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Dark Roads Ahead

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by captbilly1eye

Closed to new repliesThis discussion is closed. It stays readable, but it takes no new replies.

Today, I finished reading another depressing article on a Chrysler Franchise Yanking.
http://www.rr.com/home/home/article/rr/9000/8043500/End_of_road_for_4-generation_Chrysler_dealer/1

Perhaps I'm more 'tuned in' because of my 20+ years in the automotive industry or because I lived in Detroit for nearly that long. It just seems to me that we are heading down a very dark road that will ultimately be painfully felt by all of us.

The job losses and future higher taxes should be obvious, but the more insidious and frightening thing to me is the idea that it is now acceptable for a company to ignore legal agreements with private business owners and for our government to back such an action. Like the franchise owner in the article, I too hold the government just as responsible as the company - if not more.

The domino effect that results from the recent events with Chrysler and soon to unfold with General Motors (or should I say Government Motors?) will surely prolong the Recession and end up hitting us all squarely in the wallet.
This will happen due to the great impact the loss of these hundreds of dealerships will have on not only all those employed there, their customer base, other local businesses they do business with, but also on the huge loss of tax revenue for the cities where they reside. The latter seems to have escaped the media and most people.

On that note, be aware social programs that rely on tax revenue never go away. If the taxes they depend on dwindle, the standard course is to find other sources to tap into - other goods and/or services to tax or raising existing rates. Lately, the avenue seems to be heading toward new 'creative' ways to add tax revenue. (see: new Sin Taxes, the proposed VAT tax, the EPA's suggested Cow Fart Tax, etc.)

Even though we may not be directly employed by one of the effected dealerships or the automotive industry, like it or not, that industry is deeply intertwined with our economy. I can't help but believe that the ripple felt by a few now will be the tsunami that hits our own companies and us all in the next few years.

For now, I empathize with those many friends I left behind in Michigan that will soon be out of work. They will soon join the ranks of many other friends that are now laid off - most of whom have been out of work for over six months. I don't see their world getting any brighter in the near future. ...specially when we have a government that seems hell-bent on reducing jobs rather than increasing them. But that's just my opinion.

Does anyone see some type of positive side to this they can share? I could use a 'silver lining.'

.
[edited for dang-burn typos]

37 replies

by jdclyde

for being hard working families instead of union members. You will notice that is the one group that The Obama is not expecting to take major cuts. Payback for the blind lock-step loyalty, huh?

Yet no one is willing to stand up and tell The Obama that this is NOT the change and hope they voted for?

by captbilly1eye

...how many BO supporters now deeply regret their vote.

I can't help thinking more and more will in the next three years.

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by jdclyde

I don't think most of them CAN be honest enough to admit what a mistake it was.

Both because of the total refusal to look honestly at The Obama as a man and his history, as well as buying into something as stupid as bumpersticker slogans of the empty hope and change that were promised by this snakeoil salesman.

Just because he is HALF black is not a valid reason to vote for or against him. Gender was/is just as stupid of a reason to vote for or against someone. To bad that was all the Democrat party had to offer, first female or first half-black man. Big fricken woop.

Then again, if the Republicans would have put up a REAL candidate it would have made a difference.

by captbilly1eye

If what comes of this is a more aware voting public that has a deeper awareness of how we are all interdependent and that when someone 'gets' others have to 'give,' then there may be a benefit. I hope we're not wishful thinking and I hope the cost doesn't cause permanent damage.

by boxfiddler

I dearly hope that the coming darkness is dark enough to bring people back to recognizing what I call 'the immediate' without dragging us to hell on earth.

Much as I enjoy technology, it's brought us to a point that is dangerous to us in 'the immediate'. Ignore, for the moment, the (probable) fact that a (probable) majority of Americans may well no longer know how to survive without the marvelous accoutrement that is technology. A significant number, if not majority, of Americans live in areas where they haven't the space to do what is necessary for survival in 'the immediate'.

Postage stamp lots for those who do manage to own a single-family dwelling. Condo dwellers haven't even that.

Urban/suburban dwellers more than likely aren't allowed deep wells, never mind that electricity over which they have no control powers them. I could rant on, but I think my point is made. A God-awful dependency trap is in place.

Optimistically, we come through what is coming having learned our lesson. We revive ways of living in 'the immediate'. We lose our reliance on technology, without losing our capacity to enjoy it. But this requires a significant paradigm shift.

Historically, we don't learn from our mistakes.

