It's Open Season on Dealers

If dealers were once an influential voice in the business, that day is gone.

Evidence of that is Chrysler's national dealer council chairman Jim Arrigo telling dealers there was nothing the council could have done about Chrysler's decision to shutter 789 stores without compensation.

Against a backdrop of National Automobile Dealer Assn.'s exclusion from the dealer-reduction process, and the acceptance by our President of the proposition that a manufacturer's health is linked to reduced dealer numbers, you can see why dealers are being likened to a cholesterol count that's too high.

More perverse is how lenders have taken advantage of this open season on dealers. Renewal fees, rate minimums, line limitations and confessions of judgment have all been incorporated into a short-term scheme of draining dealers of their earnings without any concern for their long-term businesses prospects.

Floor plan interest and merchant services used to underpin a lifelong partnership between banks and dealerships. Today's bankers take a shorter view to harvesting the relationship. Dealers are being pressed to spend time, dollars and sleepless nights navigating a path to survival between manufacturer and lender indifference.

The uncertainty in banking relationships that dealers and their customers are enduring is worse than the bloated facilities and mismatched inventories from yesteryear's unreasonable demands.

Dealers can't know, from month to month, whether floor plan lines will be sufficient, or whether the terms and conditions of those lines will be burdened with fees, floors, changing line limits and draconian covenants that jeopardize profitability.

Many lenders are claiming, with impunity, a right to change their terms whenever they see an opportunity.

What's worse is that bankers have been so giddy with stimulus grants and troubled asset relief (TARP) money that they're finding it infinitely preferable to go through the motions of lending than actually taking the risk of making loans.

I'm wondering how many bankers are secretly avoiding lending new money just to get to the end of 2009 without making a mistake that might cost them incentive money.

Armed with millions of taxpayer dollars, many banks just have to wait out the year to enjoy a taxpayer-funded Christmas bonus without doing anything more than avoiding the pesky business of taking any risk. So much for the stimulus.

But, the notion that our government has wasted tax dollars on propping up banks that are unmotivated to lend, is not new. Neither is the realization that bankers have as little sympathy for dealers as their own manufacturers.

What is worthy of notice is the continuing need for transparency in the automotive equation. Transparency, also known as honesty, is what the car business has been skirting for the past 50 years.

For a half century, manufacturers and banks have used dealers to run interference for their most twisted schemes. They have made dealers the scapegoats for all the ills in the industry.

Only recently have the misdeeds of the big guys become so obvious that their only remaining play was to convince the government that too many dealers is the industry's core problem.

But once dealers are gone en masse, manufacturers and bankers will be naked to the marketplace and their methods and motives will then be subject to the kind of scrutiny historically reserved for retail.

One of the best car guys I know is unassuming and generous of spirit. True to his profession, he uses all the usual tools from eye contact and a firm hand shake, to stapling his card to everything he hands out. He even has a signature mint he offers his customers.

He doesn't sell through intimidation, confusion or sleight-of-hand. He simply crafts his pitch with an abundance of supporting information and an earnest effort to make his opening offer his best offer.

Really though, he is typical of the people I've seen succeed in the business. Truth is, most of the bad guys have been drummed out. I wish I could say the same of banking, manufacturing and politics.

Peter Brandow is a veteran dealer.

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