Bond Holders View of GM

Bond Holders View of GM

The auto industry has been in a state of flux for the last year, however, in the last 6 months things have really heated up as you can read from my previous report on the state of the auto industry. It isn't all bad, especially with people like Chris Kilcullen who are starting up campaigns like Test Drive America, a promotion focused on getting American buyers to buy American again (read more here). Unfortunately, some of the news coming out of the automotive industry is still negative. The latest press release to come across my media alerts was titled: Colorado State Rep. Joe Rice and State Sen. Chris Romer Object to Treatment of Auto Dealers by GM and Chrysler.

 

This isn't exactly the kind of press that the American auto industry needs and it is definitely not what the American consumer wants to hear when they are shopping for their next small and economic car. So what is Rice and Romer's beef with GM and Chrysler? It is actually pretty simple. They and the Colorado Automobile Dealers Association (CADA) allege that GM and Chrysler falsely claim that they terminated dealerships because they are cost centers to the business. The manufacturers' explanations for the terminations has been that it was a cost saving measure. Rice, Romer and the CADA claim that this is false. There statement says that auto dealers are profit centers NOT cost centers. Furthermore, they claim that dealerships make up as much as 90% of a manufacturer's revenue.

 

Chrysler is sizzling

Chrysler is sizzling

More than the above, they claim that since there are laws in Colorado protecting dealerships from certain termination actions and other actions from the manufacturers, they believe they have legal recourse. To add insult to injury, these aforementioned state laws were circumvented by federal bankruptcy laws when GM and Chrysler filed for bankruptcy. This process has caused in the representatives' and CADA's eyes a loss of jobs, revenue and a blight of empty store fronts.

Read the press release below for more information and if you have a comment feel free to leave it right here on the site.

 

 

NEWS ADVISORY

MEDIA CONTACT:

Tim Jackson

President

Colorado Automobile Dealers Association

303-282-1448

[email protected]org.

 

Colorado State Rep. Joe Rice and State Sen . Chris Romer  Object to Treatment of Auto Dealers by GM and Chrysler

NOTE:  Complete copies of their letters are attached.

WHO:       

State Representative Joe Rice (D) Littleton

State Senator Chris Romer (D) Denver

WHAT:

Sent letters of objection to CEOs of GM and Chrysler over their termination of Colorado auto dealers

WHEN:

Letters dated:  June 30, 2009

Information released to media: July 3, 2009

WHY:

In their bankruptcy filings, GM and Chrysler promoted the myth that their auto dealers were a cost center and by terminating select dealers the manufacturers would save money.  This is false. Auto dealers are profit centers, not cost centers and provide as much as 90 percent of manufacturer's revenue.

Actions by the manufacturers have caused extensive job losses in the state, dealer closures, significant loss of tax revenue to local municipalities and the state, and blight with empty storefronts. 

Fourteen (14) Chrysler dealerships were terminated in Colorado; while 15 GM dealerships were terminated.

Furthermore, all 50 states have motor vehicle franchise laws that protect consumers in their purchase of a motor vehicle.  These laws also protect automobile dealers from unfair mandates by manufacturers.

Rep. Rice and Sen. Romer sponsored SB09-091 during the 2009 Session of the Colorado General Assembly to protect Colorado's 260 automobile dealers.  SB09-091 passed out of the General Assembly with the support of 93 percent of legislators.  Governor Bill Ritter supported this legislation from the beginning and signed it into law on April 2, 2009.  The bill became law on July 1, 2009.

When Chrysler and GM filed for bankruptcy, all state franchise protections for dealers and consumers were circumvented by federal law.

Colorado law has several protections for automobile dealers that the manufacturers do not have to honor due to bankruptcy.  They are:  Payment of rent on the dealer's building for one (1) year; Payment of the goodwill value of the dealership; and an obligation to buy back inventory and parts of a terminated dealer.

Sales and service of new and used motor vehicles in Colorado account for 20 percent of the total sales tax revenue for the state.

ABOUT CADA

Headquartered in Denver, the Colorado Automobile Dealers Association (CADA) was founded in 1933 and incorporated in 1938.  Today, the association represents 260 new car and truck dealers throughout the state and advocates for issues important to the industry including the state’s goal of reducing vehicle emissions. CADA also provides intellectual leadership on industry issues before the United States Congress, the Colorado General Assembly, various federal and state regulatory agencies, city councils, the news media, and the public. For more information, please visit: www.coloradodealers.org.

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 Z. James Czupor  I  The InterPro Group  Principal  303-759-8989 (office)  303-503-6677 (mobile)  www.interprogroup.com 

Letters from Rice to GM and Chrysler

Letters from Romer to GM and Chrysler