The GM Giant Ranks in the Top 5 Dealers in the Baltimore Washington Sales Area

I have to say that the past several months have been the most stressful in my life. The beginning of the recession that the government just recently figured out was happening, started for our industry in September of 2007. Being in a market where truck sales lead all other segments, a slowing housing market took its toll early. Then gasoline prices rose and the truck and SUV sales slowed even more. This is when the talking heads on television started saying that GM didn’t build cars and trucks people really wanted. The truth is people wanted GM cars and trucks, but the cost of fuel and the lack of credit availability brought US auto sales just about to a halt. And if this wasn’t enough, used car sales slowed as did the number of people coming to dealership service departments, as consumers put off maintenance on cars and trucks. Just when we thought things couldn’t get worse, the executives of the big three domestic automakers flew to Washington in their Corporate jets and begged for money, admitting that without it they would fall into bankruptcy. While many in Congress said this would be good for the automakers, the auto executives told Congress that customers wouldn’t buy cars and trucks from a bankrupt manufacturer.

Well, from my experience this is certainly true. As soon as the dreaded B word was uttered, our show rooms and lots began to resemble a football stadium one hour after the game is over. There are cars in the parking lot, the employees are working but the customers are long gone. With the notion that GM, Ford and Chrysler could go out of business, customers made it clear they were afraid to buy our products.

In early December, Congress indicated that it would be passing legislation that would give US automakers the money they needed, only to have the bill killed in a partisan effort to punish the UAW for its support of the Democratic Party. Now you may not agree with this statement, but many independent analysts have come to this very conclusion. At any rate, the death sentence handed down by Congress may as well have been the beginning of an epitaph for the U.S. Auto Industry.

Within one day of the defeat of the Senate bill to help the ailing U.S. auto industry, President Bush announced that “to allow this industry to fail would be an irresponsible act”, and that he and the treasury department stood ready to help. Here is where the local story takes over, and I am pleased and humbled to tell it.

After Congress made their vote, I stayed up late writing to every Senator who had voted against the bridge loan bill. I stayed home the next day and tried to contemplate what could happen. Then I got a call from my sales manager, Phil Roath. He said, “Lee, you’re not going to believe this but we’ve sold 6 cars today and it’s only two o’clock.” That night I went to a large birthday party for a friend. One after another people came to me expressing support for our industry, for our company and for me. The next day brought more sales and a renewed spirit of hope for a good month of sales. At the end of the week the sales report from GM showed our dealership amazingly ranked number 2 out of 134 dealers in the Baltimore Washington Sales Area and solidly in first place on the shore.

I am overwhelmed by the support of our customers in this most uncertain time in our industry and in our economy. While it is true that the discounts offered on new GM cars and trucks are at an all time high, and late model used car and truck prices are at an all time low when adjusted for inflation, it still takes consumer confidence to pull the trigger and spend money. I am grateful to all who continue to have faith in our company and our products. I am happy to report that we remain in the top 5 dealers in the metro sales area. Have a happy holiday and a blessed new year. Drive safely.

The Republicans Failure to Help GM May Be Their Attempt to End Unionism and Its Support of the Democratic Party

Someone asked me this week who writes these articles for me. My sister Sharon has a Bachelors degree in journalism and a master’s degree in international business and national defense, so one might think I have her pen the “Did You Know Articles”. If I did they would probably be written better but the truth is that I spend a few hours each week researching the material and writing the articles. But this week I am going to cheat.

In reading an article by Ed Wallace in the December 15th edition of Business Week Magazine, I felt I couldn’t express the material any better. The following are excerpts from the article titled Senators Carping about Tax Subsidies Can Look in Their Own Back Yard:

In the ongoing power struggle between Republicans and Democrats, Detroit is the latest, and possibly the bloodiest, battleground. And because it is a battle of ideologies with no apparent connection to pragmatic economic reality, the matter of whether the U.S. auto industry survives takes a backseat to which party gets its way.

That's because the two parties see the fate of Detroit as a watershed moment, the kind of event that could potentially redraw the political landscape forever. By refusing to bail out General Motors and Chrysler, Republicans see a way to end the last vestiges of unionism in America and the unions' longtime backing of the Democratic Party.

