Everyone’s favorite feel-good broadsheet, SubPrime Auto Finance News, reports that 13 members of congress have written a letter to Fed Chairman, Ben Bernanke, and Treasury Secretary, Tim Geithner, requesting another raid on TALF, the Term Asset-Backed Securities Loan Facility. The congressional bagmen “applaud the joint efforts of the Federal Reserve Board and the Department of Treasury to promote liquidity in consumer loan markets through the Term Asset-Backed Securities Loan Facility.” Because making $200B available was an interesting start. “However,” continue the servants of the public trust, “we are concerned that the program may not sufficiently address the problems facing the domestic automobile industry.” Oh dear.

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The question that has haunted the very soul humanity for eons—“that thing gotta hemi?”—should hopefully drift out of the vernacular, as ChryCo is offering free Hemi V8 upgrades on every Ram 1500 they sell during “shovel ’em out the door,” uh, make that “truck month.” So yes, good sir, it’s got a Hemi. But as Wikipedia puts it, “today, ‘hemi’ is little more than a trademark that bears little meaning, descriptively, for the engines designated as such.”

DATE:         March 3, 2009                         GM 09-03

TO:             All General Motors Dealers & Saturn Retailers

FROM:        Jim Bunnell, Executive Director, NA Vehicle Sales, Service & Marketing

SUBJECT:    Vehicle Buyback Policy

…This letter also communicates GM’s policies for the repurchase of light and medium duty new vehicle inventory (herein after motor vehicles) upon the termination of a GM Dealer or Saturn Retailer (herein after “Dealer”) when there is no replacement Dealer. GM’s repurchase obligations are outlined in Article 15 of the General Motors Dealer Sales & Service Agreement and Article 21 of the Saturn Retailer Agreement (herein after “Dealer Agreement”). This bulletin provides the specific definition of “current model year” as referenced in the Dealer Agreement and outlines specific procedures for vehicle repurchases under both Articles. This letter does not replace, modify or alter the terms of the Dealer Agreement, and implementation of these policies is subject to applicable law.

GM’s policies applicable to vehicle repurchases are provided below:

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Anyone remember the John Houseman ad for Smith Barney? “They make money the old-fashioned way. They UHN it.” Well, you can put that idea in an urn, at least when it comes to Washington State car dealers. Now that times are tough, the dealers have successfully lobbied (a euphemism if there ever was one) their state legislators to increase car dealers’ “document fees” from $50 to $150. Get ready to get ill, courtesy The News Tribune.

Such an increase could let auto dealers statewide pocket as much as $100 million to $150 million, money that would go straight to their bottom line. Those figures assume dealers will sell 1 million cars and trucks and that all dealers would charge the maximum fee allowed, as most do.

Sen. Tracey Eide, D-Federal Way, said she sponsored Senate Bill 5816 at the request of the Washington State Auto Dealers Association and its 328 dealerships, and one of her former constituents, Mary Byrne, former owner of Nissan of Fife. Byrne now is a partner in Advantage Nissan in Bremerton.

It gets worse.

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When I was a little boy, my father regaled me with tales of magical creatures that lurked in the Ardennes Forest, the Alps and the high steppes of the Cossack Frontier. Dozens of ’em. And yet Dad forgot the one about the Magical Depreciation Fairy. You know: the creature that lurks in vast concrete expanses that harbor shining metal dragons that enslave weaker members of our society. I shall now inform the Best and Brightest of the characteristics of the Magical Depreciation Fairy, lest ye fall victim to its devious ways.

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TTAC reader galaxygreymx5 writes:

Mr. Farago, I stumbled on this little tidbit while reading greenhybrid.com. A forum member named gltech has a problem with his Chevrolet Tahoe Hybrid’s brakes (as in failing repeatedly).

“All of a sudden out of nowhere, the check engine light comes on, along with a couple of other lights, the chimes start going off, and the display under the speedometer alternates between “Service Stabilitrack Soon” and “Service Brakes Immediately”. When this happens, I lose power braking! Luckily, all 3 times I was going very slow in electric-only mode, twice at drive-thrus and once in the grocery lot. The first couple of times this happened I turned off the ignition and restarted, and everything was back to normal, except that the “Check Engine” light stayed on for a day or so and then it went off. Yesterday when this happened for the 3rd time, I had to turn of and restart the truck about 10 times to get it back to normal.”

gltech published a brief blog beginning to outline his brake issues, which he’s now expanded to include battery problems. Other posters on greenhybrid started chiming-in; they’re having the same issues with firmware updates and such. Several are also losing braking on a regular basis.

This little tidbit kind of encompasses everything GM faces now and major challenges going forward. The potential inability to compete in the hybrid game and how it relates to the Volt; the disintegrating dealer network and lack of communication between different arms of GM; and the brain drain as GM sheds staff that probably caused the minor problem of losing brakes in a brand new $50k car.

Despite the fact that all of the Detroit firms are actively trimming their dealer ranks, the National Automotive Dealers Association (NADA) is calling on the federal government to guarantee dealer floorplan loans. According to Automotive News [sub] NADA is requesting “anybody and everybody” in the government step up and prevent (once again) a necessary downsizing in the auto business. NADA spokesfolks say the auto retail industry’s $100 billion in annual floorplan credit is drying up, and “the cost to government for guarantees would be little or nothing.” Ipso facto. And yet the $25 billion in “136” loans took $7.5 billion to guarantee. NADA is bringing its somewhat short-on-the-details message of hope to Congress, the White House, the Treasury Department, the Federal Reserve, and the Small Business Administration this week.

