More on the GM / Chrysler bailout debacle….from someone affected by it.

Filed under the "Proper Role of Government", which as regular readers know, this is not!

I received, out of the blue, an email from a person who works on the inside of a GM dealership who wishes to get their side of the story which I am publishing below (emphasis mine).  I called her to verify that she worked where the email said she did (and I let her know that) and we had a discussion of how things had gone over the last few months – there is a very large back story that most of us have not heard yet.  Better yet, she has agreed to keep us informed as this plays out (and it is on going with many more "shoes" to drop).

It also will, over time, show the dark side of crony capitalism where success is not measured by how well one competes in the free marketplace but (as shown by Ayn Rand of "Atlas Shrugs" fame) by who you know in Government to protect your interests.  In essence, using Government as the proverbial icebreaker clearing out the competition for you. In full, not the America that most of us grew up in and think that we are still.  The Obama Administration has perhaps brought us closer to that Randian dystopia of socialism.

This is my article regarding our constitutional rights stripped away….Please consider posting it~

As a Comptroller for a GM dealership for almost 30 years, I feel compelled to let the American people, the now 60% stakeholders in the “New GM”, know the shocking truths and the down-spiraling  effects the arbitrary closing of both Chrysler and GM dealerships will have on each and every American citizen. In the following paragraphs, I aim to prove the following:

• that the closing of these privately owned businesses is unlawfulthat these decisions are directed from the government, not the factory executives
• that the closing of dealerships will have a negative impact to the manufacturers’ profit and loss statement
• that the trickling effect will become a financial burden to communities and municipalities
• that this unjust process by the political world of reducing the dealer body will drive the prices of new and pre-owned vehicles up affecting every American consumer

First and foremost, I wish to address the fact that the termination of privately owned small businesses, “dealerships” is unconstitutional, as the Fifth Amendment clearly states you cannot take another person’s property without due process or compensation.  Even in eminent domain, there is an appraised price on the property being taken by the State.  Under the State laws which protect privately owned franchised businesses, the right to due process is mandated; however, bankruptcy laws which trump State laws are being manipulated to carry out a marketing plan devised by the Automotive Task Force, randomly selecting dealers to close by methods of demographics maps and spreadsheets.  Although we elect our congressmen and senators to represent us, the citizens of the United States, when it came to spending billions of the taxpayers’ money, there was not one vote made by Congress, but all decisions are being dictated by an appointed task force.  The task force led by appointed Car Czar, Steve Rattner spent 1.7 trillion of taxpayers’ money thus far as advisors to the Secretary of Treasury.  Ironically, Steve Rattner is married to Maureen White, the former National Finance Chair for the Democratic Party.  This explains so much it’s scary.

Bottom line is this:  The free enterprise system is not to be run by the government, but run by business entrepreneurs.  The dealer, (business owner) should have the ability to decide if it’s not productive to go forward or if they want to continue investing money in their business.

Secondly,

I do not believe the decision to ax dealers has come from the manufacturers, but from Obama and the appointed “Automotive Task Force”, which is comprised of 24 people with financial backgrounds whose total automotive experience sums up to ZERO!  Some of these members do not even drive or own a car!  I just read an article in New York Times stating: “It is not every 31-year-old who, in a first government job, finds himself dismantling General Motors and rewriting the rules of American capitalism.  But that, in short, is the job description for Brian Deese, a not-quite graduate of Yale Law School who had never set foot in an automotive assembly plant until he took on his nearly unseen role in remaking the American automotive industry”.  There was a time between Nov. 4 and mid-February when Mr. Deese was the only full-time member of the auto task force. When Atty. Leonard Bellavia, a lawyer for Chrysler dealers deposed Chrysler President Jim Press, he made the statement, “It become clear to us that Chrysler does not see the wisdom of terminating 25% of its dealers.” He continued, “They are under enormous pressure from the President’s Automotive Task Force.”

