NADA Headlines (May 17, 2010)
Auto Dealers Campaign to Fend Off Regulation
WASHINGTON — After nearly a quarter-century of selling pickup trucks and cars in North Dakota, Donovan Berscht had to shut one of his dealerships last year as Chrysler downsized. Now he is worried that a second financial jolt — this time the push for toughened economic oversight in Washington — could batter his remaining Chevrolet-Buick dealership. If President Obama has his way, loans at auto dealers would be put under the purview of a new federal consumer protection authority to guard against fraud and abuse. The prospect of increased regulations, Mr. Berscht said, “could force us out of the financing business,” and it has him so concerned that he traveled to Washington last month to ask Senator Kent Conrad, a Democrat and one of his senators, for quick relief. Through their lobbying arm, the National Automobile Dealers Association, the dealers have hired a crisis communication team, taken out full-page newspaper advertisements, and organized trips to Washington for dealers like Mr. Berscht to buttonhole lawmakers and make their case. Their basic message, like those of many other industries threatened by tighter regulation, is that they did not cause the financial crisis, and they should not be penalized for it through a burdensome and costly new regulatory structure. Read more from The New York Times.
Editor's note: NADA Legislative Affairs continues to strongly urge dealers to contact their senators in support of the bipartisan Brownback amendment to the financial reform bill-S.3127. "Dealers need to have direct conversations with senators and their key staff to explain that, contrary to media reports, the Brownback amendment does not repeal or alter any existing consumer protection law regulating auto dealers," says David Regan, NADA vice president for Legislative Affairs. "All auto loans will continue to be fully regulated under the Brownback Amendment." Any dealer, bank, or other finance company that actually underwrites and funds auto loans would be subject to the new agency, Regan explains. Auto dealers who simply assist customers to find auto financing would still be regulated by federal and state consumer protection laws. "Despite what opponents suggest, unfair and deceptive practices are currently illegal and would remain so if the Brownback amendment is passed," Regan says. A vote on the Brownback Amendment could occur as early as tonight. Senators can be reached through the Senate Switchboard at 202-224-3121. Brownback amendment background information can be found at www.NADA.org/Brownback.
Sen. Sam Brownback (R-Kan.) is fighting back against a Defense Department push to regulate auto dealers under the Wall Street overhaul bill. In a letter to Undersecretary of Defense Clifford Stanley and Defense Secretary Robert Gates, Brownback is seeking specific information about how auto dealers and auto-loan financing impact members of the military. The Defense Department, alongside the Obama administration, has pushed loudly for auto dealers to be covered under a new consumer financial protection office that is included in the Wall Street overhaul bill. The House exempted auto dealers, and Brownback is the main backer of an amendment to the bill that would carve out the dealerships. The amendment could come up for a vote in the Senate this week. The National Automobile Dealers Association is strongly supporting the Brownback amendment. In the letter, Brownback is seeking specific cases and examples of how auto dealer practices are hurting members of the military. "Is it the position of the department that auto dealers pose a specific threat to military readiness?" Brownback wrote. Brownback also took issue with the Defense Department relying on a "non-scientific poll" of complaints against dealerships. Brownback is asking the department why it did not look at a broad database of complaints maintained by the Federal Trade Commission. Read more from The Hill.
A spokesman for Senate Majority Leader Harry Reid said the Nevada Democrat was “likely” to file cloture on the financial-overhaul bill Monday, which means the Senate could vote as soon as Wednesday on its final passage. Lawmakers have already made many key changes to the bill through a variety of amendments, but multiple other high-stakes amendments await in the next few days that are expected to draw scrutiny from Washington, Wall Street, and voters. Sen. Sam Brownback (R., Kan.) is offering one of the most anxiously awaited amendments, which would prohibit a proposed Consumer Financial Protection Bureau at the Federal Reserve from enforcing new rules against auto dealers. The White House is trying to kill the amendment, but the vote is expected to be very close. Auto dealers argue the financial-overhaul bill would unfairly punish them for mistakes made by Wall Street. Read more from The Wall Street Journal.
DETROIT -- General Motors Co. says it rode cost cuts and strong sales of new models to an $865 million first-quarter net profit, boosting its plans to go public. The automaker posted an operating profit of $1.2 billion from January through March, while generating $1 billion in free cash flow. GM was able to match the industry's 16 percent U.S. sales gain in the first quarter despite selling Saab and winding down Hummer, Saturn and Pontiac. GM also said last month it had fully repaid the balance on more than $8 billion in U.S. and Canadian government loans extended as part of its bankruptcy. The repaying of the loans and the completion of the 2009 accounting results were two key steps GM needed to make toward launching an IPO. Read more from Automotive News.
The U.S. Treasury, 61 percent owner of General Motors Co., is talking with several banks about advising the department on the company’s return to public trading, said a person with direct knowledge of the matter. Greenhill & Co., Lazard Ltd. and Perella Weinberg Partners are among banks interviewed by the U.S. Treasury Department about an initial public offering of General Motors Co., said the person, who asked not to be identified because the deliberations are private. A decision may not be made until the third quarter, said the person. Chief Executive Officer Ed Whitacre wants GM to return to the auto-lending business before holding an IPO in the fourth quarter, people familiar with that matter have said. Read more from Bloomberg.
Volkswagen AG, Europe’s largest carmaker, said global sales increased 11 percent in April, helped by growing demand in China and the U.S. Business for Volkswagen may become “more difficult” in the second half of 2010 as trade-in incentives expire in some European countries and local taxes are implemented, sales chief Christian Klingler said on April 29 when the carmaker released first-quarter results. “Despite the very positive performance we’ve seen to date, we remain cautious on the outlook for the year,” Klingler said in today’s statement. “It is still very difficult to predict macroeconomic developments.” Read more from Bloomberg.
Auto Makers Say Timing of Changes is Unrealistic; Lawmakers Agree to Rethink
WASHINGTON—Congressional Democrats may scale back some provisions of an auto-safety bill after car makers criticized the measure for mandating rapid and costly rollouts of new technology and eliminating their right to question government-imposed vehicle recalls. The bills also would remove a cap on civil fines for safety lapses by car makers and would empower the top U.S. vehicle-safety regulator to unilaterally order a vehicle recall. But industry representatives told lawmakers at a House hearing last week that the mandates for new technology came with unrealistic deadlines. They also objected that the bills would give too much power to regulators while impinging industry's rights to appeal decisions. Read more from The Wall Street Journal.
Representing more than 400 new-vehicle dealers in Missouri, I see these businesses continue to feel the crunch of the financial crisis. I welcome financial reform for consumers and businesses who cannot afford another meltdown. However, I am troubled by “Wall Street reform legislation” that could limit or eliminate these dealers’ ability to help customers get financing. Auto dealers already are regulated by the Federal Reserve Board and the Federal Trade Commission. For an industry struggling to provide for consumers who also are struggling, this is a mistake we cannot afford. I urge our senators to support Sen. Sam Brownback’s amendment to eliminate dealers from the bill. We can’t afford to curb auto sales when our economy is just showing signs of stability. Read more from The Columbia Tribune.