An Automotive World Turned Completly Upside Down
It seemed to come unwound in the mid-nineties when Wayne Huizenga began to secretly purchase many of America's largest auto dealerships. Wayne had made a fortune with Blockbuster Video and his waste management firm, Republic Industries. He teamed up with famed dealer turned Southeast Toyota distributor, Jim Moran, who owned twenty-five percent, to hand-pick the best dealers.
Dave Powers, the man behind J.D. Powers, was holding mega-dealer summits and attracting wealthy dealers who flew in in private jets to hear what Brave New World ideas Dave's people were espousing. Ideas like mega dealers would become so powerful that they could market their own products, built by manaufacturers with idle plant time. Dave painted a picture of an entirely new paradigm for the auto dealer. The family dealership that was passed from generation to genration was over. The time for corporate ownership of the automotive franchise was here. Afterall, that was how it was done in Great Britain. Investors from Hong Kong were seen at these soirees.
Republic Industries became AutoNation. Many of us bought into the whole idea. We believed in Wayne. He showed us a movie with a U2 song as the soundtrack I doubt they had the right to use, but it excited me. So did the millions of dollars they seemed to be waiving under my family's nose. But the payment was in the form of AutoNation stock. A stock we should have dumped while it was still worth $44 per share. We were told we could sell right away.
When it was time to cash a few thousand shares in it had dropped $5 per share. I did the math. I had lost tens of thousands of dollars. Welcome to the stock market! I would just wait for it to go back up. It would go back up, wouldn't it? It went, instead, as low as $5...
So now my dad and I are country clubers. To our fellow dealers we looked like the cheshire cat that just swollowed the mouse. One dealer leaned over and whispered in my ear that he wished he could sell his GM deal for the kind of multiple Friends of Wayne were getting. Fast forward to 2009 and we look like geniuses as GM and Chrysler are bankrupt. The headlines we're reading today about Toyota trashing their seemingly bullet-proof brand of quality in a mere week of bad publicity may dwarf the Tiger Woods brand debacle.
Toyota Recall Handled Badly. Reputation for Quality Gone Almost as Quickly as Tiger Woods Brand Image.
Saab Deal is back on.
VOLVO SOLD TO GEELY
The deal between Ford Motor Company and the Chinese holding company will take place in the first half of 2010.
Will Chrysler & Dodge dealers Get Their Franchises Back?
Letters sent to dealers dropped earlier this year will have an opportunity to appeal and get their dealerships back.
HUMMER DEAL FINALIZED TENGZHONG TO BE OWNER
James Taylor, who is not an entertainer, will continue as the CEO.
SATURN TO BE SHUT DOWN GM DECLARES - PENSKE CAN'T GET RENAULT TO BUILD CARS
Saturn will follow Pontiac's fate and be shut down next year by GM. Roger Penske has decided not to buy the company that once was the fancy of the American auto industry. His plan, which was a brightspot in the otherwise grim General Motors bankruptcy, did not involve acquiring any manufacturing plants. He hoped to outsource that to Renault and just operate the dealerships, which is a business he knows well. But now it will be curtains for brand that started with a bang, then slowly faded into obsurity with a lack of fresh product.
CASH FOR CLUNKERS WAS A SUCCESS MOST BELIEVE
When the US Government, which is now in the car business, announced the Cash For Clunkers program they hoped to accomplish several goals. They wanted to stimulate car sales and thus, the economy. They also were hoping to get some cars off the road that get poor mileage - you now, reduce our dependency on foreign oil • help the environment, that kind of thing.
But the program, which dealers thought was impracticle, was tweaked and expanded and helped sell nearly a half million new cars, many of which were foreign-made, critics argue. More Money, more car sales, more polluting cars off the road and more people working. I think it's great, afterall, nothing spurs car sales like a good rebate program.
GENERAL MOTORS IS NOW OUT OF BANKRUPTCY
2,600 Dealers to be axed this year.
GM emerged from bankruptcy after spending a mere 41 days in court. It comes after GM's loss of nearly 90 billion dollars over the past few years. The federal government now owns 60.8% of the automaker; the United Auto Workers & Canadian government own the rest. The US government hopes to sell its interest, but it will take years.
By selling Hummer, Saturn & Saab, dropping Pontiac and thousands of dealers GM is now leaner and ready to take on one of the worst car markets in American history. Former AT&T chairman Ed Whitacre has been elected to run GM's new board & Bob Lutz has been lured out of retirement to leading a rebranding & new marketing plan.
Poof! That is the sound of $172 Billion in debt vanishing into thin air! It's more than double its assets of $82 Billion. If you thought the Sounds of Silence was just a Simon & Garfunkle song, then contemplate the Silence the closing of 11 auto manufacturing plants makes, as well as the idling of 3 others.
