Where’s NADA?

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I’ve been asked several times in recent weeks, “Where is the NADA?”

It seems there is an undercurrent opinion among dealers and industry observers that NADA has not been aggressive enough in supporting a bridge-loan package for the auto makers or a financial package for their dealers.

Also, NADA Chairman Annette Sykora raised eyebrows during her testimony before the House Banking Committee in November when she said the dealers weren’t there to ask for money.

That was not a blunder, but a calculated attempt to keep Congress and the media from thinking dealers were part of the problem. Instead, Sykora says she hoped to convey the message that a thriving, energetic dealer base is part of the solution for auto makers.

Sykora’s message seemed to get the media’s attention. Each day, I receive a Google email update of dealership-related stories in local papers around the country. Now, there is no way to quantify this, but the number stories highlighting the devastation befalling state and local economies should large numbers of dealerships close, seemed to go through the roof in the days after Sykora’s testimony.

Although NADA lobbied hard -- often behind the scenes -- for a bridge-loan for the auto makers, the fear was that the Detroit Three would use the money to eliminate brands and dealerships.

Indeed, GM’s restructuring plan it submitted for the second round of congressional testimony included plans to cut as many as 1,750 dealerships as well as strategic alternatives for Saturn and Saab. Ford planned to eliminate less than 300, while Chrysler strategy was vague.

Instead of asking Congress for money, NADA’s strategy has been to ask Federal agencies for help in generating floor-plan assistance for dealers. The group has had several meetings with the Small Business Admin. to convince officials to redefine what a small business is – at least for auto dealers.

The current definition is based on a business’ annual revenue or gross receipts. Only dealerships with less than $29 million in yearly sales are eligible for SBA loans. While many dealerships operate as small, family-run operations, their revenue (an average of $33 million) far exceeds the standard set by the SBA, primarily because vehicles are big-ticket items.

NADA is asking the SBA to base dealer loan eligibility on the number of employees, rather than revenue. Sykora and other officials of the trade group say they hope the SBA announces a decision this week.

NADA officials in recent weeks also have worked with the U.S. Treasury Dept. to craft a plan to spur car sales by providing banks and financial institutions the confidence to begin lending again.

The Federal Reserve established a $200 billion Term Asset-Backed Securities Loan Facility (TALF), which should facilitate the issuance and sale of securitized auto loans. The Treasury Dept. will provide $20 billion of credit protection using funds from the Troubled Asset Relief Program to the Federal Reserve in support of the TALF.

Another key point of TALF: The Federal Reserve, following a meeting with NADA officials last week will include floorplan financing as part of the TALF. The terms of the TALF also were extended from one to three years and allow the facility to provide fixed or floating rates. The goal is to help automotive finance firms participate in floorplan securitization.

TAGS: IdeaXChange
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