How can that be? Simple party politics. Because if these individuals bring down the American economy by destroying Detroit, they'll simply walk away from the disaster saying "It was the other guy's fault."

Somewhere along the way this debate seems to have overlooked the fact that Detroit, for all its blunders, is still a viable economic engine, providing jobs to millions and creating some of the world's best cars. For example, the best-selling vehicle in America, even in this downturn, is still Ford's F-Series truck, and second place goes to the Chevrolet Silverado, while sales of the Toyota Prius are down substantially with the fall-off in gasoline prices.

What's amazing is that Senator Richard Shelby (R-Ala.) is such a huge critic of using taxpayer money to bail out Detroit. Amazing because the State of Alabama has provided hundreds of millions of taxpayer dollars to lure foreign auto companies to build factories on its soil. These were considered wise investments because the promise was that they would create more jobs for the chronically underpaid Alabama workforce. However, in the summer of 2003, Mercedes brought in Polish workers on questionable B-1 work visas to expand the factory because they could be paid far less than the local workforce.

The reality is that there's no end to the tax largesse handed out to some of the most successful car companies in the world. And you know their names: Volkswagen, Toyota, Honda, Nissan, Hyundai, Kia, Mercedes-Benz, and BMW.

Other industrialized countries around the world will be stepping in to ensure that their own automobile industries will still be working when whatever financial downturn we are looking at is finally over. As for Congress, shame on you for playing politics when so many jobs and, in many ways, the future of American manufacturing is at stake.

To read this article in its entirety, click here. From everyone at Bob Smith Automotive Group, the GM GIANT and Giant GMC, have a happy holiday. Drive Safely!

You Can Buy a $34,000 Truck at a Cost to You of Under $14,000

It sounds impossible that you could buy a $34,000 truck for under $14,000, but in a way you can. Let’s say you own a business and need a truck. You pick out a Chevy Silverado that lists for about $34,000. Now that’s a pretty nice truck, probably 4 wheel drive and in a 4 door crew cab that would work nicely for your business. If you buy on the GM Red Tag program, you could get $10,000 or more in savings, leaving you a balance of $24,000. The recent stimulus package passed by congress allows you to take up to $25,000 in depreciation on up to $100,000 in vehicle purchases. If you are a C corporation paying 34% federal tax and 8% state tax that is a total of 42%. $24,000 in depreciation reduces your taxable income by the same amount, and at a 42% tax rate your tax savings is $10,080 making the net to you $13,920. In addition to that you would get a free tool box or bed liner. And if you qualify for other incentives your cost could be even less.

These are extraordinary times offering extraordinary deals. We almost need a score card to keep up with the incentives. There are incentives if you have a leased vehicle and don’t lease your next one. There are loyalty incentives and other incentives called conquest if you don’t have a GM product. There are incentives if you live in certain markets and others if you are a member of a club or organization that GM has a deal with. There are even more incentives if you have qualified for a predetermined demographic that GM has targeted and sent you a promotional piece in the mail. There are incentives if we have had the vehicle in stock too long and others if it is a brand new model. On some models you can get free service, OnStar and XM radio. You have GM credit card rebates and some business can get a $500 gift coupon from Lowes. Plus, the best darn military discount- for active duty and reserve members of the US military. There are so many different incentives that if I listed them all I wouldn’t have room in this article. And then there are the tax incentives from the government like I mentioned at the top of the article.

If you are a GM employee, a direct relative of a GM employee, a GM dealership employee or a direct relative of a GM dealership employee, you qualify for GM employee pricing on top of all of the Red Tag incentives. I have seen these deals come out to almost half off the sticker price.

I have been in the car business for 30 years, and I have never seen anything like this. And if you think the new car savings are good, you should see what you can buy a used late model car for. As the factory has put incentives on new cars, it has driven the price of off lease and rental used vehicles to record lows. And it doesn’t end here.

For all you have heard about financing, now some of the banks are competing for the car business. That has driven bank rates on car loans down for qualified buyers. And while you have to have good credit, it doesn’t have to be perfect.

