Car dealers want a bailout

Car dealers in Virginia are seeking that the value of their dealership be guaranteed and that their mortgages be paid for three years, if an automaker decides to cancel a brand.

For example, if GM decides it no longer wants to make the Saturn brand, a dealer who took the risk on Saturn a few years back would get a “bailout” from the parent company – at a time when car makers are already over a barrel from the federal government to restructure.

Donald Hall, president of the Virginia Auto Dealers Association, said the bills only give dealers the chance for payments in a court case, not a guarantee, and that dealers needed more power to fight decisions by automakers.

“We watched them run Oldsmobile into the ground and pay dealers nothing who had been in business 80 or 90 years,” he said, referring to the former GM brand. After paying more than $1 billion to select dealers to close Oldsmobile nationwide, Hall said GM “said the thing we do now is let it run into the ground on its own without doing anything for the franchises.”

Admittedly, car manufacturers are somewhat to blame for this, as they have fought against allowing car dealers to diversify; but does it make sense for the automaker to have to pay dealers for the risk they took?

Apparently the General Assembly thinks so.

Senate Bill 1410 and House Bill 1778 have sailed through the House and the Senate. Of all 140 legislators, not one member opposed these bills. And in the Senate, not one member “took a walk” over conflict of interest, including Sen. Creigh Deeds, whose father works for an auto dealer or Senate Minority Leader Thomas Norment, who owns a minority share in a Yorktown dealership.

Norment, a lawyer and one of three owners of a struggling Yorktown dealership, said he does not have a conflict of interest in carrying the measure, because it applies to all vehicle franchises in Virginia. The state has 525 new-car dealers and has lost 25 in the past year during the recession.

“Clearly, I don’t have a conflict of interest from a legal standpoint,” Norment said. “Perceptually, someone might raise the question that, ‘As a minority owner of a dealership, isn’t there an incidental benefit to you?’”

The free market is dead.

Category: Government