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from an article in the Star Tribune:

Restructuring plans that affect hourly workers, plant managers and suppliers also will hit dealers.

Auto dealers received a yin-yang punch this week: good news about tax goodies embedded in the stimulus package for new car buyers and bad news that dealers could face costly concessions under the massive bailout plans being proposed by Chrysler and General Motors.

The automakers are hoping to secure $38 billion in total federal aid and are out to prove they can slash costs and survive a questionable future. GM has already received $13.4 billion of its requested bailout money. Chrysler received $4 billion. The rest will come only if the feds approve their restructuring plans.

During a conference call with Chrysler executives Tuesday night, dealers in Minnesota and around the country learned more about those plans -- and that they would share in the pain as Chrysler plans to lay off 3,000 more workers, shut down an unspecified production line and cut dealer margins.

In a statement issued Wednesday, Chrysler officials said the company would cut costs and improve cash flow through a number of initiatives, including reduced dealer and service contract margins and eliminating the practice of underwriting the cost of filling vehicle fuel tanks.

Chrysler spokesman Rick Deneau said dealers would give up something along with union workers, suppliers and managers. The concessions are "really mandated if we are to get the remainder of the [federal loan] money that we had originally asked for," Deneau said. "So everyone does have to come to the table."

Chrysler said this week that it would cut 3,000 union jobs. Managers lost 401(k) matches, incentive bonuses and merit pay. Retirees lost their life insurance. Now it's time for dealers to give something too, Deneau said, adding that no one was surprised by this.

All 84 Chrysler dealers across Minnesota will be affected. But Tom Leonard, owner of Fury Motors in South St. Paul, said the concessions are not a huge deal.


"If that's my negative, I am going to do somersaults," Leonard said, noting that Chrysler's fuel funding has long been spotty and that dealers ultimately control their margins because they dictate a vehicle's final sale price.
Leonard was one of 3,000 dealers to participate in a conference call with Chrysler leaders Tuesday night as they learned about the latest cuts.

Unlike the GM plan -- which looks to shed 47,000 workers, close five more plants, consolidate more dealerships, secure billions more in federal loans and phase out its Pontiac and Saturn brands -- Chrysler's plan leaves its brands intact.

"Nothing changes," said Chrysler spokesman Stuart Schorr. "We continue to do business and invest in new products. What we have laid out is a plan that gives us solid footing to continue for many years."

Chrysler and GM must wait until March 31 to learn if the government approves their restructuring plans and grants their requests for aid.
Ford Motor is not requesting bailout money.

For now, automakers and dealers are looking to this week's stimulus package for a boost. "We think it will restore some confidence," even if the credit crunch continues to suppress auto sales, Deneau said.

Under the new law, car buyers can deduct the state sales tax on new vehicles from their federal taxes. The deduction applies to vehicles under 8,500 pounds that cost less than $49,500.

"Those caps are huge," said Scott Lambert, spokesman for the Minnesota Auto Dealers Association. "The taxes [6.5 percent in Minnesota] are on the first $49,500 of the vehicle."

To qualify, sales must take place in 2009 and buyers must make less than $125,000, or $250,000 for couples.

"That's pretty high," Lambert said. "We are hoping this is a real consumer incentive for us. I assume the dealers will make a big deal out of this."

Leonard said his Fury Motors dealership would advertise in newspapers, TV and the Internet -- "all talking about the stimulus. And I am putting a billboard up [at the dealership]. Over the top it's going to say, 'Our Stimulus Package,' and show an orange Challenger" along with the tax break, his zero-percent financing, $1,000 rebate and employee pricing. He said the vehicles would sell below the dealership's cost.

At Saturn of Rochester, sales manager Chad Duellman helped a customer with questions on a midsize 2009 Outlook SUV. The new tax credit "should help business out a little" and bring in more customers, Duellman said. He would not comment on the possibility that GM might decide to sell or kill its Saturn brand.

If it does, it would be the latest of many blows to the industry. The Minnesota Automobile Dealers Association's 435 dealer-members have all suffered setbacks as the recession and credit crunch stifled big-ticket purchases. More than 60 Minnesota dealerships have folded in five years because of consolidations and declining sales, Lambert said.
Paul Taylor, chief economist for the National Automobile Dealers Association, expects the tax incentives to boost car and truck sales around the country "by several percentage points."

As of the fourth quarter of last year, U.S. sales were declining so fast that the number of vehicles sold was on pace to sink below the number of cars that are scrapped each year, Taylor said.
 
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