Dealers Fight for Survival; Push Congress to Approve Bridge-Loan Bill

Automotive dealers are fighting on multiple fronts at the White House, Capitol Hill and with several federal agencies to help save U.S. auto makers as well as themselves.

The first order of business is convincing Congress of the urgent need for an immediate bridge loan for General Motors Corp. and Chrysler LLC to help them stave off bankruptcy over the next few months.

Congressional Democrats and the White House agreed on a bill late Tuesday that the House could vote on as early as today.

Dealer efforts on Capitol Hill supporting the auto-stimulus bill have been “intense,” a National Automobile Dealers Assn. member tells Ward’s.

More than 150 automotive dealers and their state association directors flew to Washington Monday and Tuesday to lobby Congress to support the loan package. Meetings with Congressional members are continuing today, NADA Chairman Annette Sykora says.

The NADA organized the fly-in and divided the dealers into several groups, sending them armed with a list of talking points to targeted Congressmen. The trade group brought in the dealers after deciding late last week to throw its support behind the bridge-loan legislation.

“Congress still needs a better understanding of what is at stake for Main Street if lawmakers fail to act on an automotive-stabilization package,” Sykora says. “(Congressional members) are finally stopping and listening to what we have to say. We’re meeting with the right people, and it seems as if they finally understand the urgency.”

However, media reports say some Senate Republicans are threatening to derail the loan package. A report Tuesday in the Roll Call, a newspaper covering Capitol Hill, says Sen. John Ensign (R-NV) is threatening to place a hold on the loan package, claiming “major changes need to happen to that bill before it goes through.”

Ensign complains the bill was authored only by Democrats, although reports says the White House was involved and managed to win certain concessions including tougher oversight of the auto makers’ restructuring efforts.

Sen. Richard Shelby (R-AL) and Sen. Mitch McConnell (R-KY), both of whom oppose the bridge loans, declined an invitation to participate in helping put the bill together over the weekend, the Roll Call says.

Sykora says Senate Republicans indicated in meetings yesterday they were upset at not being included in the drafting of the bill.

Nevertheless, many dealers are cautiously optimistic. One member of the dealer contingency, who requests anonymity, says, “I have to think that somewhere in this building there are serious discussions going on among the senior (Congressional) leadership that will lead to a deal.”

Dealers believe several politicians are on the fence, including Sen. Chuck Hagel (R-NE), Sen. John Cornyn (R-TX), Sen. Norm Coleman (R-MN), Sen. Elizabeth Dole (R-NC) and Sheldon Whitehouse (D-RI).

Although the bridge-loan bill is expected to survive a House vote, passage by the Senate will be dicey. Sen. Harry Reid (D-NV) indicated Tuesday that a vote might not happen until early next week and threatened to keep the Senate in session over the weekend.

The Senate has to work through several procedural issues that could derail the bill before it makes it to the floor. Importantly, the proposed legislation needs 60 votes, including 20 from Republicans, to overcome any filibuster efforts that some senators are threatening to enact.

Although NADA is concerned federal funding provided to auto makers might result in the elimination of some dealers, being denied financial assistance is a far worse alternative, officials say. Many dealers view it as winning the current battle in order to survive to fight the next one.

It’s “one battle at a time,” Sykora says. “Unfortunately, the industry needs money now.”

According to some NADA officials, the specter of a powerful “car czar” also is troubling because the person conceivably can require GM and Chrysler to shed brands and dealerships.

“We’ll just have to work hard to educate that person that dealers are not cars, if we get to that point,” one NADA official says.

The trade group says it has been careful not to ask Congress for money for fear dealers will be viewed as part of the problem, rather than the solution.

Instead, NADA is looking to Federal agencies in an effort to generate floor-plan assistance for dealers. The group has had several meetings with the Small Business Admin., the latest on Sunday, to convince officials to redefine what a small business is – at least for auto dealers.

The current definition is based on a business’ annual revenue or gross receipts. Only dealerships with less than $29 million in yearly sales are eligible for SBA loans. While many dealerships operate as small, family-run operations, their revenue (an average of $33 million) far exceeds the standard set by the SBA, primarily because vehicles are big-ticket items.

NADA is asking the SBA to base dealer loan eligibility on the number of employees, rather than revenue. Sykora and other officials of the trade group say they hope the SBA announces a decision this week.

NADA officials in recent weeks also have worked with the U.S. Treasury Dept. to craft a plan to spur car sales by providing banks and financial institutions the confidence to begin lending again.

The Federal Reserve will establish a $200 billion Term Asset-Backed Securities Loan Facility (TALF), which should facilitate the issuance and sale of securitized auto loans. The Treasury Dept. will provide $20 billion of credit protection using funds from the Troubled Asset Relief Program to the Federal Reserve in support of the TALF.

Another key point of TALF: The Federal Reserve will maintain the ability to clarify its reach later, which NADA hopes will lead to the agency using the funds to establish liquidity for floor-plan financing for dealers. Sykora expects that to happen later this week.

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