Aren't you glad I answered?

etu < sighs >

by michael jay

CRAP, there is no hope is there.

Or is there, some hope. The midterms are coming up in 2 years. Two years too late.

by boxfiddler

a quote from Frank Zappa.
[i]The illusion of freedom [in America] will continue as long as it's profitable to continue the illusion. At the point where the illusion becomes too expensive to maintain, they will just take down the scenery, they will pull back the curtains, they will move the tables and chairs out of the way and you will see the brick wall at the back of the theater.[/i]

by santeewelding

The dark is already upon us. I judge that by the belly-ups I see all around me.

Learn fire. Then candle-making. Then light.

by captbilly1eye

... to be so formal.

Capt. or Billy will do just fine.
;-)

I have also been known to occasionally answer to "Hey Bonehead!" - but only coming from my wife.

by jamesrl

And both the workers and management play a role in making domestic automakers unable to continue without a radical makeover.

Even before the credit crunch, there were too many domestic dealerships. The manufacturers make money from selling franchises. And they kept selling franchises even as their share of the market dropped. The average Toyota or Honda dealer sells twice as many cars per dealership as a domestic.

Sadly dealerships must close and people will lose their jobs. I feel less sympathy for the ownwers, as most own multiples franchises of different brands including foreign manufacturers.

The recession will pass and people will start buying cars again.

Does anyone think that if Obama did nothing, there would be more dealerships open? That makes no sense to me. Frankly it may have only delayed an inevitable bankruptcy. But when Republican president Reagan bailed out Chrysler, it did come back.

It is too early to tell what will happen or whether the huge expenditures will help the industry retain jobs in the US and Canada. I truly hope that GM and Chrysler survive and reinvent themselves and can pay back some or all of the loans, and that the shares can be sold back to the public by the government.

James

by jamesrl

In my province, there is in every definition of the word, a recession. And it isn't just a few people spending less, its jobs losses. We are now at 9.4% unemployment. Almost 500,000 manufacturing jobs, or about 25% have gone since the peak in 2002.

So while I'm not wishing you ill, from where I sit there is a recession, and people are hurting, including friends and neighbours. And no amount of pollyanna bullshit is going to change that.

James

by captbilly1eye

Whether or not there were too many domestic dealerships or if many should be closed in the name of good business sense was not the point. Although, to that point, I'd ask where then is the justification for closing profitable and successful dealer points?

Nor did I mean to imply that if BO had done nothing there would not be dealer closings. In fact, If anything, it was his administration giving billions in an attempt to prop up failing auto manufacturers that delayed their filing bankruptcy and 'postponed the inevitable' as you put it. If the companies had been allowed to move toward reorganization on their own as they would have been forced to do under the normal course of our free enterprise system, yes, dealerships would have been closed. But the selection of which ones would have gotten the ax would not be up to government bureaucrats. The wrong thing was for the government to become a controlling force in how a private business succeeds or fails. Unlike the Reagan loans to Chrysler, the current bail-outs are targeted more at Controlling private industry rather than Supporting it.

To that point, closing a franchise is one thing. Yanking it while voiding all legal contracts and refusing all responsibility is another! No previous administration would have permitted let alone endorsed such an action. When Chrysler went through its restructuring under Lee Iacocca in the early 80s, many dealers had already closed of their own accord and many others were directed toward closing later. When GM closed the Oldsmobile dealers a few years ago, dealers were compensated for their losses. The clear difference is in how the closings are being handled now. These franchise owners are left with absolutely nothing/NADA except for a white elephant that is the building and property. ... a building and property (inventory included) that they were forced by the manufacture to add to and increase in the past few years. They lost their entire investment, life's work and legacy over night.

The article that was included in the original post was an example of just how these business owners are being screwed without recourse. It is one of several I have read in the past few weeks - one on Audette Cadillac in West Bloomfield, MI and another on a dealership in Wisconsin. None of which were multi-franchise dealers, BTW.

Now to the real point...

Whether or not you work in the automotive industry or your company or business has direct ties to that industry, we will all ultimately feel the repercussions of the recent chain of events. We will feel it through increased government intervention, a prolonged 'Recession,' higher inflation, lower growth, more business closings, higher taxes and increased costs across the board and borders.

Perhaps I should have said 'DarkER Roads Ahead.'
.

[just noticed a funny - Nada ~ N.A.D.A]

[edited for poor grammar]

by jamesrl

It was GM management who decided which brands to kill and which dealers to close. GM Management made the proposal, and unless there is some secret cabal that I'm unaware of, they presented their plan to the government which simply rubberstamped it. Do you really think a bureaucrat went through lists of dealerships with a red pen?

