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NADA Headlines (Aug. 9, 2010)

Barofsky: Washington Post Gets It Wrong on Dealer Cuts

(The following is a letter-to-the-editor of the Washington Post by Neil M. Barofsky, special inspector general for the Troubled Assets Relief Program, countering the newspaper's criticism of his office's findings on dealership closures.)

The July 20 editorial about our automobile dealership termination audit ["Treasury's back-seat driver"] misapprehended both my office's proper role and the audit's findings. First, The Post criticized the office of the special inspector general as a "back-seat driver." Our mandate from Congress is to conduct after-the-fact, in-depth reviews of Treasury's decision-making process in its administration of the Troubled Assets Relief Program, and that is exactly what we did in this audit. Second, the editorial implied that the audit criticized the decision to use TARP funds to support the automobile manufacturers, which is not the case; rather, it addressed the decision-making process that led Treasury to reject General Motors' original plan to reduce its dealership network over time in favor of more immediate terminations. Read more from The Washington Post.

Mum No More: Marchionne to Address Chrysler Dealers

DETROIT -- Chrysler Group CEO Sergio Marchionne plans to address dealers en masse for the first time since taking control of the company after it emerged from bankruptcy in 2009, Chrysler and dealer sources say. Marchionne will appear at Chrysler's dealer show scheduled for Sept. 13-15 in Orlando, Fla. Chrysler has not held the dealer meeting since October 2007, soon after Cerberus Capital Management took majority ownership in Chrysler from Daimler AG. Then-CEO Bob Nardelli and co-President Jim Press addressed that meeting. Some dealers see Marchionne's decision to speak to them as long overdue. Read more from Automotive News.

Whitacre: Massive Makeover Reshapes GM's Retail Landscape

General Motors Co.'s remaining U.S. dealers are in the midst of the largest store makeover in the company's history, CEO Ed Whitacre said. Whitacre, speaking last week at the CAR Management Briefing Seminars in Traverse City, Mich., said 300 dealerships have been upgraded this year and a total of 1,000 upgrades will be finished by year end. He also said GM will have 4,500 U.S. dealerships as of Nov. 1 -- about 25 percent fewer than before its bankruptcy last year. GM had targeted 2,064 dealerships for elimination of at least one brand by October 2010. Chrysler shut down 789 stores last year. Read more from Automotive News.

Many Mercury Dealers Hold Off on Settlements

Many Mercury dealers are reluctant to sign their settlement deal with Ford Motor Co. because they want larger payments. Many dealers aren't sure of their options but know they don't like the offers. Of the 1,712 Mercury dealerships, about 700 have signed Ford's compensation agreement, the automaker says. "There's no question that dealers feel Ford's offers are not a true value for the franchise," says Mike Charapp, a McLean, Va., lawyer who represents dealers. "Ford's contention, as I understand it, is they'll broaden the Lincoln lineup, and the dealers will pick up the sales that way." Some Mercury dealers fear that if they are left with only Lincoln, they will go out of business. "For some dealers, the loss of Mercury will lead to the destruction of their Lincoln franchise," says Charapp, the dealer lawyer. "They have legal cause now to argue that by terminating Mercury, it's a constructive termination of Lincoln also." Read more from Automotive News.

NADA Used Car Guide: Depreciation Trends Stable, Used Values Climb

McLEAN, Va. — Depreciation trends have continued to be relatively steady, according to NADA Used Car Guide, which said the majority of used-vehicle sub-segments have only seen a "minor" softening of their values. .. of the 165 sub-segment/model-year combinations, the used values of only eight showed depreciation of 2 percent or more from July to August. Most of rest fell between zero percent and 2 percent, while a few increased. "For yet another month, NADA used car values only experienced a minor depreciation in most sub-segments, which is a continuation of the pattern that has dominated the 2010 calendar year," stated Jonathan Banks, executive automotive analyst for NADA Used Car Guide. Compared to June, vans showed the heaviest gain (up more than 0.9 percent), while cars climbed more than 0.7 percent and pickups jumped almost 0.6 percent. SUV prices were ahead 0.5 percent from June and CUV prices gained more than 0.4 percent. Read more from AutoRemarketing.

Revenue Rises, and Chrysler Narrows Its Loss in Quarter

DETROIT — Chrysler said on Monday that it narrowed its loss in the second quarter to $172 million and recorded its second consecutive operating profit as sales and revenue increased. The carmaker earned $183 million in operating income, which excludes one-time charges, an improvement of $40 million over the first quarter. “The second quarter operating profit confirms that Chrysler Group is on track to achieve its goals, yet an extraordinary amount of work still lies ahead,” Sergio Marchionne, Chrysler’s chief executive, said in a statement. “Customer traffic in our dealerships and confidence in the company’s future continued to grow.” Unlike G.M., which earlier this year paid off the portion of its loans that remained on its balance sheet as debt, Chrysler is not in a hurry to repay the government, Mr. Marchionne said. He has previously said the company would pay its government debt by 2014. “We have enough cash to pay it all off, but you can’t run a business without cash,” Mr. Marchionne said on July 30. Read more from The New York Times.

BMW Sales Rose 9.1% in July on China, U.S., U.K. Demand

Bayerische Motoren Werke AG, the world’s largest luxury-car maker, said sales rose 9.1 percent in July, spurred by demand from China, the U.S. and the U.K. “We are reaping the benefits not only of the global economic recovery but also of customers’ positive response to our vehicles,” BMW sales chief Ian Robertson said, predicting sales growth “to remain strong” in coming months. BMW raised its 2010 sales target on July 13, forecasting a 10 percent gain to more than 1.4 million units. Read more from Bloomberg.

GM IPO: Tough Sell for Obama Administration?

NEW YORK/DETROIT - U.S. taxpayers were already mad about getting stuck with a $50 billion tab for bailing out a poorly managed General Motors. Now, the Obama administration will try to convince a skeptical public that a sale from a better-run GM is in their best interests. (Chief Executive Officer Ed Whitacre) said on Thursday that GM was preparing its IPO filing. GM will be pushing its IPO while car sales are still well below pre-crisis levels and a full recovery of the U.S. auto industry is still questionable. "With the government's involvement and the extremely unusual bankruptcy that it went through, there are a number of stakeholders who have very conflicting interests," said Linda Killian, a portfolio manager at Connecticut-based Renaissance Capital. "They need to be very clear about what the plans are for the company and who is going to be making the decisions," Killian said. Read more from Reuters.