“The plans offered today by Chrysler and General Motors are a step in the right direction, but still fall short of what is needed to help re-instate profitable car dealers and put their employees back to work. Earlier this year, after receiving billions of dollars in taxpayer money, Chrysler and GM announced they were terminating more than 3,000 dealerships, many of them profitable small businesses employing thousands of people in communities all across the nation. Their logic didn’t make sense then, and it still doesn’t make sense today. Rather than costing money, profitable car dealers help a manufacturer’s bottom line. In fact, Chrysler’s former CEO Jim Press has acknowledged that terminating car dealerships will hurt, not help that company’s recovery.

“Over the past several months, I have worked closely with Majority Leader Hoyer, Congressmen Kratovil and Maffei, and other Members of Congress to help reinstate profitable dealerships. The House of Representatives, by a wide margin, passed a measure earlier this year to restore terminated dealerships. However, in an effort to find a non-legislative resolution to this matter, we convened talks with the auto dealer groups and the manufacturers. While both sides offered significant concessions, these efforts have fallen short and the measures announced today by the two auto companies don’t go far enough to help get profitable dealers re-instated and their employees back to work.

“I intend to re-double my efforts to enact legislation that will give auto dealers a fair and reasonable opportunity to get back into business, put people back to work, and help pump money back into America’s car companies.”

We are greatly disappointed at today’s unilateral decisions by General Motors and Chrysler to end negotiations with dealer representatives and to publicize indefensible so-called reinstatement plans. We would say that their plans are shams, but that is an insult to the word “sham” because the GM and Chrysler plans would at best reinstate only very, very few dealers, if any.

We assure dealers, Members of Congress, and consumers that at no point in the negotiating process did General Motors or Chrysler present a plan that would realistically get more than a few dealers back in business. On the other hand, dealer groups have been willing to show flexibility on a nonlegislative solution in order to get our colleagues back in business as soon as possible.

We just could not in good conscience accept the GM or Chrysler plans when they rely so much on flawed criteria and would make a mockery of the arbitration process. Under their plans, a dealer would have had a better chance at winning the Powerball lottery than getting back in business.

We will not foreclose future discussions with GM or Chrysler to resolve the dealer crisis. However, we intend to press forward with our numerous bipartisan supporters in Congress to ensure enactment of legislation to add back in dealers whose economic rights were trampled by GM and Chrysler.

-Jack Fitzgerald
-Tamara Darvish
-Alan Spitzer

November 19, 2009

Mr. James Press
President
Chrysler LLC
1000 Chrysler Drive
Auburn Hills, MI 48326

Dear Mr. Press,

We are writing to request an update on the assurances you provided the Committee in June regarding issues related to Chrysler’s restructuring process and related dealership terminations.  We are also very interested in receiving an update on the negotiations that have been ongoing between Chrysler and its dealers during the past several weeks.

Given the federal government’s ownership stake in Chrysler, it is our shared obligation to ensure all impacted dealers are treated as fairly as possible. We continue to urge you to take all actions necessary to uphold the assurances you provided earlier, as well as to achieve a mutually agreeable and timely outcome to the negotiations between Chrysler and the dealers.

Vehicle Parts and Inventory
In your letter to the Senate Commerce Committee dated June 12,2009, you committed to help dealers redistribute their parts inventory and special tools. You also said Chrysler would buy back any remaining parts at the average transaction price for all parts already distributed. It is our understanding that some dealers still await payment for their redistributed vehicles and many have parts and tools that have not been redistributed or repurchased. Please update us on your plan to repurchase any remaining parts and special tools from terminated dealers, and provide an
expected timeline for resolution of all outstanding inventory, average transaction price paid to dealers for parts, and the methodology used to arrive at that figure.

Market Re-Entry
In your June 12,2009, letter, you stated that Chrysler would provide terminated dealers the right of first refusal for any new dealerships that opened in the same location as the previous dealership. Has this, or is this, expected to occur? If so, have previous dealership owners been notified of such action?

