Obama Speaks, NADA Responds
By Jake Ruby
Earlier this week Obama made an announcement concerning his plans on how to reconstruct and strengthen the currently suffering Auto Industry.
More specifically Obama concentrated on the two companies, GM and Chrysler. He spoke plainly first assuring customers not to fear buying and investing in these companies during this reconstruction period. Obama states, “Your warranty will be safe. In fact, it will be safer than it's ever been, because starting today, the United States government will stand behind your warranty.” He also wanted to be clear however that the US government will not be in control of these companies, stating it twice, “Let me be clear: The United States government has no interest in running GM. We have no intention of running GM.
What we are interested in is giving GM an opportunity to finally make those much-needed changes that will let them emerge from this crisis a stronger and more competitive company.” Regarding Chrysler Obama expressed a different option, stating a more difficult path preference for the company. It seems Chryslers need for a partner has come to a crossroad with the European company, Fiat. Obama states, “I'm committed to doing all I can to see if a deal can be struck in a way that upholds the interests of American taxpayers. And that's why we'll give Chrysler and Fiat 30 days to overcome these hurdles and reach a final agreement -- and we will provide Chrysler with adequate capital to continue operating during that time. If they are able to come to a sound agreement that protects American taxpayers, we will consider lending up to $6 billion to help their plan succeed. But if they and their stakeholders are unable to reach such an agreement, and in the absence of any other viable partnership, we will not be able to justify investing additional tax dollars to keep Chrysler in business.”Obama went on to layout four steps the government will be taking to help the current auto industry:
“First, we will ensure that Recovery Act funds to purchase government cars get out as quickly as possible and work through the budget process to accelerate other federal fleet purchases, as well.
Second, we'll accelerate our efforts through the Treasury Department's Consumer and Business Lending Initiative. And we are working intensively with the auto finance companies to increase the flow of credit to both consumers and dealers.
Third, the IRS is launching a campaign to alert consumers of a new tax benefit for auto purchases made between February 16th and the end of this year -- if you buy a car anytime this year, you may be able to deduct the cost of any sales and excise taxes. And this provision could save families hundreds of dollars and lead to as many as 100,000 new car sales.
Finally, several members of Congress have proposed an even more ambitious incentive program to increase car sales while modernizing our auto fleet. And such fleet modernization programs, which provide a generous credit to consumers who turn in old, less fuel-efficient cars and purchase cleaner cars, have been successful in boosting auto sales in a number of European countries. I want to work with Congress to identify parts of the Recovery Act that could be trimmed to fund such a program, and make it retroactive starting today.”
In response to Obama’s announcement, the chairman of the National Automobile Dealers Association (NADA), John McEleney, expressed his appreciation towards the presidents plans and his commitment put forth to this important issue. However the chairman also stated two major concerns on behalf of both dealers and customers. He states, “First, if something is not done in the immediate future to restore the auto dealer's access to both wholesale vehicle inventory (or 'floorplan') financing and retail consumer credit, the restructuring plan will not work.” There second concern is to not, “under any circumstances”, allow bankruptcy. The chairman believes, “It would further erode consumer confidence and, therefore, our ability to sell at the retail level. Moreover, it would further exacerbate the availability of credit.” As the auto industry eagerly awaits Obama’s plan for GM and Chrysler over the next 30 days; the question remains whether or not the concerns of the NADA will affect the president’s plans in the end.