While these may be tough economic times, there has never been a better time to buy a new or used car or truck. To see the basic Red Tag savings for yourself, log on to www.gmgiant.com. But remember you may qualify for even more. Drive safely.

The Local Car Dealer Is a Car Manufacturer’s Greatest Asset

The big question this week on the news is “should GM be forced into bankruptcy?” While this may seem to be GM’s best bet to get a better labor contract, absent from the discussion is the affect it would have on dealers. Many people don’t recognize that dealers are independent businesses that put their own capital at risk. The following is part of a response to an article in the Washington Post:

NADA Letter
The Nov. 20 editorial “Detroit at the Brink” makes some good points about the Detroit Three’s current predicament. But to group the dealership network in the same sentence as executive salaries and labor costs is just plain wrong. It is not the number of dealerships that General Motors, Ford or Chrysler have that is forcing them to seek government loans to weather the current global credit crisis.

What’s not widely known is that dealers are independent business men and women who invest millions of dollars of their own money in land, buildings, improvements, personnel and advanced tech equipment to sell and service vehicles. It is the dealer who buys the vehicles and the parts from an automaker in the first place. Without the revenue that dealers provide to their automakers, the factory assembly lines would screech to a halt. Dealers pay their manufacturer for just about everything, even including the signs out in front of their stores.

Moreover, we should not be too quick to want to arbitrarily lower the number of dealers that any manufacturer has. Beyond creating good jobs for over a million Americans – jobs that cannot be sent overseas – dealers also provide great value to consumers in terms of competition and convenience, not to mention their charitable and other contributions to the community. If there is an overabundance of dealers, the market will address it, as it has over the past 60 years when we have seen market forces reduce the number of dealers from 50,000 to the 19,700 we have today.

So, the question is not whether the domestic dealer network is overgrown. The question is whether dealers are a cost center to the automakers. And they are not. In fact, the dealer network is the manufacturers’ greatest asset, providing customers with convenient and competitive sales, service and financing. And this is all done at minimal cost to the manufacturers. Dealers represent almost 20% of all retail sales in this country. It is their recovery – not their demise – that is essential to the survival of the overall U.S. economy.

ANNETTE SYKORA
Chairman
National Automobile Dealers Association

GM’s Failure Would Send the Country into a Depression

By now you are probably tired of hearing about the US automakers asking the government for a loan. I get asked by friends, what really happens if GM fails? The simple truth is that a failure of GM is just not an option. Let’s examine some facts, many of which you won’t hear in the media because it isn’t a fit with the story line. Most of us including me, feel that the labor union and past GM executive decisions put GM and the rest of the domestic automakers in a weak competitive position. We see the current situation as an opportunity to break the union contracts. It is a position of power over the union and GM brass we have never experienced before. We want retribution on the automotive executives that made us accept inferior products like the Citation and the Granada. But are these really the guys we should be angry with?

Rick Wagoner, the chairman of GM, along with Vice Chairman Bob Lutz, President and Chief Operating Officer Fritz Henderson, and Mark LaNeve, Executive Vice President Vehicle Sales Service and Marketing North American Operations and cousin of local Little League World Series Coach Tom LaNeve, are the ones responsible for GM’s recent turn-around in product design and quality. GM’s vehicles have quality ratings equal to or exceeding the imports. They lead more segments in fuel economy than any other manufacturer. GM’s service satisfaction scores beat every manufacturer except Porsche. GM is still the leader in vehicle sales in the U.S. and is in a virtual tie with Toyota for world vehicle sales leadership. GM is the leader in hybrid technology, fuel cell technology and will be the first to bring a plug in electric car to market in about 18 months with the Chevy Volt.

GM’s problems began with labor contracts signed decades ago, not with recent contracts signed by current leadership. It is GM’s legacy costs that make their cost per vehicle higher than the imports. Those costs are being phased out in the current contract negotiated by the current leadership team, and will begin to pay off in 2 years as the retirement health care costs are being assumed by the union. GM’s need to ask the government for loans was triggered by the collapse of the banking industry. Without cash to sustain them through the recession, they cannot pay their workers, vendors and dealers. Dealerships are independent businesses with their own capital at risk. When a dealer sells a car with a big rebate, they have to wait for their money from GM to be made whole in the deal.