Closing Decision Transparency
In that same letter, you pledged to provide dealers with information explaining how the dealership closing decisions were made. How many dealerships have received this information? We request that all dealerships be provided this information, not solely the ones that inquired.

Rural Customer Service
Chrysler assured the Committee it would weigh the possibility of “companion facilities” to handle customer service needs affected by dealer closings. It is important that customers not be saddled with an extra burden of traveling long distances to have their vehicle serviced. Please update us on the status of this consideration and any results this examination has on market reentry.

Chrysler Technician Placement Assistance
Also in your June 12, 2009 letter, you discussed placement assistance plans for Chrysler-trained mechanics. What steps have you taken to assist mechanics who were displaced from their job as a result of the dealership closings?

Dealer Negotiations
Please provide us with a detailed update on the ongoing negotiations between Chrysler and the dealers, informing us of any agreements that have been reached. In addition, please identify any outstanding matters, and explain how you intend to resolve those issues and the expected timeframe.

As you know, Chrysler’s unprecedented bankruptcy has greatly impacted dealers, consumers, employees, small businesses, and communities across the country. It is crucial that outstanding issues be resolved as expeditiously and efficiently as possible to provide the least amount of hardship to both Chrysler and its dealers. We appreciate your continued attention to these issues and look forward to your response.

Sincerely,
22 Members of the Senate Commerce Committee

Rockefeller and Hutchison Lead Call for Updates from Chrysler and GM on Dealership Restructuring Process
Bipartisan Letter Signed by 22 Members of Commerce Committee

WASHINGTON, D.C. –John D. (Jay) Rockefeller IV, Chairman of the U.S. Senate Committee on Commerce, Science, and Transportation, and Ranking Member Kay Bailey Hutchison led the call today from a bipartisan group of Senators for updates from Chrysler and General Motors (GM) on the restructuring process and related dealership closures. Senators Rockefeller and Hutchison secured promises from Chrysler and GM during a Committee hearing on the issue earlier this year that both companies would work during the restructuring process to address the concerns of dealers.

“Given the federal government’s ownership stake in Chrysler and GM, it is our shared obligation to ensure all impacted dealers are treated as fairly as possible,” the Senators wrote. “We continue to urge you to take all actions necessary to uphold the assurances you provided earlier, as well as to achieve a mutually agreeable and timely outcome to the negotiations between Chrysler, GM and the dealers. Chrysler and GM’s unprecedented bankruptcy has greatly impacted dealers, consumers, employees, small businesses, and communities across the country. It is crucial that outstanding issues be resolved as expeditiously and efficiently as possible to provide the least amount of hardship to Chrysler, GM and the dealers.”

Joining Chairman Rockefeller and Ranking Member Hutchison in signing the letters are Senators Daniel K. Inouye (D-HI), Olympia J. Snowe (R-ME), John F. Kerry (D-MA), John Thune (R-SD), Byron L. Dorgan (D-ND), Barbara Boxer (D-CA), Bill Nelson (D-FL), Roger Wicker (R-MS), Maria Cantwell (D-WA), George S. LeMieux (R-FL), Frank R. Lautenberg (D-NJ), Mark Pryor (D-AR), David Vitter (R-LA), Claire McCaskill (D-MO), Sam Brownback (R-KS), Amy Klobuchar (D-MN), Mike Johanns (R-NE), Tom Udall (D-NM), Mark Warner (D-VA) and Mark Begich (D-AK).

The letters request updates from Chrysler and GM on several issues, including:

· Participation Agreements

· Vehicle Parts and Inventory

· Closing Decision Transparency

· Rural Customer Service

· Market Re-Entry

· Technician Placement Assistance

· Ongoing Dealer Negotiations

The manufacturer’s evaluation of a dealer’s sales performance is based on the assignment of an area of responsibility (manufacturers typically provide dealers with a computer generated map of this geography) and the requirement that a dealer maintain the state average % of sales.  In other words, if Chevrolet sells 10% of all the cars in the state, then each Chevrolet dealer must sell 10% of all the cars in its assigned geographic territory to be “Sales Effective.”  Area of Geographic Sales and Service Advantage AGSSA (GM), and Primary Market Area PMA (Chrysler) are acronyms used to describe the assigned territories.  Some of the Problems with this approach:

Just as the country has variations by region in vehicle registrations, Domestic vs. Import, within the states themselves are wide swings that automatically prevent Imports or Domestics from achieving a fictitious “state average.”