And Obama has said, as has the Canadian Prime Minister (who is a conservative BTW) they they will sell their interests as soon as it is possible. They have stated that they don't want to own GM or run GM, just to keep it going until it regains its feet.

I'm not aware that anyone is voiding legal contracts. Sorry I'm aware of many aspects of a franchise agreement, and from what I know most are structured in favour of the manufacturer's ability to control their brand and have the right to nullify the agreement under the right conditions. It may be one side, and distateful, but I'm not aware that its illegal.

When I talked about not feeling sorry for many of the owners, its not because their individual dealerships are multi franchise, its because most dealerships, in both US and Canada are owned either by dealer groups who own multiple franchises to spread the risk, or by companies that do the same. AutoNation, Penske, Sonic etc. spread their risks by owning different franchises from different manufacturers. The sound theory is that if buyers move from one brand to another, they can still hope to keep the sales in the group. Many automalls are owned by one or two groups even though they dont' shout it by using the same names. So the owners who have multiple frachises have a cushion. I do feel sorry for the mom and pop who have one store and one brand, but competition from the big groups was hurting them anyone.

I know personally dealer principles who are bing forced to close, and some who have survived.

There were compensations from GM for closing the dealerships, though the terms are supposed to be secret. For sure they didn't cover the losses, but it wasn't zero and for some dealers it will be millions.

Yeah I got NADA. I've never been but I hear the tales.

I'm not suggesting I'm happy with government owning shares - I thought the idea of the government asking for the head of GM was wrong. If the entire board felt the same way, that would be fine, but the way it was done was against corporate governance principles.

James

by jdclyde

with The Obama trying to dictate to the Big3, it is likely things will get much worse before they ever get better.

Sure, there are fools out there that demonize the SUV, but in areas where I live a large percentage have trucks because they are required for work.

As The Obama refuses to lead by example, (date night) it shows that his convictions apply only to others.

by nicknielsen

Was helping a friend move into a new apartment complex in Lexington, SC, a couple of months ago (hey, free beer!). According to him, this complex is a "singles" complex for young professionals. (Given the rates start at $850 for 1 bedroom - in a suburb! - I'm inclined to believe him!) His building has 18 units; out of 21 vehicles parked in front of it, 15 were trucks or SUVs. His made 16 of 22.

I'd be willing to bet I could survey employee parking lots outside local medical offices and lawyers offices and get more than 50% trucks/SUVs. How many of these professionals require trucks to do their work?

I've been convinced for years that the SUV is the station wagon for people who wouldn't be caught dead driving a station wagon.

edit: spleling

by nicknielsen

Well-written story, lousy journalism.

I had no idea what city this was until page 4 of the article and if I hadn't googled "Isakson Chrysler", I still wouldn't know what state it was in!

by captbilly1eye

It bugged me, too that the writer seemed so hesitant to identify the location.

But, I have to say, after reading so many similar articles, it doesn't really matter so much where it is exactly anymore ... just that it is happening in our country.

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by captbilly1eye

With the current closings, Chrysler franchise owners did not receive ANY compensation for their franchise. That's why I used the term 'Yanked.' Their franchise agreements were immediately made Null & Void.

The only revenue they were able to glean from the process was when they were forced to sell their inventory to the remaining dealers at a loss.

BTW, most dealerships in this country are independently owned and not part of conglomerates. Also, the government was involved in deciding how the restructuring was performed and what dealers had their franchises yanked. They did this under the guise of vested interest related to the bail-out monies. They did this by showing they now had the power to decide who runs the company and who gets fired.

...and, yes, you are still missing the point.

The main issue was not about the closing of dealerships in and of itself or how it was done. Nor was it about whether Chrysler or GM will survive. The point was and still is on how this will effect us all in the near future. - outside of the automotive industry.

.
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[for those wondering, N.A.D.A. stands for National Automobile Dealers Association & nada means 'nothing' in Spanish]

by thechas

From what I saw of the Chrysler list, and from what very little I have heard of GM franchise closing, it looks like a first year MBA made a spreadsheet and drew a simple line at "X" number of units sold per year.

Small towns and rural areas got hit pretty hard by the closings. Large urban areas, even with dealers nearly next door to each other saw no losses.

I can see where reducing the number of dealers in a given market could reduce inter-brand competition and improve profits.

