Chicago Automobile Trade Association

CATA takes credit crunch issue to newspaper editorial boards

November 15, 2010

Restoring the lending spigot for dealers and their customers is imperative to the immediate health of Main Street, CATA directors this month told executives of the Chicago Tribune and the Chicago Sun-Times.

And without the sizable taxes it generates, CATA officials said a failed dealership would leave budgetary craters in state and municipal coffers.

The sermon has been delivered to elected officials across the land, including in a March letter to President Obama that was co-signed by the NADA, the AIADA and the National Association of Minority Dealers.

"Without floor plan financing, an auto dealership will close within a matter of days, triggering additional unemployment and further erosion of the local tax base," the dealer groups stated.

The national dealer groups are asking the Obama administration to work with the Federal Reserve Board and the Treasury Department to refine the Term Asset-Backed Securities Loan Facility, to invoke any options to restore retail and floor plan lending.

Officers of the CATA board of directors—Chairman John Phelan, Vice Chairman Kevin Mize and Secretary Michael Ettleson—visited Chicago media to explain that the credit tourniquet is a greater problem for them than the woes of automakers both domestic and abroad—even Toyota and Honda are seeking purchasing credit for U.S. consumers from the Japanese government.

Among the points made by the CATA in the meetings:

• Illinois state sales tax collected by CATA dealers—not including local and municipal sales tax—exceeds $645 million. Of that figure, General Motors, Ford and Chrysler franchisees account for more than $415 million.

"When just one dealer goes out of business," the CATA directors said, "it can leave a six-figure hole in the budget of a local town or village. Some villages count on dealerships for more than 50 percent of their annual operating funds."

• If GM or Chrysler are directed to bankruptcy, they most likely will not come out. That would only exacerbate the foreclosure crisis and continue to negatively impact the credit crisis.

• All dealers—of domestic and foreign makes—are challenged to find available consumer credit. Lenders must loosen their qualifying criteria to enable more consumers to secure vehicle loans.

• The manufacturers’ tough work has been done through ongoing restructuring. That work should not be allowed to fail as they complete corrections to their problems.

In a March 17 interview with Reuters, NADA Chairman John McEleney said: "If we don’t fix this wholesale credit issue, this whole thing (the auto industry) collapses. Every week there are more dealers that are being impacted and going out of business."

GM and Chrysler have received $17.4 billion in emergency government loans and have asked for another $22 billion. Ford, the third member of Detroit’s storied Big Three, has not sought any emergency funding and says it has sufficient liquidity to make it through 2009.

President Obama's autos task force has until the end of March to decide whether to grant further loans, as the automakers work to secure concessions from their bondholders and the United Auto Workers union to cut debt.



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