Soft-selling a raw deal
Somehow, amid the thundering of hooves shod in loafers and heels, Pat Berrang managed to turn from the precipice to which he was herded by a plan to snatch away his General Motors franchise in Waynesboro. Remarkably, he did this without being trampled afoot by Obama administration officials racing from responsibility for the dealership closings announced last week by two of the Big Three automakers.
Of course, Team Obama described differently the move to drop almost 2,000 GM and Chrysler dealerships and eliminate more than 100,000 jobs. The operative term, consolidation, should ring familiar to portions of Obama’s base who disdain Corporate America. Defined, it means job cuts. Whatever, the Obama gang sniffed Friday, we had nothing to do with it.
“As was the case with Chrysler’s dealer consolidation plan,” the Treasury Department said in a news release, “the [president’s auto] Task Force was not involved in deciding which dealers, or how many dealers, were part of GM’s announcement today.”
Perhaps mindful of the Obama administration’s capacity to fire or force out CEOs who fail to hop to, GM brass quickly sounded echoes. Sales chief Mark LaNeve told reporters in a conference call that the president’s task force neither chose doomed dealers nor determined their number.
This is subterfuge, a rosier term for one more fitting. “President Barack Obama’s auto task force has pushed for a massive downsizing of dealer networks as a fundamental component of the restructuring of GM and Chrysler,” the Detroit Free Press reported May 10. GM Chief Executive Fritz Henderson said the president’s task force pressed the company to make “faster and deeper” dealership reductions, according to the Los Angeles Times. Team Obama didn’t wield the knife, it only put the blade in carmakers’ hands, pointed a revolver at their temples and shouted, “Cut!”
The remaining smoke Obama sells is more myth. “The Administration’s commitment to this industry,” the Treasury Department said, “has given both companies a new lease on life.” For car dealers, such as the three locals who last week received pink slips from GM and Chrysler, it’s a new lease on death. And not the dealers alone. Local car franchises are economic drivers. They inject tax revenues into local government, help fuel the local real estate market, advertise heavily in local media, invest in local charities and supply some 20 percent of local communities’ retail sales, according to National Automobile Dealers Association figures.
Remaining dealers will be more profitable, but that will not staunch carmakers’ bleeding, nor even slow it significantly. Dealers cover almost all of the local costs of sales and service. The more palpable impact will be felt on Main Street, that mythical place where craven rhetoric screeches head-on into wanton reality.
Pat Berrang stands squarely in the middle of that intersection. After receiving notice Friday that GM planned to shelve him, he decided to battle to retain his franchise. Other dealers – many of them, like him, successful entrepreneurs – either have arrived at a similar conclusion or are considering it. GM, at the moment, will be legally hard-pressed to force Berrang and others of like mind to back down, but a bankruptcy declaration, which is certain to come, could change that. Chrysler already has declared, meaning so-called rejected dealers likely are finished before beginning to fight.
Culpability for the predicament abounds, and almost all of it falls on carmakers and workers’ unions, whose mismanagement and greed replicates that which produced the steel industry collapse three decades ago. Still, the Obama administration could do Americans a small kindness by shedding base political instincts to slip responsibility, conceding rather than concealing its role in dealership cuts and acknowledging the toxin that dear old Main Street is compelled to imbibe. The taste is sufficiently bitter without the addition of insult by pretense.
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Reader Reactions
Just to clarify:
1. We are not suggesting that the car bailouts were a good idea. We, in fact, repeatedly have editorialized against them, as we have the bailout wave initiated under Bush and continued under Obama. Standing back and allowing the companies to declare bankruptcy, a move that Chrysler already has taken and GM soon will follow, without bailout dollars would have resulted in the restructuring those companies now are pursuing.
2. We are blaming carmakers and unions for car companies’ plight. Our point here is about Obama’s role in the dealership cuts and their impact. Our point at the end was to provide the clarity that we’re not suggesting Obama had a role in car companies’ financial woes.
3. We are saying that shuttering dealerships will do little to ease carmakers’ plight since dealerships cover almost all of the costs of sales and service. The National Autmobile Dealers Administration, by the way, says some 1,200 dealers probably would go out of business this year anyway—so let them go. We don’t think any taxpayer money should be used to prevent that from happening. But not all of these dealerships are failing—many have long records of success and some still are profitable, just not as profitable as others. We’re saying the government should stay out of it and let the process work.
4. We are pointing out that the Obama administration is being disingenuous when it suggests it had little or nothing to do with the dealership cuts. Reports in the Detroit Free Press and the L.A. Times—whose leanings are decidedly left of ours—demonstrate that Obama’s task force pushed hard for these cuts.
5. We don’t expect to lose a major advertiser. What we’re pointing out is that car dealers are significant local economic contributors, here and elsewhere. Car companies do not keep dealerships afloat. If they can’t make it, they fall of their own accord. Slashing dealerships won’t save Chrysler or GM. But it will hurt Main Street, something we thought Democrats and Republicans alike were concerned about. These aren’t fat cat CEOs we’re talking about, after all.
6. What does it say about the rank and file, who are compensated at some $20 an hour more than foreign competitors, if GM and Chrysler sell “overpriced junk” and still can’t make a profit? To answer part of the question, we’re not raising questions about the quality of the products but principally about how the companies have been managed.
I wonder how much of this is frustration coming from a major advertiser - or frustration over maybe losing a major advertiser, or a good portion of their advertising.
Because the rest of it is rather illogical. The message we get from this editorial page over and over and over again is that government is supposed to cut spending during the recession so as not to put an uncomfortable burden on taxpayers. This editorial seems to suggest that not only was the auto-industry bailout a good idea, which considering the source is a surprise in itself, but also that the bailout should have been bigger so that no dealerships, including Berrang, were cut.
The business sense of keeping open dealerships that aren’t pulling their own weight notwithstanding, this suggestion doesn’t make good political sense, either.
I am sure that poor quality and over priced junk had no affect on the problems that GM and Chrysler have.
After the bulk of this mindless editorial attempts to blame the Obama administration for closing auto dealerships, the final paragraph admits that the blame belongs to the auto industry itself. It seems that the editor has anticipated the logical criticism of his pathetic and baseless sniping at the President, but in doing so, he has negated the first 80% of his editorial.
As we grow accustomed to the News Virginian’s perpetual “sore loser” policy on President Obama, it is important to notice that the underlying issues that they use are just as illogical. The auto industry has failed. Big and bloated and admitedly producing poor and overpriced products, it has failed to meet the demands of the American people for decades. The News Virginian’s criticisms of President Obama’s attempt to fix the problem is glaringly devoid of solutions, or any constructive element whatsoever.
They continue to pander to that tiny percentage of Waynesboroans who prefer partisan fantasy over logic and reality.
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