I don't see where closing a low volume dealer in a small town miles away from any other dealer helps the company. People who live in areas where the local dealer was forced out of business are not apt to drive 50 or 100 miles to an open dealer. They will switch to the brand of one of the closer dealers.

Now, while it will prolong the inevitable, (who ever would of thought of Fiat being a stronger auto company than Chrysler) I believe that the controlled bankruptcies are gentler to the US economy than what would have happened to either Chrysler or GM in a more normal bankruptcy. The biggest part being the funding of the pension and health care funds.

Under "normal" bankruptcy, I suspect that the secured creditors would have held sway and the assets of both Chrysler and GM would have been sold off and both companies would have disappeared. Of course, then all of the dealers would have lost their franchises as there would be no source of Chrysler or GM vehicles for them to sell.

The big negative of all this is that investors are going to be much more cautious about whom the lend money to and what the terms are. It will be much harder for marginal companies to get the funds they need to make changes required to quickly respond to changes in the market.

The silver lining, is that however wounded they are, we still have Chrysler and GM as part of the US auto industry. The alternative would have been Ford, Toyota, Honda and a large number of imported car lines.

Chas

by nicknielsen

[i]The silver lining, is that however wounded they are, we still have Chrysler and GM as part of the US auto industry. The alternative would have been Ford, Toyota, Honda and a large number of imported car lines.[/i]

The corporate headquarters of Honda and Toyota are in Japan, making them, technically, imports, even though some vehicles are assembled in the USA. Mitsubishi, BMW, Mercedes, Nissan, Subaru, Hyundai, and Isuzu also assemble vehicles in the US. Shouldn't they also qualify to be on your list with Toyota and Honda?

Before you start spouting "buy American" rhetoric, you might want to check this story: http://www.urbanreviewstl.com/?p=5962

edit: added link

by boxfiddler

of my 'made in America' autos are assembled from no small number of 'parts' manufactured anywhere in the world but America.

by jdclyde

Debt is renegotiated, not a liquidation.

Can't do that though, because it would not be good for the unions.

by thechas

The big difference between the Chrysler and GM bankruptcies and a normal chapter 11 is that in a normal filing the secured creditors interests are usually protected at the expense of the unsecured creditors.

The only reason either company ended up filing chapter 11 is that the secured creditors refused deals that ended up being better than what they are ending up with.

The secured creditors stuck to their guns because a normal chapter 11 proceeding against either Chrysler or GM would have ended up in chapter 13 with the secured creditors carving up the assets.

Chas

by av .

Change you can believe in. It was even futile for the Clintons to burst that bubble. The Republicans blew it even though their ideas on the economy and healthcare were better, IMO. They didn't have a rock star candidate and they had Bush baggage.

Mitt Romney would have been the better choice for Republicans, but hindsight is always 20-20 vision.

AV

by jdclyde

And yes, McCain was a big mistake, hand chosen by the media. i did not vote for him, as he was liberal-lite.

It is a shame how big business news has learned to control the mindless masses, to get the President they wished for.

Now we all are going to pay.

Nuke war a real possibility for the first time in MY lifetime? Yeah, maybe if we just try to understand them they will be nice to us? How stupid. Say it is alright for Iran to have nuke power, but chastise Israel for making houses. Nice perspective.

by av .

You better believe we are all going to pay dearly for Obama's big plans. Someone's gotta pay for universal healthcare and its not just the wealthy.

The media just has a love affair with the Obamas. Its Camelot all over again. The Whitehouse has a new puppy and a garden. How sweet, but our country is in deep s*t.

The possibility is definitely there for a nuke war in our lifetime. I don't think the US would ever use our nukes, but Iran or North Korea might use theirs. Its not going to be pretty if that happens.

AV

by jdclyde

was created because of the oppressive and abusive policies of Democrats. There was an attack on trucks via taxes, and SUV's were a way around that.

It has now become a battle call for the brain dead to cry about, regardless of if it really is the villain or not. When you look at total emissions, including what it takes to make, the SUV isn't so bad after all.

by jackofalltech

Why would the govt force any company to shut down a profit center? These dealerships do not cost the manufacturer money - they GIVE (in return for merchandise, of course) the manufacturer money! WTH?

I wonder if we'll ever find out what's REALLY going on.

by dadspad

Fiat said they intended to build their US cars in the US. But with a ready made network of dealership from Chrysler why not court them, instead of closing. I can understand closing some, but the numbers do not make sense.

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