NADA Headlines (Dec. 8, 2010)
U.S. Democrats Question Obama's Tax Deal
WASHINGTON - President Barack Obama's plan to extend tax cuts for all Americans ran into trouble on Tuesday when his fellow Democrats questioned it and investors dumped U.S. Treasury bonds on fear that low taxes will dig a deeper hole in the budget deficit. While analysts believe Congress will probably approve the deal, Obama faced a rift with many in his party who think he was too quick to compromise with Republicans on taxes. Democrats had sought tax reductions only for the lower and middle class and their support for the deal remained unclear before they hand over control of the House of Representatives to Republicans next month. House Speaker Nancy Pelosi emerged from an evening meeting with fellow Democrats telling reporters that there was "unease" in her party with aspects of the tax-cut plan. That was evident from Representative Sander Levin, who chairs the tax-writing House Ways and Means Committee. "We expressed very serious concerns" about estate tax breaks in the plan that were won by Republicans. Economists say the plan could raise economic growth by 0.5 percent to 1.0 percent next year and lower unemployment. Read more from Reuters.
WASHINGTON -- In a victory for auto dealers and Senate Republican Whip Jon Kyl, President Obama and congressional Republicans agreed on a tentative tax-cut package that would head off a huge increase in the estate tax. The agreement yesterday, which still has to be approved by Congress, would set a maximum estate-tax rate of 35 percent for two years with an exemption of $5 million for individuals and $10 million for couples. “This (proposal) will help restore consumer confidence and speed economic recovery,” the National Automobile Dealers Association said in a statement (Tuesday). The NADA and other groups pushed for the estate-tax rate in the proposal as an alternative to the Obama administration's plan earlier this year for a 45 percent rate with an exemption of $3.5 million per person. The average net worth of an auto dealership was $2.2 million in 2009, according to NADA data, suggesting that most dealerships would not be subject to any estate taxes under yesterday's proposal. About half of all U.S. dealerships are second- and third-generation family businesses, NADA spokesman Bailey Wood said. Read more from Automotive News.
House Democrats continued fuming Tuesday night behind closed doors over President Obama’s tax-cut deal with Republicans, with several saying its estate tax provision is something they intend to aggressively attack—even if they can’t do much about other parts of the package. But exactly where their venting will lead remained uncertain. Vice President Joe Biden as of Tuesday night had been invited to meet today at the Capitol with the House Democrats, but had not yet confirmed he would. “I don’t think the president should count on Democratic votes to get this deal passed,” suggested Rep. Anthony Weiner, D-N.Y., after the closed-door House Democratic Caucus meeting. “I think there are a lot of people who are concerned that it wasn’t a very good deal and more needs to get done.” Much of the criticism voiced on Tuesday focused on the inclusion of an agreement between Obama and Republicans setting the estate tax at 35 percent for individuals, with a $5 million exemption. It is now at zero, and a Democratic bill passed by the House last year would have set it at 45 percent. “It is the biggest of the problems. The inheritance tax was probably the biggest problem because that was the one we had the most leverage on,” (Weiner) said. “That one was going to lapse in January. That’s the one that goes to virtually nobody and it’s a very tiny number of people. The deal that was given away was just that, it was a giveaway.” Read more from National Journal.
Credit continues to loosen and more lenders are giving auto loans to shoppers with credit scores that are considered less than perfect. The number of new car loans that went to these shoppers in the third quarter increased by 12.7 percent compared to the third quarter of 2009, according to Experian Automotive. "Easier access to loans is a positive sign for the auto industry, as tighter loan criteria during the economic downturn represented a significant challenge for automotive manufacturers and their retail networks," said Scott Waldron, president of Experian Automotive. "Making it easier for consumers to obtain credit can only help the auto industry moving forward." Experian Automotive breaks its quarterly analysis down into credit tiers. Auto loans for new vehicles for consumers with nonprime credit scores (620 to 679) increased to 10.86 percent in the third quarter, from 9.79 percent in the third quarter a year ago. More subprime car shoppers (550 to 619) also received auto loans for new vehicles, up from 5.66 percent a year ago to 6.61 percent in the third quarter. Deep-subprime shoppers (550 and less) were up from 1.46 percent to 1.59 percent. "Overall, our Q3 analysis shows that there are very positive signs for the automotive lending industry," said Melinda Zabritski, director of automotive credit for Experian. "With delinquencies down and less money in their portfolios at risk, lenders can be a little less conservative in their lending strategies. Consumers still have the impression that lending is extremely tight, so it will be important for lenders and automotive retailers to educate car shoppers that there are more loans available to a wider group of consumers." Read more from AutoLoanDaily.com.
Hyundai Motor Co. may add two luxury models and create a luxury brand that would likely be called Genesis to compete directly with Toyota Motor Corp.'s Lexus and other upscale makes, Hyundai's top U.S. executive said. The South Korean auto maker, which has boosted its U.S. market share 50% in two years, is evaluating whether to build a four-door sports car akin to BMW AG's 3 Series as well as a crossover utility vehicle like the Lexus RX 350. There are three branding scenarios under consideration. The most likely is to create a subbrand called "Genesis," and sell the models under the same dealership roof as Hyundai but in a separate part of the showroom, possibly with dedicated salespeople, said John Krafcik, the president of Hyundai Motor America. The other scenarios are to keep the premium cars badged as Hyundais, or—in the most ambitious move—spin off the brand into separate dealer facilities, much like Lexus or Honda Motor Co.'s Acura, Mr. Krafcik said in an interview. "One of the keys to this plan is how well the Equus does," Mr. Krafcik said. "We don't need to make a decision for some time" on the branding question. Read more from The Wall Street Journal.