In 1979, Chrysler partnered with Dealers

August 11, 2009

During all these months of the economic downturn and in particular the crisis within the American Automotive Industry I’ve remained uncharacteristically quiet. The daughter and friend of a family of east coast dealerships have kept me abreast of the situation concerning dealership closings. In her most recent communication, she stated she’d be going before congress one more time to plead the case of dealer closings. She seems to believe words from me could alter what is already very much in motion.

During my 50+ years in Detroit I supported dealers and was proud to be considered a friend. I’ve been advised a broad brush was used when deciding which dealerships were no longer viable. And, since I am not privy to the criteria used, it is impossible to comment or chastise those that made the cuts.

However, from my experience dealers are very much the backbone to communities across the country. They employ people, sell cars, participate in their local service organizations and, are involved in a host of intangible activities that enhance all citizens. When it came time to raise money to renovate The Statue of Liberty and Ellis Island, dealerships did more than their share. Just recently diabetes research was greatly assisted by the family of Chrysler dealers. As a group they continually step up to the plate when asked.
So, I am unaware of the dealers costing manufacturers money.

It is my hope that Congress and anyone else currently in charge will look very closely prior to altering for good what is the fabric of America.

Respectfully,

Lee Iacocca

LI/ns

    In light of recent developments, we want to urge you to re-engage with your Members of Congress to push hard for legislation reinstating Chrysler and GM dealers or for a fair nonlegislative solution.  It is critical that you reach out vigorously, since Congress will be leaving again for Thanksgiving and then in mid-December will take a lengthy recess.

     You should tell Congressional Members and staff that there have been new significant developments that support our contention that the GM and Chrysler dealer terminations were misguided and put the companies at greater risk.

• We have long maintained that Chrysler and GM should have known that reducing 3,400 dealers was harsh and irrational.  The media have started to find proof that the dealer position is accurate.  For example, the October 26 Automotive News featured a lengthy article on Chrysler’s former top executive, Jim Press, in which the reporters wrote that in private meetings, Jim Press “opposed both the scope and the terms of the dealership closings. He argued that fewer stores would mean fewer sales.” (Emphasis added)  Nonetheless Jim Press testified before Congress that the closings were “absolutely necessary” to ensure Chrysler’s viability post-bankruptcy.
• Automotive News finally broke its silence and featured an Editorial on November 9 entitled, “It’s time for GM to admit, finally, its $2 billion lie.”  This was an Editorial penned by Automotive News, not a letter to the editor from a subscriber.  Automotive News evidently agrees with a fundamental point CRDR has made in the halls of Congress that CEO Fritz Henderson was misleading at best when he testified before Congress about $2 billion in savings from reduced dealer incentives, floor plan support, and market support.  Automotive News has accepted our assertion that most of these purported savings are “variable costs that depend on the number of vehicles sold — not the number of dealerships selling vehicles.”  The Editorial continued, “To claim otherwise is disingenuous and the worst kind of new math.” (Emphasis added)
• CRDR has consistently argued that the real problem facing GM and Chrysler was that their products did not attract consumers.  We have cited Consumer Reports as a fair indicator of a brand’s success.  Now, the new chief of sales for GM, Susan Docherty, was quoted by the Associated Press on October 28 as saying that one of the two worries keeping her up at night is GM’s rankings in the widely read Consumer Reports reliability survey.

