Three days before launch, the Department of Transportation has finally released the rules [PDF] for car dealers participating in the federal Cash for Clunkers program. Dealers must disable the trade-in’s engine [official powerplant-killing technique after the jump] and then send the clunker to an approved salvage auction or an authorized disposal company, which will kill, crush and destroy (not to mention recycle) the remaining bits. The doc also contains a word to the wise: “The CARS Act specifies that while many parts of the trade-in vehicle are permitted to be removed and sold, in the end the residual vehicle, including the engine block, must be crushed or shredded. Therefore, the trade-in value of the vehicle is not likely to exceed its scrap value. Purchasers should not expect to receive the same trade-in value as they might if the vehicle were to remain on the road.” I wonder how many consumers will make that calculation, or how many dealers will help them in that regard.
More testimony over the fate of GM and Chrysler’s culled dealers yesterday revealed possible compromises, although consensus is still elusive. Chrysler VP and Associate General Counsel Lou Ann Van Der Wiele told the House Judiciary Committee (via the NYT) to ignore the pleas of Chrysler’s 789 slashed dealers, explaining that dealer reinstatement would be the end of Chrysler as we’re getting to know it. “Legislation aimed at reversing some of the painful but necessary actions taken during Old Carco’s bankruptcy will simply take Chrysler back to the future that Old Carco faced not long ago—and this time, without the option of a purchaser for substantially all of its assets. Complete liquidation, with all of its dire consequences, could follow.” But then, “complete liquidation with all its dire consequences” could follow if The New Chrysler ate the wrong tuna sandwich.
A TTAC Commentator emailed this about the what did she mean debate re: GM’s proposed inventory levels for the new Buick LaCrosse.:
Just an FYI, but the execs at Chrysler always looked at the dealer stock and total stock separately. Although the cause of this was as you pointed out – due to the sales bank where cars were being parked in overflow lot. The situation got so bad in 2008 that Chrysler had to track “unaccounted for and parked somewhere random” stock separately… but that’s a separate story. Hopefully New GM will never go the route of building thousands of unallocated cars (but I’m sure they’ll find a way). The two metrics were required because the various operating groups could be measured against the gap between dealer/total stock or the efficiency of the dealer stock. It just depended on what was being measured.
What is Susan Docherty smoking? At the unveiling of the new Buick LaCrosse, the VP of Buick, Pontiac and GMC (which one of these things is not like the other) told Bloomberg that GM aims to keep a “75-day to 90-day” supply of the model on dealer lots. A 60-day supply is considered ideal. But, apparently, a 15 to 30-day overage would be OK, ’cause the supply would be “consistent with similar premium models such as Honda Motor Co.’s Acura TL.” And there we were thinking the LaCrosse was aimed at something in the Lexus portfolio (48-day supply). Docherty’s comparison to the Acura TL is, shall we say, invidious. The TL is a dog, with a 100-day supply on the ground. Also worth noting: Acura dealers have a 62-day supply of RLs and a 32-day supply of the TSX. And if you figure-in Acura’s SUVs, the wayward Honda brand’s total dealer inventory represents a 58-day supply.
Well, we called it . . . new incentive sheets this morning, and already they are being corrected because GM’s own website verification software is wrong.
Check out this email from GM to dealers . . .
“Please be advised that the new Employee Bonus Cash was NOT intended to be compatible with the outboarded APR’s. We are now in the process of getting this corrected to make it not compatible with outboarded APR. Please advise that currently VIN Lookup shows that the two are compatible, however they are in fact not. A formal communication is forthcoming, but wanted to pass this along as I’ve already had a few inquiries.”
Imagine you called a customer when the sheets came out; by the time they arrived at the store, you had to explain that the deal wasn’t available.
Your automotive industry bailout probably just became a little more expensive. Automotive News [sub] reports that the House of Representatives has passed a spending bill including provisions to reinstate dealers culled during GM and Chrysler’s restructuring. The measure now moves to the Senate, where 24 co-sponsors of a similar bill should have little problem rounding up votes (although Senate Majority Leader Harry Reid tells the NYT that the bill is not at “the top of the agenda in the Senate at this time”). The problem is that President Obama has urged congress to dump the reinstatement bill, indicating that he will almost certainly veto it. Meanwhile, a non-legislative “solution” to dealer grievances is still being touted as the ideal solution. Which indicates that GM and Chrysler will have to pay off dealers, a move that would likely cost taxpayers even more money.
