bill that would double that funding to $50 billion. U.S. buyers of all-electric vehicles can already receive a tax credit of $7,500.
Meanwhile in Canada, the government of Premier Dalton McGuinty announced this week, it would provide buyers of plug-in hybrid and battery electric vehicles with rebates of up to $10,000 for vehicles purchased after July 1, 2010.
All electric and hybrid/electric car buyers would also be allowed to use less-congested High Occupancy Vehicle (carpool) lanes, even if there is only one person in the vehicle and they would also receive a special green license plate for their vehicle. These would give them access to public recharging facilities at select Ontario government and GO Transit parking lots.
The government projects that one out of every 20 vehicles driven in Ontario, Canada might be electrically powered by 2020 if the incentives have the impact it is counting on.
Automakers have responded to all the incentives being offered. Just this week, Ford CEO Allan Mulally said in an interview that battery powered vehicles “are the future,” for the company, adding Ford was committed to bringing battery vehicles to the market in the next few years, but that it would take significant reductions in cost to make them mainstream vehicles. He said Ford was taking advantage of the various government incentives to address some of those cost issues.
Nissan Motor Co. is doing the same and aiming to be the top seller of electric vehicles in the U.S. It is using $1.6 billion in U.S. loans to retool its Smyrna, TN plant to build battery powered cars. Ford Transit EV Industry forecasters believe the market for all-electric vehicles in 2011 will be only about 7,500 units along with 60,000 plug- in hybrid cars and that most of these sales will occur in California.
The various federal incentives being enacted are aimed at boosting those combined numbers to at least 1 million units in the U.S. and 1 in 20 vehicles in Canada by 2015.
New Chrysler Needs Industry to do 13 Million Sales Per Year for Healthy Profits Fiat Chief Says It Will Not Happen Before 2011
Sergio Marchionne, the new CEO of Chrysler Group LLC, told the Detroit News this week that the U.S. automaker would recover, but that the company would have "healthy margins" only if overall U.S. auto sales recover to annual levels of 13 million to 14 million vehicles. He added, however, that he did not think this would happen by 2010. WANADA Bulletin # 29-09 July 24, 2009 Page 5
That’s bad news for a company that saw sales decline near 50% for the first half of the year. Marchionne said the integration of various Fiat platforms and technologies was moving forward rapidly and that he expected to see a positive impact from those actions in the second half of 2009. He reiterated a prior forecast for a small annual net profit in 2009 for Fiat.
The board of Chrysler, which includes representatives from the United Auto Workers' Voluntary Employees Beneficiary Association, the U.S. Treasury and the Canadian government is meeting for the first time next Monday, Tuesday and Wednesday to address Chrysler's future, one that is predicted by most auto industry analysts to involve a smaller share of the U.S. auto market, but higher per vehicle margins. Fiat may increase its Chrysler holdings if it reaches certain sales/profitability targets and could become the majority stakeholder once the U.S. government recoups its investment in the company. Further down the road, it has been reported that Fiat hopes to spin off its automotive operations as a separately listed company.
MINIMUM WAGE Reminder: Effective today, July 24, 2009, the federal minimum wage will increase to $7.25 per hour. This means that this will also be the wage rate in Virginia and Maryland while in the District of Columbia the wage rate will be higher at $8.25 per hour. The updated Federal Wage-Hour Poster can be downloaded at http://www.dol.gov/esa/whd/regs/compliance/posters/minwage.pdf
It Pays To Be A Hyundai Dealer Korean Firm Gets More Praise From J.D. Power and Records Record Profits Too.
After having its Genesis luxury vehicle named “Car of the Year” by a number of enthusiast magazines earlier this year, Korean automaker Hyundai scored another success this week as J.D. Power & Associates announced it as the winner of its Launch Award, a measure of how successfully a new model is brought to market. Labeling the effort as near flawless, J.D. Power said the Genesis launch scored 689 out of 1,000 possible points, meaning it pretty much met every expectation for projected sales level, price point, residual value, marketing support and most important, retained dealer margin. Meanwhile, Hyundai reported a record quarterly profit this week indicating that its contrarian marketing approach, to expand when everyone else is contracting, has paid off. Hyundai said its net income for the quarter from April to June soared 48 percent from the year previous to $650 million. In the U.S., its unusual marketing schemes of offering buyer assurance in case of a job loss, guaranteed fuel prices at $1.49 per gallon and advances for “clunkers,” has led to a market share increase from 3.1 percent to 4.3 percent and in partnership with its affiliate Kia, a rise to 7.3 percent from 5 percent.Announcing the results in Seoul, South Korea, Chung Tae-hwan, Hyundai’s CFO said the company expected worldwide sales to increase to 3 million even as the U.S. market drops to 9.7 million units as a whole. For Hyundai “better times await,” he said; Sweet music to its franchise holders. WANADA Bulletin # 29-09 July 24, 2009 Page 6
Thought for the Week….
“The last buyer of a GM car is the most likely buyer of a new GM Car."
--Ron Bloom, chairman, Auto Industry Task Force, 7/21/2009
WASHINGTON AREA NEW AUTOMOBILE DEALERS ASSOCIATION