East Valley auto dealers want Congress to act

As talks broke down Wednesday in Washington, D.C., over a proposed federal bailout for Detroit's Big Three auto manufacturers, some East Valley dealers worried the do-nothing strategy could negatively affect them.

Congress called off a planned vote on a $25 billion emergency loan package for General Motors Corp, Ford Motor Co. and Chrysler LLC. The three firms' dealerships account for 35 percent of sales in Maricopa County, according to the Valley Auto Dealers Association.

The automakers - hobbled by lackluster sales and choked credit - are burning through money at an alarming and accelerating rate: about $18 billion in the last quarter alone. GM has said it could collapse within weeks, and there are indications that Chrysler might not be far behind. Ford Motor Co. has said it could get through the end of 2008, but it's unclear how much longer.

Congress' potential inaction could be devastating, said Marc Cannon, spokesman for AutoNation, which owns 14 local dealerships, including Brown and Brown Chevrolet and Power Chevrolet in Mesa and Power Chrysler and Power Ford in Scottsdale.

He said his company's dealerships are large enough to brave the current turmoil, however "you are absolutely going to see dealers go out of business. This is a serious, serious issue."

Cannon said consumers won't purchase cars from a bankrupt auto manufacturer. "Why would a customer spend $30,000 in a bankrupt company and not know what the value of that product is going to be?"

The industry has already had its share of problems in the East Valley.

Georgia-based Bill Heard Enterprises, one of the leading Chevrolet vehicles in the nation, closed all of its dealerships in September, including one in Scottsdale where more than 150 employees worked. The company also shuttered a collision, parts and service division in the city.

Desert Kia, a Gilbert car dealership on Country Club Drive south of Baseline Road, also has closed.

John Nissen, general manager of Earnhardt Ford and Mazda in Chandler, said automakers have contacted him and other dealers to urge them to pressure local congressmen to support the relief measure.

"It's pretty scary," he said. "The economy's bad enough right now. We certainly don't need rumors and/or the reality of this manufacturer going under, or that one possibly going under."

Although Nissen's sales are down about 30 percent from last year, he said the parent company - Earnhardt Auto Centers - is positioned to make it through the current turmoil.

The company doesn't sell GM vehicles, but it does own Earnhardt Dodge in Gilbert, which gets its automobiles from Chrysler.

Nissen echoed the concerns of his counterparts, saying a bankruptcy would result in a further slowdown of industry sales.

"It would probably make it less likely for someone to go out and buy a car," he said. "The next thing he's probably going to think of is, 'Well, OK, let me hold off. I don't want to buy anything yet.'"

A bankruptcy would mean companies that make auto parts will close, affecting all manufacturers, Nissen said.

Michael Anselmo, general manager at Scottsdale's Five Star Ford, said he'd rather see the government use its $700 billion financial rescue program to prop up lenders. He complained that even customers with great credit scores are having a difficult time getting loans.

"We need people to come in the store and be able to buy a vehicle," he said. "How that money gets to them? I'm not an economist, I've got a hard-enough time running a car dealership."

Knox Ramsey, president of the Valley Auto Dealers Association, predicted little impact if any of the major automakers file for bankruptcy reorganization.

"Cars will continue to be sold, warranties are going to be honored," he said. "Insofar as driving down the street and seeing dealerships in business - that's going to continue to happen regardless of which way it goes and consumers can buy with confidence."