Is Something Burning in D.C.?

WASHINGTON D.C. — There is a lot of smoke, but where's the fire?

You can call it paranoia, or the boy who cried wolf, or Chicken Little, but the American International Automobile Dealers Assn. is convinced the very livelihood of dealers selling import brands is in danger.

So last month, leaders of the association along with members of the Association of International Automobile Manufacturers (AIAM) and Americans for Free International Trade PAC (AFIT-PAC) gathered here at the first International Auto Industry Summit to lay out what they perceive to be the greatest threats.

Other than the Alternative Minimum Tax that Congress may try to increase next year (see pg. 4), the issues about which AIADA is sounding the alarm are not new. Because of the current Democratic-controlled Congress, there is a sense of urgency, though, not evident since the mid-1990s.

Attempts to increase the Corporate Average Fuel Economy (CAFE), the rhetoric against free trade and the perceived possibility that politicians, in order to protect or help American businesses, may create a more difficult environment for foreign companies — such as auto makers — concern AIADA leaders.

The truth is there is a lot of smoke with little fire at the moment. AIADA is reacting more to what the association thinks Congress will do, rather than what it is doing.

But Republican Rep. John Campbell, a former California dealer, cautions AIADA members not to be fooled.

“The Democrats are waiting this year out,” he says. “This Congress likely won't pass much legislation in the next two years.”

The strong possibility of a Democrat being elected president along with 61 seats open in the House of Representatives means there may be a better political climate in which to accomplish their agenda, says Campbell.

AIADA's leadership, though, is not waiting to light a fire under its members.

Jim Press, president-Toyota Motor North America Inc. and this year's chairman of the AIAM, began the urgent rhetoric during a reception at the summit, saying this year's “Congress was elected on the back of protectionism.”

CAFE, though, was the burning topic during the summit.

Press also takes several sarcastic swipes at Congress for suggesting auto makers should increase CAFE of their fleets 4% a year for perpetuity.

A few minutes later, AIADA Chairman and California dealer John Hawkins tossed his notes the staff prepared for him and instead opted for more fiery language telling attendees, “Bad things can happen very quickly.

“Our friends on Capitol Hill are hell bent on having a hanging,” he says, of the CAFE debate. “If they lose an auto maker in the process, so be it.”

About the politicians discussing such a scenario, Hawkins says, “They are so unrealistic, you don't even know where to start the dialogue. Environmentalism has become a religion. People in Washington are worshiping at the temple of climate reform and Al Gore is the high priest.”

Don Beyer, who owns several franchises in northern Virginia, and who was last year's AIADA chairman, smiles when he hears Hawkins' comments. One of few dealers who is a Democrat, Beyer says he is used to the Republican-friendly rhetoric.

Taking a more moderate position, Beyer points out, “If we had raised CAFE 2% several years ago when we had the chance, then we wouldn't have to raise it 4% now.”

Meanwhile, Jack Fitzgerald, another Virginia dealer known for his “green” initiatives tells Ward's, “We have to raise CAFE. We just can't be so reckless about it.”

Mike Stanton, president and CEO of the AIAM is resigned to a CAFE increase, but argues for some flexibility.

“Congress is just picking a number,” he says. “If you pick the number, at least give us an off ramp.”

The next day, the Senate Commerce committee approved a bill requiring auto makers improve fuel efficiency by 4% annually beginning in 2011 and average 35 miles per gallon by 2020. Following 2020, 4% gains would be expected annually after that without a set time frame.

The bill might make it to the senate floor in June.

Campbell urges the auto industry not to play defense on CAFE. He also says the industry cannot keep saying, “No,” to government solutions.

Instead, auto makers and dealers need to get in the game and start offering alternatives, he says.