Car Dealers Rally for Big Three Rescue

The National Automobile Dealers Association is sending a call to all its dealers to call Congress immediately. In a press release to its members, the association declares, "Although some progress has been made on a proposal to provide bridge loans to the Detroit Three automakers, some members of Congress still need to be convinced. Congress needs to hear from auto dealers immediately on this issue and urge action."

The big three car franchisors are strapped by some 20,000 car franchises that have become unmanageable. But state auto franchise laws have helped protect franchise owners.

The Big Three's dealership structure is one reason they've been harder hit by the recession than foreign manufacturers, whose smaller networks have helped their bottom lines as auto sales have fallen.

State franchise laws protect dealerships, making it expensive for auto makers to close them. In an interview Wednesday, Ford Motor Co. Chief Executive Alan Mulally said that the number of Big Three dealers was still too high, but "There isn't enough money in the world to buy everybody out."

Ford expects to have cut its dealership base by 14% from 2005 to the end of this year, to 3,790 outlets.

General Motors Corp. hopes to reduce its dealerships by up to 1,800 -- to 4,000 outlets by 2012. Chief executive Rick Wagoner has pointed out that would leave GM with four times more outlets than Toyota Motor Corp. - WSJ: Auto Dealers Late to the Game, $$

Paul Ingrassia, a columnist who follows the car industry, shares why the government needs a trustee to get franchisors out of agreements that have helped lead to their downfall:

Negotiating contract changes with the UAW will be a protracted process, and negotiating with dealers to reduce their numbers will be slower still. Even if the company does get down to 4,700 dealers by 2012, it will still have an excess of at least 2,500 dealers -- as compared to the average annual sales volume of Toyota dealers.

That's why an "Oversight Board" isn't enough. What's needed, under the aegis of the board, is a federal restructuring trustee who can lead car companies through a bankruptcy-type process if they opt for federal loans -- which Ford, alone among the Detroit Three, says it might not have to do. A restructuring trustee would have the power to set appropriate compensation for terminated dealer-franchise contracts, which would be invalidated with no value if an auto maker files for Chapter 11 bankruptcy. - WSJ: The Latest Song of Detroit $$

Will the franchisor take over some of the bigger, more troubled dealers? GM said that it plans to consolidate its various brands in the big metro markets. They also may need help getting around the various state car dealers franchise laws. Rick Wagoner, the head of GM, said before congress last week that the firm will leave the franchisees of small cities and towns to do as the franchise owners see fit.