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NADA pushes on all fronts to correct credit situation, stabilize industry

November 15, 2010

By Ray Scarpelli Sr., Metro Chicago NADA Director

Throughout April, the NADA continued to push on numerous fronts to shore up the wholesale and retail auto credit situation and to help stabilize the industry. In mid-April, the NADA met with GM’s Fritz Henderson and Mark LaNeve and in late April, association leaders met with President Obama’s autos task force.

During that meeting, representatives of the administration said they were considering ways to help dealers access money to buy vehicles for inventory through the Small Business Administration. Dealers told the task force that increasing the business-size standards and shifting to an employee-based size standard would help.

Currently, the SBA’s loan guaranty program caps eligibility at $29 million in annual gross receipts, an amount that most dealers surpass. "The mechanism they choose doesn’t account for the fact that cars have gotten more expensive over time, but the returns don’t get larger," says Andrew Koblenz, vice-president of NADA Legal and Regulatory Affairs.

A group of 35 senators, led by Sen. Jeanne Shaheen (D-N.H.) also asked the Obama administration to quickly expand dealers’ eligibility for SBA loans and to restore liquidity for retail auto and floor-plan lending. The letter was initiated by the NADA.

Dealers encounter two major stumbling blocks when trying to push policymakers and legislators on liquidity restoration. One is the lack of familiarity with the dealership business model. Most legislators don’t know that dealers, not automakers, pay to keep inventory, hence the great need for floor-planning credit.

The other is that securitized floor-plan loans don’t tend to experience defaults the way mortgages do. Among other types of collateral, dealers’ personal and business assets back the loans. This is one point Koblenz made to a group of more than 20 capital and asset management firms in New York City this month.

"Cash for Clunkers" compromise near

A potential bright spot on the retail side of the business is the nearing compromise on a "cash for clunkers" bill in Congress. Details such as total budget, program duration, the age of older vehicles, criteria for new vehicles, and specific incentive amounts have not been resolved.

The NADA recognizes the significant economic benefit for dealers and their communities that could result from passage of a "cash for clunkers" program, and NADA lobbyists are meeting with Congressional leaders to ensure that dealers are paid promptly by the federal government and that any incentive program is available for all automobile manufacturers. Once passed by the House, the bill would have to pass the Senate before going to President Obama to be signed into law.

In other legislative and regulatory news . . .

"Card Check" has stalled in the 111th Congress. The Employee Free Choice Act (H.R. 1409 and S. 560) would allow a majority of employees to be represented by a union by signing a card instead of a traditional election, with secret ballot, overseen by the National Labor Relations Board. The legislation has fewer cosponsors this time around, showing weakening support.

In late March, Sen. Arlen Specter (D-Pa.) said he would not support closure of debate on the legislation, which put its fate in jeopardy. Sen. Blanche Lincoln (D-Ark.) made a similar announcement in early April. Even so, dealers and ATAEs should urge Members of Congress not to cosponsor the legislation and to oppose a compromise measure. Senators should be urged to vote "no" on any cloture motion on the bill.

If you’re hiring, you must now use the revised I-9 Employment Eligibility Verification form. The new form took effect April 3. The main changes to the form involve documents acceptable for identity and/or employment authorization. For example, all documents must now be unexpired; the Form I-688 Temporary Resident Card and Forms I-688A and I-688B, Employment Authorization cards, no longer are acceptable; and foreign passports with certain machine-readable immigrant visas are acceptable. For faster employment eligibility checks, employers are encouraged to use the Homeland Security Department’s E-Verify program at www.dhs.gov/E-Verify. For more information, go to www.nada.org/regulations.

The American Recovery and Reinvestment Act of 2009 provides a number of tax incentives for businesses. For a summary of incentives, go to www.nada.org and click on "Tax Provisions – Stimulus Law" in the left-hand column.

 

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