Local Dealers Stress Importance of Loan
By CARRA HIGGINS and BEN SIMMONS, Staff WritersArticle Photos
As the Big Three Detroit automakers ask Congress for $25 billion to save the financially troubled businesses, local car dealers are hoping the requests are granted.
Roger Bolton of Town and Country Chrysler Dodge in Belington said the survival of the domestic auto manufacturers - Chrysler, General Motors and Ford - is necessary for a full economic recovery in this country.
"If any one of the Big Three should fail, it could cause a catastrophic domino effect resulting literally in the loss of hundreds of thousands if not millions of jobs nationwide," Bolton said. "The burden to our government and ultimately to the taxpayer created by this unemployment and loss of related benefits would be many times greater than the burden created by any type of assistance offered by the government to prevent it."
Bolton said there are many reasons that the automakers are in this predicament.
"High wage demands by the UAW (United Auto Workers) and legacy costs associated with pensions and health care have always been a burden, but these companies have made great strides recently in reigning in these costs and up until several months ago were actually returning to profitability if not already profitable," Bolton said.
"Then they were hit with a double whammy, if you will. Fuel prices soared - thus weakening the demand for the vehicles that provided the most profit. Retail sales weakened when more of potential buyers' income was going toward fuel purchases and the purchase of goods whose price had risen because of higher fuel costs. On top of that came the tumble of the credit markets and suddenly financing on both the retail and wholesale levels became harder to get. Now, through very little fault of their own, these manufacturers are looking at the annual nationwide new car sales rate falling from around 17 million units to less that 11 million units. It is this reduction in sales that has these manufacturers on the ropes," he said.
In the 72 years that Bolton's family dealership has been with Chrysler, there have been many changes in the auto industry. He said one thing that hasn't changed is that consumer demand dictates what sells.
"When gas is cheap and times are good, we seem to prefer bigger, more comfortable and more powerful vehicles," Bolton said. "As gas prices move up and the economy slows, we tend to move toward smaller, more fuel efficient cars. The auto manufacturers need to be quicker on their feet so that they can adjust to market demands faster and still be able to cover expenses when profits decline."
According to Bolton, there are about 6,300 new car dealership employees in West Virginia. He said these employees account for almost 13 percent of the state's total retail payroll.
"Nationally, there are approximately 1.1 million dealership employees," Bolton said. "Add to these figures the auto manufacturer's employee count along with their suppliers and the numbers grow exponentially. With all of these jobs in jeopardy, help is needed from Congress. That help needs to come in the form of a loan or loan guarantee. Though costly and maybe even risky, it is the only way these companies have a chance to weather the current economic storm. Also, a move by the Treasury Department to make loans available at the retail level and for inventory financing is needed and may already be in the works."
Bolton said a lot of the problems facing the auto industry specifically and the economy in general have been created largely because of government intervention and perhaps, where the credit crunch is concerned, inaction.
"In the auto industry, fuel economy demands, environmental demands, product and work place safety demands have all put a terrible burden on these companies," Bolton said. "If Congress should grant the manufacturers' request for funds, then the government needs to let these companies follow their own approved strategies to return to profitability, perhaps providing oversight but certainly not getting involved with product development and quotas. The new administration's 'green' agenda might have them all building nothing but $40,000 sub-compact electric cars with a 40-mile range. One thing for certain is that even with monetary support from Congress, these domestic car companies will still need the support of the consumer. Right now, on the bright side for the consumer, there has probably never been a better time to purchase a new car. Most manufacturers are offering incentives that have vehicles selling at fire sale prices."
Tuesday, the automakers arrived in Washington to make their case and Jim Jackson, owner of Elkins Fordland, said before the plan was presented that automakers would give Congress a "plan for viability that will be impressive and conclusive."
"While I believe that nobody is worth a $22 million year salary, it is outrageous and insulting for a member of Congress to suggest that the corporate CEOs accept $1 a year," Jackson said. "Allan Mulally has done a much better job at turning around Ford than Congress has done at running our country. How many of our elected officials work for a buck? Yes, I do believe there should be and will be substantial compensation reduction concerning top management. Where was this tight scrutiny when we unconditionally rewarded $700 billion to the industry most responsible for our financial collapse?"
"When Allan Mulally presents Ford's plan for the future including products like plug-in hybrids, hydrogen cars and flex fuels, members of Congress will realize that the $22 billion Ford has spent on research and development of fuel efficient vehicles makes them not only viable, but the leader in technology," Jackson said. "I'm sure GM and Chrysler will be able to impress this very skeptical Congress."
Jackson says an economic disaster may occur if the bridge loan is not passed.
"Many believe the company with the most to gain, if it is not passed, is Ford," Jackson said. "This is not a time to be concerned with personal gain. This is an issue of international concern, the ripple effect felt by the loss of a company like GM would effect the lives of many millions, not only in the U.S. but throughout the world. This is a time for action, Congress must do what is in the best interest of the people of our nation. This is why I support the bridge loan to the auto industry with a demand for accountability. I am sure that one company will provide that and I am confident that all three will."
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harriskn
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12-10-08 2:46 PM
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As a current owner of 2 Ford vehicles, I can honestly say this. My personal vehicle is a 2006 and I have had no trouble with. My husand's truck is a 2004 and we have already had to put a new transmission in this vehicle. I was so frustrated with Ford Motor Company because this vehicle was only 8,000 miles out of warranty. $3000 later our truck was up and running again. See we do ALL of the scheduled maintenance to our vehicles. It is my opinion that domestic is what it is. It runs great in the beginging but is not meant to last. We both intend on purchasing foreign vehicles after our current cars. I want a vehicle that is worth the money that I put into it. It is no wonder sales are down and they need a bail out. If business is bad...then the Big Three need to*****it up and realize two things. #1: Build a better, longer lasting product. #2 The government is not a bank, this money comes from somewhere and better business planning could have avoided this crisis.
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sydney12
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12-03-08 11:30 PM
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Prop up a failed industry whose workers are compensated on average $72 per hour in wages and benefits. Pump and dump some more sand on the east coast beaches in hurricane alley for the folks who can afford to live there. Spend it ALL beacause it is certain to bring back the jobs, the 401k, and economic prosperity for everyone...Isn't it??? My crystal ball sees millions flocking to their nearest Chevy dealership to trade in thier Toyota and Honda for one of these fine products, literally just millions lining up that there will be such demand that the reconfigured, taxpayer owned American auto companies just won't be able to keep up with demand. Spend it, I say!
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Gertie
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12-03-08 2:06 PM
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CORRECTION; The amount of money that the automakers are asking for is $34 billion, not $25. People won't flock to GM cars anymore because they just might be out of business soon enough anyhow. Ford's restructuring plan involves closing 600 dealerships. Would you buy a Ford knowing that you might not be able to get it serviced at your local Ford dealership?
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Virginia
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12-03-08 11:59 AM
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Please ---- don't lay all of the blame for the "Big 3" problems on the UAW and pension and health care for retirees! Just recently, I was asked (by an anti-union individual)why a member of UAW should be paid as much as he/she is. When you have CEOs and upper management making several million $$ (yes, millions!)a year, why shouldn't the workers actually making the product the company sells make a comparable wage(not that $45-50/hr****pares)? As for reitree benefits, those workers were PROMISED retirement packages. Let's take a look at all the years the Big 3 automakers have been in bed with the big oil companies! The US has had the technology for years to create and build bybrid cars - foreign automakers just sped right by us..... in their fuel efficient, hybrid cars! Loan $$ to the companies and save jobs - kick out ALL of the management!!!
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