anyone know "dealer participation"

[sallen1]

re: "bailout"

I heard there is some kind of dealer participation in the mfgs acceptance of the money.

One thing I did see was that the mfgs would need new contracts with their dealers by 3/31/09. My current contract runs thru Oct. 2010.

Does anyone know what the government is looking for? Factory folks out west don't know and aren't guessing.

s

[Gasser]

Only thing i saw was in the Detroit Freepress.com....UAW Gettlefinger saying shareholders,bond holders,dealers & workers would have to participate in the sacrifice as well as the UAW.

[jimmuntz]

Scott-

I think this looks like one of the "soft" issues in the announcement- in other words, its exact meaning is to be determined.

Here is what is contained in a Whitehouse "fact sheet" relative to the announcment yesterday: Note the last line-

Terms And Conditions

The binding terms and conditions established by the Treasury will mirror those that were supported by a majority of both houses of Congress, including:

Firms must provide warrants for non-voting stock.

Firms must accept limits on executive compensation and eliminate perks such as corporate jets.

Debt owed to the government would be senior to other debts, to the extent permitted by law.

Firms must allow the government to examine their books and records.

Firms must report and the government has the power to block any large transactions (more than $100 million).

Firms must comply with applicable Federal fuel efficiency and emissions requirements.
Firms must not issue new dividends while they owe government debt.

The terms and conditions established by Treasury will include additional targets that were the subject of Congressional negotiations but did not come to a vote, including:

Reduce unsecured debt by two-thirds via a debt for equity exchange.

Make one-half of Voluntary Employee Beneficiary Association (VEBA) payments in the form of stock.

Eliminate the jobs bank.

Work rules that are competitive with transplant auto manufacturers by December 31, 2009.

Wages that are competitive with those of transplant auto manufacturers by December 31, 2009.

These terms and conditions would be non-binding in the sense that negotiations can deviate from the quantitative targets above, providing that the firm reports the reasons for these deviations and makes the business case that it will achieve long-term viability in spite of the deviations.

In addition, the firm will be required to conclude new agreements with its other major stakeholders, including dealers and suppliers, by March 31, 2009.

[sallen1]

Jim, thanks for the detail.

I suppose the "new contract" issue will be where they can justify terminations based on capitalization standards, csi, sales effectiveness, etc. It took GM all summer 2005 to get the regular renewals done. How they will do this in 3 months is a mystery!

I did pass on to the dealer council my concerns that the dealers not be looked at as "unsecured debt holders" via our factory receivables accounts. With rebates at record levels and (at least GM) slow paying by an additional 2 weeks, these amounts are getting quite big. I don't want to see 30 cents on the dollar.

The response was that the receivables will be paid and handled in the usual manner.

Anyone out there that gets any concrete news on this, please add to the thread.

Thanks

scott allen

[jimmuntz]

I think the issue of "too many dealers" has been over-sold as one of the reasons the domestics are having so many problems.

I understand their preference for fewer, better-financed dealers, but do not understand how anyone would think that this will ultimately save them a lot of money.

Dealers fund themselves, pay their own selling costs, buy the factory's output, advance the cost of providing warranty repairs, etc.

How can a new agreement result in increased margins for the manufacturer?

Stonger dealers can arguably represent the brand better, but even that would appear to be a marginal approach to recovery.

I suspect that this will not be one of the make or break achievements that will determine if GM and Chrysler meet the guidelines for continued support beyond March 31.

I too am interested in how others view this issue.

[This message has been edited by jimmuntz (edited 12-20-2008).]

[jimmuntz]

More Details-

The clipping below comes from the "GM Term Sheet" posted on the Treasury Dept's Web site. Note Item 4.

It appears the only reference to dealer agreements would fit under this provision and just makes GM and Chrysler justify the contractural agreements with suppliers and dealers. At least that's what it looks like to me. (all subject to a closer read)

Here is page 5 of the "GM Term Sheet" as well as a link to download the whole 15-page document: (you will have to copy and paste the url- we have disabled the live links within the forum for security reasons)

http://www.treas.gov/press/releases/rep ... pendix.pdf

Restructuring Plan: By no later than February 17, 2009, the Company shall submit to the Presidents Designee a plan to achieve and sustain the long-term viability, international competitiveness and energy efficiency of the Company and its subsidiaries (the Restructuring Plan), which Restructuring Plan shall include specific actions intended to result in the following:

1. Repayment of the Loan Amount and any other financing extended by the
Government under all applicable terms and conditions;

2. Ability of the Company and its subsidiaries to (x) comply with applicable
Federal fuel efficiency and emissions requirements, and (y) commence
domestic manufacturing of advanced technology vehicles, as described in
section 136 of the Energy Independence and Security Act of 2007 (Public
Law 110-140; 42 U.S.C. 17013);

3. Achievement by the Company and its subsidiaries of a positive net present
value, using reasonable assumptions and taking into account all existing and
projected future costs, including repayment of the Loan Amount and any
other financing extended by the Government;

4. Rationalization of costs, capitalization, and capacity with respect to the
manufacturing workforce, suppliers and dealerships of the Company and its
subsidiaries; and

5. A product mix and cost structure that is competitive in the United States
marketplace.

The Restructuring Plan shall extend through 2010 monthly and annually through
2014 and shall include detailed historical and projected financial statements with
supporting schedules and additional information as may be requested by the
Presidents Designee.

[sallen1]

Cost Capitalization and Capacity ... with respect to dealers..

I guess this to mean if the car business sticks to a 12M build for a few years AND the dictated product is more like the Cobalt than the Escalade, there would be a lower requirement for sales outlets to profitably sell that number and type of vehicles.

Maybe the rest could become authorized service centers?

Either way, I'm not sure there is much "cost" to the mfgs. to have dealerships. In fact, the way my open account bills every month, I think we are more a profit center even if we sell nothing.

The note that this a monthly deal for two years make me skeptical of anything forced on the dealers.


s