On top of the $20 billion American taxpayers have already invested in GM get ready to watch another $30 billion disappear into GM's coffers. It is hoped that government-backed warranties will boost the car buying public's level of confidence in what was the Nation's 4th largest bankruptcy filing on record.
MOTOWN IS IN SHAMBLES
Former NBA great and now Mayor of Motown, Dave Bing, along with Gov. Granholm, are hoping to convince GM to keep their world headquarters downtown in the Renaissance Center.
Chrysler has notified dealers they are out. It was done publicly and without consideration for years of loyalty. Some dealers had recently invested hundreds of thousands of dollars in remodeling theirs stores at the factory's request (read: demand) and now they are used car dealers at best and their inventory is worth pennies on the dollar. Rebates run out soon and nobody is offering to take back the parts or the cars. This couldn't be avoided. The dealers that were cut had below average sales and their balance sheet indicated they were weak. Survival was already in question. Like an injured horse they were shot to put them out of their misery.
CHRYSLER TO BE ACQUIRED BY FIAT
Fiat SpA is acquiring a 20% stake in a bankrupt Chrysler headquarters in Auburn Hills, Michigan. They say they'll take a 20% stake in Chrysler initially, then as Fiat begins distributing Dodge, Jeep and Chrysler automobiles in the US they raise the stake to 25%. It goes to 30% when they build engines in the US and to 35% when they build a car in a US plant that gets 40 mpg. Since Chrysler has no small cars Fiat could provide those, too.
GM LAYING OFF 23,000 FACTORY WORKERS
They are now owned by the US Treasury and United Auto Workers union (89%). President Obama said the US government does not want to be in the car business, so they expect to sell their shares to someone. GM has taken $15.4 billion in loans and may borrow as much as $27 million by year end.
OBAMA WANTS GREENER CARS
President Obama pledged to require cars and trucks built in the future to meet much tougher air quality and tailpipe emissions standards. There was a collective sigh heard from the suburbs of Detroit as American automakers struggle to earn a profit. They claim the added costs of hitting a 35 mpg target by 2020 will make cars more expensive and create a burden on them.
Obama said he wants our economy to be less reliant on Middle East oil and vows his administration will get serious about greenhouse gasses.
States like California and many others that want to write their own standards for air quality that are tougher than national policy set by ex-president Bush are encouraged by this news.
LARGE DEALER CHAINS CREDIT DOWNGRADED
Penske Auto Group & AutoNation, two of America's largest corporate owners of franchised new car dealerships, had their credit ratings downgraded by Standard & Poors. With shoppers being scarce these days in showrooms expect car dealerships to close their doors and lay off hundreds, if not thousands of workers. In the Tampa Bay area Bill Heard Chevrolet has closed, along with two large AutoNation stores, Dodge in Clearwater & Chevrolet in Tampa. A large Ford dealer in Tampa, Ernie Haire, has filed for bankruptcy. more about dealers ...
GM HAS A BIT OF TIME, BUT NOT MUCH
GM is still in real trouble. Their $40,000 Chevy Volt can't compete, much less be their Golden Goose. Somehow they got money out of Washington without coming up with much of a plan. More on the car industry...
CAR DEALERS CLOSING THEIR DOORS
Owning a new car franchise used be synonymous with having a printing press that turned out $100 bills. These days it means negative cash flow, lots of inventory that won't go away and an overhead that is crushing their bank account. Last year 1,000 auto dealers called it quits. More...
Ford Motor is in Better Shape
Ford says they won't need government bailout money. They are betting on importing cars designed for Europe and the economy turning around later this year. They see keeping out of the government spotlight as a way to set themselves apart from the pack. They went to credit markets and pledged all their North American assets before those markets dried up.
But they now must compete with two auto manufacturers that have the US government backing them. An in Europe Ford is crying foul as many governments aren't playing by the rules.
GM Tells Dealers to Wait for their Money
Late last year nearly 6,500 dealers were sent an e-mail by General Motors asking them to wait a couple of weeks for reimbursement of incentive money. Here we go! "The Check's Not Going to Be in the Mail for Two Weeks!" Yikes • GM dealers sold almost 170 thousand cars & trucks last month and are owed an average of $3,400 in incentive "dealer cash." We're talking $575 million! At this point any creditor of GM better cut them off because GM can't pay there bills. More on this story...
Labor Costs Still Higher For Detroit
GM workers average $74 per hour versus $45 for Toyota workers. Their base pay is much lower, but when pensions & other future compensation is factored in the gap is dramatic. GM said Wednesday 30,000 workers will lose their jobs as they work toward equalizing costs.