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Benjamin Franklin said it’s better to be a pessimist and pleasantly surprised than an optimist and constantly disappointed. Followers of Motown’s meltdown—and the wider malaise affecting the entire auto industry—know it’s going to be a long time before the pleasant surprise part of the equation. Bloomberg reports, “Confidence among U.S. consumers plunged to a record low in February, signaling spending will slump further as unemployment soars. The Conference Board’s index declined more than forecast to 25 this month, the lowest level since data began in 1967, from a January reading of 37.4, the New York-based research group said today.” Lest we forget, the housing bubble begat the auto bubble which begat the collapse which lit up the turbos on Detroit’s decline, as it powered unthinkingly on its Thelma and Louise trajectory. So how’s that housing thing going? Do you really want to know?

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Sorry about the pun (referring to the yearly sales rate), but Automotive News [sub] nailed the headline, and I couldn’t just repeat it without a little TTACitude. Sometimes, though, the simple truth is all there is. The fact that America’s largest publicly traded dealership group has cut new vehicle orders by 60 percent is… stunning. It means that that the U.S. new car market is dead in the water. Federal bailout or no, someone’s going to take a dirt nap. Not that Mike Jackson thinks so. The AutoNation CEO reckons U.S. new car sales have stabilized at a rate of 10 million per year, and expects that number to climb over 11 million by the end of the year. What’s more, the formerly pessimistic Jackson has looked at Chrysler and GM’s new viability plans and put Smash Mouth’s “I’m a Believer” on his iPod. “I felt the outline of the direction they gave back in November was too optimistic on the sales side and not deep enough on the cuts side. These plans are much more realistic and it’s the right approach.” So another one bites the rust. Or something like that.

Now that GM’s Car Czar is slinking off into the sunset before his bankruptcy-proof pension becomes a bone of contention (“I’ll have to check with my accountant about that”), the man of Maximum is shooting off his mouth in the great Lutzian style. “My personal favorite would be to see Saturn survive and prosper,” GM’s vice chairman told Automotive News [sub], “But frankly, the reality is that that is probably not going to be the outcome.” Does this sound a bit like finding out you were dumped via a batch e-mail? AN somehow managed to find a doomed Saturn dealer (as they all are, now) who didn’t use expletives when hearing of the multimillion-dollars-per-year executive’s casual execution of the Rethink brand. “That really seals our fate,” said Lasser, owner of Saturn of Denville, Saturn of Mount Olive and Saturn of Livingston. “I think they knew this fact months ago, and they never shared it with us.” So who killed the non-electrifying cars?

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When it comes to “why can’t U.S. car companies kill their dead brands?” TTAC has always pointed the finger straight at America’s 50-state patchwork of franchise laws. If GM killed, I dunno, Saab, every Saab dealer in these here United States would drag The General’s ass down to the local courthouse demanding—and receiving—reparations. Lest we forget, Oldsmobile’s termination cost GM a billion dollars back when a billion dollars was a lot of money. If, however, Chrysler, GM or Ford filed for Chapter 11, they could kill brands and dealers at will—without paying ex-dealers anything more than the cost of their inventory. And maybe not even that. Franchised dealers can see the writing on the wall, and they’re not happy. So they’re proactively legislating a new post-C11 deal for themselves—inflating the claims against the automakers’ assets, increasing the likelihood that the D2.8’s bondholders will file for same.

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GM’s “different kind of car company” is furiously trying to forge a future amid plummeting sales and little outside interest in buying the brand.  Saturn’s Franchise Operations Team has been meeting with GM executives in hopes of creating some kind of strategy for the brand’s dealer network. According to Automotive News [sub] the options were narrowed down at a meeting last week, and after further refinement they should be presented to Saturn dealers later this week. When asked if this spelled the end for the Saturn name, Franchise Operations Team member Todd Ingersoll told AN “everything is fluid. You can’t commit to any option.” But he also indicates that “you don’t need four options to kill a brand.” So what’s really going on?

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Remember the “worst case sales scenario” in GM’s viability plan? It predicted 11.5m annual sales in the US. Unless a turnaround arrives sometime this year, there’s no chance that sales will hit that number. According to Automotive News [sub], annual sales expectations for 2009 have dropped to 9.8m units. But there’s still a surprising amount of unfounded optimism among Detroit’s spinners and marketing mavens. Specifically, Ford’s execs say that retail sales have “stabilized” over the past four months. Too bad, then, that they’ve stabilized at an abysmal rate of 8.5m units per year. “We’re heartened to see it stabilize — although stabilizing at an awful level,” said Ken Czubay, Ford vice president of U.S. sales and marketing. Heartened? Seriously? But enough of the maudlin posturing. There are scapegoats to blame!

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A dealer writes:

Say I order a pickup truck from the Chrysler mothership: an ’09 Dodge Mega Cab Cummins 4×4. MSRP: $59k. Invoice: $53k. Hold back: $2,400. Chrysler bills my bank for invoice ($53k). My bank gets the title and pays for truck. [ED: this is also known as floor-planning or flooring.] I take delivery of the truck, I sell the truck. Two weeks later, my floor-planning bank transfers the funds to Chrysler. First, I have to pay off the flooring liability: the Ram’s invoice price ($53k). Then I wait for the factory rebate money. That’s why it costs so much to operate a franchise dealership: the operating capital requirment is huge. We are fronting the manufacturer’s cash flow by overpaying for the units when we (the dealer) buy them from factory.

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