Auto dealers: Bailout needed

By Diana Mazzella
Staff Writer

Saturday, November 22, 2008

Some local car dealers believe a federal loan to automakers is necessary to prevent massive layoffs nationwide while another says it won’t solve any problems.

“I don’t think bankruptcy is an option for the automotive industry,” said Wayne Perry, president of the Perry Auto Group with locations in Elizabeth City. “If they fail, I’m just afraid this country’s going to be in the biggest mess you’ve ever seen in your life.”

He said local dealers of American-made cars would see fewer sales because of a consumer concern about the stability of car warranties.

“Why do I want to buy a product that if something happens to it, nobody’s going to be there to service it or who’s going to pay for the repairs if the car does break down?” Perry said of customers think manufacturers might declare bankruptcy.

The proposal in Congress for $25 billion in loans to major American auto manufacturers, specifically Ford, Chrysler and GM, has been put on hold while Congressional leaders wait for the companies to create plans for how they will use the money.

Bruce Biggs, president of Biggs Pontiac, Buick, GMC and Cadillac, said he would not understand if Congress doesn’t extend a loan to the manufacturers.

“I can’t believe that’s going to happen,” Biggs said. “But the indecisiveness of Congress is making the situation worse. People that ... would buy a new car are putting off their buying decision until something happens with this request.”

Car dealers are already facing fewer sales due to fewer people willing or able to buy a car on credit and the summer’s high gas prices.

“The car business was off at first, I think, because of the $4 gas and then after that came the credit crisis,” he said.

Perry said the loans are vital, but individual local dealers may not see demand for new cars return to what it was until possibly the next few years.

Perry and Biggs point to the thousands of dealers, parts suppliers and auto workers throughout the country who could go out of business or lose their jobs if the companies go bankrupt.

They believe businesses like theirs — Perry’s dealership has existed in some form for 94 years — will suffer if the manufacturers aren’t given federal aid.

“The automotive industry is ... just too important to our economy to let it go out of business as we have known it these past hundred years,” Biggs said.

Jonathan Davenport, owner of Alliance Nissan in Elizabeth City, disagrees with the loan idea and thinks filing for Chapter 11 bankruptcy is the most efficient solution to the manufacturers’ woes. Nissan, as a foreign car company, would not have been awarded a loan as part of the aid plan laid out this week.

He sees the request as a way to get quick, but ultimately useless, cash from the government before the companies find long-term solutions in the private sector.

The American auto industry, he said, is constrained by old technology, bad deals with unions and vehicle and dealership redundancy. Some dealerships are selling almost exactly the same car under different manufacturer names.

“They’ll come back a much more vibrant business because they won’t have so much expense” if they file for bankruptcy, he said.

He admitted that bankruptcy would result in some layoffs, but that it could preserve the industry for the long-term future and give it the time it needs to become competitive with imports. The concern about warranties should not be realized if the car companies were investing the funds used for that purpose as they should, he said.

Meanwhile, all agree there will be a future for the auto industry, in one form or another.

Biggs said American car companies have already agreed to make new cars more fuel efficient, as some congressional leaders suggest, which will take several years.

Perry said he thinks it’s fair for Congress to ask for more fuel efficient vehicles and that the industry needs to “take drastic steps to be competitive again.”

Tom Simms, owner of Toyota of Elizabeth City, believes some kind of federal aid is needed by the auto industry, but he thinks it should go to the dealers where it would be of most use.

“I think it should go to the dealership level to help sell cars ... in the form of rebates, special financings, things like that,” Simms said.

He said it’s the dealers that account for a large chunk of jobs in each American community. He’s approached every day by civic groups, churches, school sports teams and other charitable groups for donations for their events.

“I think the dealers have a lot more to lose than the manufacturers do,” Simms said.