A bumpy ride

As Detroit pleads for aid, Maryland car dealers wait, worry, hope

November 20, 2008|By Lorraine Mirabella | Lorraine Mirabella,lorraine.mirabella@baltsun.com

Around Maryland, dealers who sell domestic automobiles are wondering what the future holds as they watch the big three automakers lobby Washington for financial aid to stave off bankruptcy.

With auto sales at their weakest levels in decades, many dealers fear the U.S. auto industry will collapse without quick approval of $25 billion in federal loans. They say that could lead to widespread business failures and job losses in a sector that employs 26,000 people statewide.

"I don't think anybody can tell dealers what would happen if the unsinkable went out" of business, said Sam Weaver, owner and vice president of Chevy Chase Chevrolet and Chevy Chase Acura in Bethesda. "When somebody says baseball, apple pie and Toyota, that just doesn't sound right."

Dealers, some with franchises for both domestic and foreign brands, say a failure of one or more of the Detroit three would damage more than the auto industry. They predict it could decimate retail sales and lay the cost of pensions on the federal government.

David Williams, whose family has been in the car sales business in Elkton since the 1940s, has seen tough times before and has learned how to cut costs in a recession.

"What I don't have a business model for is a GM bankruptcy," said Williams, president of Williams Family Automotive, which has Chevrolet and Pontiac dealerships on U.S. 40. "I don't know what that would look like from a dealer's standpoint, trying to do business with a company that's bankrupt - from a marketing standpoint to getting paid on warranties and incentives. It would wreak havoc."

Yesterday, executives of General Motors Corp., Ford Motor Co. and Chrysler returned to Capitol Hill for a second day to plead for relief. But the rescue plan appeared stalled as the White House and other leading Republicans said they could not support Democratic proposals to help bolster the industry with a portion of the $700 billion financial bailout money.

"This is a crisis of mass proportions for the industry," said George Magliano, director of automotive research for North America for IHS Global Insight Inc. "One way or another, they're going to have to muddle through this year. It does not appear the money is going to come from this Congress."

The bridge loans would help get the manufacturers through next year but would not address the need to restructure and change product offerings, Magliano said.

"This is only one part of the puzzle, but this is the part the industry needs, because the recession is deeper than everyone thought because of the financial crisis," he said.

If no aid comes from a new Congress early next year, Magliano said, he would expect few options left for GM or Chrysler beyond filing bankruptcy.

Dealers in Maryland have been urging members of Congress to act quickly. In Maryland, 340 auto dealers employ workers with average annual salaries of $50,000, said Peter Kitzmiller, president of the Maryland Automobile Dealers Association. At the association's request, Sen. Barbara Mikulski, a Maryland Democrat, has proposed an amendment, now part of the bailout package, that would allow vehicle buyers to deduct interest on car loans and sales tax through next year.

"For the government to do nothing is wrong, to loan money without conditions is wrong, but to loan money to help these organizations become more efficient and leaner would be a good investment," said Geoff Pohanka, president of Pohanka Automotive Group, which operates 13 domestic- and foreign-brand dealerships in Maryland and Virginia.

In a move to preserve its dwindling cash, GM said this week that it will delay reimbursing dealers for sales incentives by about two weeks.

Kitzmiller said the argument that U.S. automakers no longer make products consumers buy is simply wrong; GM accounts for 20 percent of the U.S. market.

"None of the domestic manufacturers are in this situation because they build too many gas-guzzling trucks or pickups," he said. "They're in this position now because the banking system and the housing market went upside down inside of six weeks, and it pushed them over the edge."

Roman Clark, a sales manager for Heritage Chevrolet Buick in Owings Mills for the past seven years, says he's hoping to weather the storm.

"We're still going to sell cars, and we're still coming to work," Clark said. "Americans just need reassurance."

The Associated Press contributed to this article.

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