Last night, I watched a Flood Automotive Group TV ad touting “Cash for Clunkers.” The message was simple: Uncle Sam’s got $1 billion for clunkers. Come get $4500 for your clunker. Not a single word about which vehicles qualify for the money. It didn’t even refer viewers to a website for details—like this ad for C4C “designated” dealer Phil Fitts Ford. A quick ring ’round twenty dealers nationwide shows a definite “reluctance” to discuss the particulars of the CARS program over the phone. “I’m sure your vehicle will qualify,” a Chrysler dealer told me re: my theoretical 2005 Chrysler 300. “Bring it down and we’ll have a look.”
Today GM marketing announced another $1,000 rebate on old invoice units. To check eligibility the dealer enters the VIN into a website. A dealer who has properly managed his inventory will not have any units in stock that qualify, and is thereby less competitive and penalized. Dealer trades become difficult at best and the customer is confused when told that the car they want is more than the identical car sitting next to it that they don’t want.
As our previous story on New GM’s dealer oath indicated, New Chrysler and Government Motors are fighting a desperate battle to head-off H.R. 2743. The bill—which has cleared committee and continues to gather steam amongst the axed dealers’ political allies— would require the former bankrupts to take back thousands of terminated franchisees. “We’re open to a non-legislative solution,” Chrysler spinmeister John Bozzella told Automotive News [sub]. “We’re interested in a non-legislative solution,” GM spokesman Greg Martin echoed in an e-mail. Although the automakers’ media mates are happy to parrot the euphemism, let’s call this for what it is: a pay-off. Price tag? The two automakers sliced 2,789 dealerships. Even if you figure a paltry $1 million each, that’s a $2.789 billion fate-thee-well. Compared to the $70 billion to $100 billion-plus that Uncle Sam’s plowed into the zombie automakers, it’s a pittance. But the actual retail price of the showcase is likely to be . . . much more. Watch this space.
Webchatting on the FastLane blog, GM Reinventor-in-Chief Fritz Henderson wanted the world to know GM dealers don’t need no stinkin’ reinvention.
[Comment From Alfred ]
Mr. Henderson: what changes can we expect to see when we walk into a New GM dealer? What guarantees can you give us that customers won’t be mistreated and abused as before?
[Henderson]
I think our dealers do a fine job taking care of customers, and if you personally had a bad experience, you can let me know and I would ask that you look at another fine gm dealer. most research that we see indicate that gm dealers are by and large a real competitve advantage.
When TTAC received a copy of GM’s letter to dealers “asking” them to lobby against the dealer cull rollback bill, we blogged it as a “loyalty oath.” More than a few commentators said pish-posh [paraphrasing]; H.R. 2743 was nothing more than an SOP lobbying campaign. The fact that the letter told dealers to cc GM’s National Dealer Council Chairman Duane Paddock left little doubt in our (OK my) mind that New GM’s dealers were being told in no uncertain terms to toe the New company line (i.e. shiv their former colleagues). Automotive News [AN, sub] reports that “General Motors executives have been pressuring individual dealers to sign a statement saying they oppose legislation that would restore terminated dealerships’ rights, according to a U.S. senator, a dealers group and dealer representatives.” Point counterpoint after the jump.
“The last time we looked at [the G8], we decided that we would continue to import it as a Chevrolet,” Lutz told Automobile magazine. “It is kind of too good to waste.”
The House Appropriations Committee has passed a provision in the 2010 financial services spending bill that would require GM and Chrysler to work through state courts—instead of the federal bankruptcy court—to terminate dealerships. Rep. Steven LaTourette, R-Ohio, sponsored the amendment. Ignoring the fact that federal bankruptcy law trumps state bankruptcy law, LaTourette explained, “Car companies have used bankruptcy to run roughshod over state bankruptcy laws.” In reporting this, Automotive News made what has to be the understatement of the month, if not of the year: “GM opposes the House bill.” Ya think???
Passing committee is just the first of many steps on the way to a complete episode of Schoolhouse Rocks. And the way Automotive News [sub] tells it, the latest iteration of the Great Dealer Restoration may just face a rocky path. The substance of H.R. 2743 has been attached to a 2010 financial services spending bill that passed the House Appropriations Committee. The problem is that this amendment represents a policy change, in that it would cut funding to the automakers if they refuse to reinstate dealers as ordered. Such policy changes are not technically supposed to be attached to spending bills. No worries though. According to AN’s paraphrase of Rep Steven LaTourette (R-OH),
“Some lawmakers will ask the House Rules Committee early next week to issue a rule to protect the bill from so-called ‘point of order’ challenges that would spike the dealer provision”
And that’s why I’m so particularly fond of Porsches.
GM has filed a request in bankruptcy court to cancel the franchise agreements of 38 dealers who rejected wind-down agreements. In doing so, GM has identified, for the first time, dealers which it plans to cut. Read the full pleading here in PDF form for a complete breakdown (starting on page 32) of the dealers on the chopping block.
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