Congressional Requests – What to ask of Congress: 

• Members of Congress who are not yet cosponsors of H.R. 2743 and S. 1304 should become cosponsors immediately, to show Congressional leadership that they support full reinstatement of dealers.
• Members who are already cosponsors should contact the relevant Chairmen of the House and Senate Appropriations Committees, Rep. David Obey (D-Wisconsin) and Sen. Daniel Inouye (D-Hawaii), and the Ranking Republican Members, Rep. Jerry Lewis (R-California) and Thad Cochran (R-Mississippi), and the Financial Services Subcommittee Chairmen, Senator Richard Durbin (D-Illinois) and Rep. Jose Serrano (D-New York) to urge preservation of the LaTourette Amendment in the final version of the Financial Services Appropriations bill (Sec. 745 of the House bill).
• Members, particularly Democrats, should contact the Office of Congressional Affairs at the White House to urge the senior White House staff, such as Rahm Emanuel, to meet with CRDR co-chairs and other dealers to hear first-hand how the White House Auto Task Force got it wrong and unnecessarily displaced thousands of dealers and put at risk 169,000 direct jobs.  We have not received the courtesy of a meeting with anyone at the White House throughout this process and there has not been a White House representative attending the negotiations over possible nonlegislative solutions.  We firmly believe that the White House has the ability to unwind some of these faulty decisions and to restore dealer economic rights, particularly given the government’s ownership interests in the two companies.
• Members should urge the House and Senate Judiciary Committees to hold hearings on the auto dealer crisis and how the bankruptcy court permitted the termination of dealerships in violation of state franchise law protections.

    Thanks as always for your time and effort on this issue,

 Jack, Tammy, Alan

Research has proven that CSI data from the Manufacturers is flawed

CSI

GM & Chrysler used flawed databases, including CSI, to close franchises.  Customer Satisfaction Scores (CSI) are very important, but are certainly not the most important factor in determining the financial viability and sustainability of any business.  See the story of Bill Heard Chevrolet for example. 

 In addition, GM & Chrysler CSI scores have been manipulated by factory and dealer employees to the extent that they are meaningless.  It is outrageous to use this data as termination criteria.

In the late 1970’s the automobile manufacturers began surveying dealership customers.  Initially manufacturers told dealers this information would help them self improve.  After a short period of time, the dealer CSI scores evolved to become a significant factor in manufacturer evaluations and compensation of dealerships.  Dealers, directed by manufacturers, found many ways to influence customers to provide good scores (example:  free tank of gas if you bring the survey back for the dealership to mail) and manipulate the system itself (reporting an incorrect address to the manufacturer for a known dissatisfied customer).  It has been reported that dealers took those actions in order to achieve generous allocations from manufacturers, while manufacturers encourage these actions because their executives’ bonuses were tied to CSI scores. 

Because GM & Chrysler lost market share every year, for so many years, it was hard for their executives to get a bonus any other way.  This data has been manipulated to the point where GM & Chrysler do not know the names and addresses of their customers and have to buy an address list from RL Polk to notify owners of a recall.

Imports get their business on the coasts

The Need for More Dealers – Not Less

The myth of “too many dealers” has gone on so long that people believe it’s true, without ever examining the facts.  Most dealers would rather have less competition, it’s only natural.  Simple math and an examination of the facts prove there are too few dealers, not too many.

Above is a U.S. map from R.L. Polk showing Domestic and Import VIO (vehicles in operation) at 237 Million.  This information proves the need for more (not less) GM and Chrysler dealers throughout the country because 150M cars on the road are Domestic Vehicles, nearly 2 out of every 3, but only 87M are imports.  Yet with the proposed cutbacks, there will be 9.500 Domestic dealers and 9.900 Import dealers.  Obviously Domestics will have almost twice as many cars to serve as Import dealers.  In addition to the simple math, the geography is significant too because Domestic sales are throughout the country, heavily concentrated in states with large geographical areas, while Imports get the largest share of their business in 9 dark blue states, 6 on the East Coast and 3 on the West Coast. 

Note:  In most of the 9 dark blue states there were already 200 more Import dealers than Domestics to start with, and after the cuts, it’s Imports with 2,018 to Domestics 1,348.   In addition, the Domestics will be abandoning their dominant position in the dark red states where they get most of their volume.  This will create an opportunity for Imports to expand into the empty facilities.  Kiplinger says 900 over the next two years.  Can GM & Chrysler survive?