GM’s car and truck prices when adjusted for inflation as a percent of family income and when you consider product content are the best since WWII. If people don’t buy these incredible vehicles at these ridiculously low prices, and if GM doesn’t get the financing it needs, it will kill the entire US auto industry taking Ford, Chrysler and many of the imports’ US assembly plants with them. GM’s suppliers who also supply the other manufacturers that build cars in the US will not be able to survive without GM’s business. GM’s 6,000 dealers will close or become used car lots. These dealers often are the pillars of their communities donating hundreds of thousands of dollars to local charities. Those donations go away along with the 1,000,000 jobs they provide in the US. Businesses that rely on dealerships for revenue will loose jobs or close. The center for automotive research estimates the job loss in the first year after a GM failure to be 4,500,000. And that is just the beginning. Some estimates reach 13,000,000 jobs lost within 2 years. The failure of the US auto industry is simply not an option we can afford.

My advice is to support the government loans to GM and take advantage of the incredible prices by purchasing GM cars and trucks. Businesses even qualify for a $25,000 deduction in their 08 taxes for purchasing certain trucks, SUV’s and crossovers. If you have a job and want a new car or truck, you can help yourself and help the economy by purchasing a new American car or truck. Tell your Congressman and Senators you want them to help save the US auto industry that is responsible for the employment of 1 in 10 Americans. For more information and to see how you can contact your Senators and Congressman log onto www.gmfactsandfiction.com. Pray for our auto industry and our economy.

On behalf of everyone at the Bob Smith Automotive Group - the GM Giant and Giant GMC – and Giant Fishing Charters, Happy Thanksgiving! Drive safely.

Is GM Going To Buy Chrysler?

I don’t think I have heard so much buzz in our industry as I have since the news leaked of this potential deal. Why in the world would GM want Chrysler? One potential outcome would be if GM only purchases the manufacturing assets and intellectual capital. This is how they bought Daewoo. That would allow them to combine the Chrysler products they want to keep manufacturing and sell them through their existing GM dealerships. This would be troublesome though because it would affect the current Chrysler franchise holders.

GM’s purchase of Chrysler would also give them more access to an additional 3 billion dollars in government loan guarantees for research in alternative fuel vehicles. Remember, GM partnered with Chrysler in the development of the 2 stage hybrid used in the Tahoe and Yukon. The Chrysler deal will most likely include GM selling Cerberus Capital the rest of GMAC. Cerberus owns 51% of GMAC and about 80% of Chrysler.

Of course, GM could purchase all of Chrysler’s assets much like Ford did with Volvo, and continue to operate the way it is. They could create some economies of scale making both companies more efficient. All of this is Monday morning quarterbacking on my part, since I have no input or insider knowledge. Drive Safely.

The GM Giant And Giant GMC Are Holding A Used Car And Truck Auction!

The success of the GM Employee Pricing for Everyone sale has caused both of Bob Smith Automotive Group’s dealerships to be over-stocked with used inventory. Soon we will be starting our year end events and currently GM’s incentives are equal to the Employee pricing on many of our most popular models. We must sell the used inventory to make room for the trades coming in November and December.

With the economy as tough as it is, we decided to hold a sale and auction. Here is how it works: We will post our inventory on our web page at www.gmgiant.com and www.giantgmc.com as well as in our print ads in the Star Democrat. We will give a “buy it now” price and give you the opportunity to make a bid. The bids can be made at our office, or you can place a bid online. If you wish to have us arrange financing in advance we will. All finance arrangements must be complete by October 31st. Our online auction is being done through a link with E-Bay. At noon on Saturday November 1st we will compare the in dealership bids to the online bids and declare who the purchaser is. We will reserve the option to accept any price at our discretion before November 1st.

I am not aware of anyone else trying anything like this. It is our effort to liquidate all used inventory by November 1st. This offers the consumer a real bargain on some of the cleanest used inventory in Maryland. The sale is going on now so don’t miss it.