In GM CEO Fritz Henderson’s oral testimony to the US Senate Commerce, Science and Transportation Committee he addressed them with the following statement:  “I welcome this opportunity to testify. It’s our obligation to be open and transparent in all we do to reinvent GM, particularly with the American taxpayer as our largest investor.”  However, they are not being open and honest, but just telling the public what they think they want to hear.  He goes on to say, “Yes, consolidations will bring cost savings. A smaller, more healthy dealer network reduces GM’s costs, primarily related to support we provide for information technology systems, dealer and sales person incentives, field sales, service and training, service parts, and advertising. This support costs GM roughly $1,000 per vehicle, or a multi-billion dollar expense.” The first hole I wish to punch in this statement is this: In theory, if GM states they lose $1000.00 per new vehicle sold, then they are doing something wrong.  If they wish to reduce dealerships to sell more units, wouldn’t they lose more money no matter which dealership was selling the vehicle?  In response to GM’s cost for dealer support, I would argue each expense named above.  Individual dealers are charged monthly for technology, training, marketing materials, special tools, etc.  The advertising is charged on each individual vehicle invoice and there are minimal dealer and salesperson incentives.  Furthermore, GM and Chrysler would have to charge more fees to the remaining dealers to makeup for the loss of revenue once received for various expenses such as training and technology from the terminated dealers.  The funny thing is the appointee’s of the Task Force are under the assumption that the dealers are a liability to GM and Chrysler when the dealer is really a source of revenue.  Over and above the line by line expenses, the manufacturers will lose market share to the competition by having less dealerships.  “Hometown” friendly dealerships represent the foundation both GM, Chrysler, and even Ford were built upon.  Our customers are not as loyal to the “brand” as they are to the dealership, the salesperson and the service facility they’ve come to know and trust.  The dealership is the retail representative of the GM and Chrysler product.  We sell their vehicles, parts, accessories and maintain the customer base through marketing, providing a warranty facility for repairs, while absorbing much of the cost to do so.

It goes without saying that the closing of over 2,000 dealerships will directly result in over 100,000 people losing their jobs, forced to collect unemployment.  This is outrageous ~ the government is supposed to be in the business of creating jobs not killing jobs.  The reduced earnings will reduce the tax revenues derived directly from their income and spending will be reduced.  Indirectly, the local community vendors will be drastically impacted as well as the local little league, senior citizens groups, boys and girls scouts, and all the non-profit groups which dealers so generously support throughout the year.  The closing of dealerships means tens of thousands of dollars in state and local tax revenues lost which will drastically impact fiscal budgets which highly depend on this income.  The spin-off effect will result in a further decline in consumer spending affecting the local shops, malls, restaurants and other small businesses which depend on local patronage.  The additional loss of jobs will in no way help our already crippling economy.

Now, a direct financial impact the closing of dealerships will have on you as a consumer is this:  The cost to purchase a new or pre-owned vehicle is going to increase due to the lack of competition between dealerships which drive prices down and keeps everyone “honest”.  Ultimately, the manufacturers will increase the MSRP of units and eliminate factory incentives; hence, keeping in line with new car pricing, the value of pre-owned units will also increase.  This fact is based on relative pricing where the ratio of two products remain constant if there is a notable increase or decrease in pricing one of the products.

I have addressed mostly the issues of the forcefully terminated dealers, or dealers who have received “wind-down” letters thus far.  For those dealers who were chosen to move forward with the reinvention of GM and received participating agreements, it is not a “walk in the park” for them either.  They could be bullied into relocating, building a new facility, overstocking their lots with new units, and the stipulations go on, and months down the road, GM or Chrysler, in their restructuring mode, could decide the dealer is under-performing and terminate them, (steal their franchise) at a later date with no monetary assistance.  They will have no legal rights to petition a new dealer placed in their territory or rights to appeal the manufacturer’s decision to terminate.  One may think the dealer may be better off to just close now!

In closing, I am crying out to the average citizens of our nation to appeal these ludicrous, unconscionable decisions to close dealerships.  Contact your local, state and federal authorities to raise public awareness and create a revolution to stop this nonsense.  What will be next…A pizza parlor task force? A flower shop task force?  We need to reverse this precedent set by government officials which gave appointed individuals the power to interfere in free markets, stripping entrepreneurs of their Constitutional rights!

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Comptroller, <redacted (for now)>, LLC
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