As General Motors and Chrysler prepare to shutter thousands of dealerships, car dealers from Georgia and across the nation are turning to Congress and the White House help them stay in business.
“We’re planning on visiting members of Congress, senators and essentially anybody who’s willing to listen to our message that dealers are absolutely critical to the viability of automakers,” said Bailey Wood, spokesman for the National Automobile Dealers Association. “Closing dealerships does not make GM or Chrysler any more viable.”
GM and Chrysler are expected to announce Thursday that they’re canceling contracts with as many as 3,400 car dealers nationwide as the automakers struggle to survive. The companies say cutthroat competition between too many dealerships is one reason they’re losing money.
Minority-owned dealerships could be hit the hardest, said Atlanta-area dealer Greg Baranco, whose Baranco Buick Pontiac GMC in Lilburn has suffered a 70 percent drop in sales over the last year.
“Minority dealerships are the most vulnerable because they’re the newest dealers and often in the least-attractive markets,” said Baranco.
“Their capitalization isn’t as strong because they’re first generation whereas majority dealerships are second and third generation,” he said. “We fear it’s a matter of last in, first out.”
Baranco is among 150 car dealers converging on Washington to lobby Congress. Representatives of the group are scheduled to meet with President Obama’s auto task force overseeing government investments in the car companies.
The auto dealers group says more than 180,000 salesmen, mechanics and others could lose jobs if as many dealerships are closed as expected. “And it’s not like those people are going to be able to go to the dealership down the street to get a new job, because they’re already laying people off too,” Wood said.
Labels: auto dealers, chrysler, closings, general motors, Georgia
# posted by
Brian Vanderhoff @ 8:02 AM
The White House says neither GM nor Chrysler submitted acceptable plans to receive more bailout money, setting the stage for a crisis in Detroit and putting in motion what could be the final two months of two American auto giants.
The Obama administration, however, has decided not to require the automakers to immediately repay government loan money they previously received, since that would force both companies into Chapter 11 bankruptcy.
Obama was set to make the announcement at 11 a.m. Monday in the White House's foyer.
Instead, the administration has decided to give Chrysler 30 days to work out a deal with Fiat and GM 60 days to come up with a new restructuring plan. Both companies will be provided with "some working capital" during those time periods.
A senior official said, "bankruptcy is not the goal," although there may be a "role for a court supervised process to effect the restructuring... different from Chapter 11."
Two additional parts of the plan include the government standing behind both car companies' warranties during the restructuring periods and the White House naming a Labor Department official to minimize the impact of restructuring on communities where auto plants are located, by coordinating support for workers and their families.
GM and Chrysler, which employ about 140,000 workers in the U.S., face a Tuesday deadline to submit completed restructuring plans, but neither company is expected to finish its work.
GM owes roughly $28 billion to bondholders. Chrysler owes about $7 billion in first- and second-term debt, mainly to banks. GM owes about $20 billion to its retiree health care trust, while Chrysler owes $10.6 billion.
Officials say GM and Chrysler were treated differently because of differences in the companies.
Neither company is viable now, but Chrysler is an almost purely domestic company that has passed through several ownership changes and is not viable as a standalone company. It was "never in position to pay down its debt." GM is a global company with "a more substantial collection of assets and brands," and its cars received a higher ranking from Consumer Reports.
Officials say they are "confident GM can survive and thrive as a company... but it will take more significant restructuring."
No decision has yet been made about how much working capital the government will provide GM during the restructuring period.
Chrysler's potential deal with Fiat has a couple of requirements: Fiat's ownership must initially be less than the 35% US Government stake in the company, and it's not to rise above 49% until the new loan money is fully repaid. Chrysler will be provided up to $6 billion in additional working capital during the restructuring period.
In his comments tomorrow, Obama "will be clear that greater sacrifices are required from all stakeholders," officials said.
His aides had substantial criticism of bondholders, saying not only did GM's bondholders fail to meet the targets for reducing the company's liability under the loan agreement, the loan agreement's target weren't adequate for the current market environment.
Officials confirmed GM CEO Rick Wagoner was asked to leave, but denied it was a condition for receiving more government aid. The official said "we wanted to start GM with a clean sheet of paper. We felt the change in leadership would assist that."
Labels: Barack Obama, chrysler, gm, halts detroit bailout
# posted by
Brian Vanderhoff @ 8:18 AM
