Thursday, February 12, 2009

Chrysler dealers share the pain.

This is from the Globe and Mail.

So while the financial institutions receiving bailouts in the US give retention bonuses, Chrysler is giving incentives to dealers to drop out by imposing costs the company used to cover. Interesting that in providing loans to Chrysler there is a provision that forces the auto union to negotiate wages downward. That is the new role for unions. Of course lower wages sure help stimulate spending don't they! The bailout plan has more to do with rescuing profitability than helping the ordinary working person. Insofar as they do help them it is simply collateral crumbs.

Chrysler dealers share the pain

From Thursday's Globe and Mail
February 11, 2009 at 8:39 PM EST
TORONTO — Chrysler Canada Inc. has cut dealers' profits on new vehicles and downloaded to its dealers the cost of filling up a new vehicle with gasoline as part of their contribution to sacrifices Ottawa and Ontario are demanding from the auto maker's stakeholders.
The moves represent tens of millions of dollars worth of sacrifices by the company's 450 dealers in Canada, Chrysler president Reid Bigland said yesterday.
The cost of filling up vehicles could range from $100,000 to $220,000, dealers said yesterday, and could wipe out profitability for those dealers who are close to the edge.
“They've got way less room to manoeuvre before they're in the red,” said one dealer, who noted that the cut in dealer margins helps the auto maker's bottom line.

In another move to raise revenue, dealers will now be charged $1 every time they access an internal system that helps them find, say, a blue Dodge Caravan at another dealer if they don't have one on their own lot.
About 90 per cent of the company's dealers are profitable, Mr. Bigland said in an interview at the Canadian International Auto Show in Toronto, but he acknowledged that the drop in Canadian sales since November is making things more difficult.
Negotiations between Chrysler and the federal and Ontario governments on a $1-billion loan are about 10 days away from being completed, he said.
Conversations between the company and the Canadian Auto Workers have started, although CAW officials have said no written proposals have been exchanged.
The terms of the Chrysler loan will include a proviso that wages at the Canadian units of the Detroit Three become competitive with wages at Japanese plants in the United States.
Talks between the two governments and General Motors of Canada Ltd. on a $3-billion loan are less advanced. Ontario Economic Development Minister Michael Bryant said yesterday that GM is no longer seeking emergency loans, but is still seeking longer-term aid from the two governments.
Mr. Bryant said he is confident that a restructuring plan can be crafted that protects jobs in this country.
“I think it's important to keep in mind that the industry itself has an interest in keeping an appropriate Canadian presence,” he said. “They are not here because they love Canada. They're here because we have excellent, highly educated workers and productive plants. They are not going to want to give up on those productive plants at all.”
The two companies face a deadline of Feb. 20 to present restructuring plans to the two governments, three days after their parent companies, Chrysler LLC and General Motors Corp., are scheduled to submit their plans to Washington.
Mr. Bigland applauded the proposal in last month's federal budget to inject $12-billion into the credit markets to kick-start the leasing market for vehicles and heavy equipment.
But the money needs to be made available as soon as possible, he said, in part so dealers can offer leasing to customers again and can finance their purchases of vehicles from Chrysler's factories.
Mr. Bigland said dealers are telling him that banks are denying loans to 20 to 25 per cent of people seeking to buy Chrysler vehicles, compared with 10 per cent during normal times.
One Chrysler dealer said yesterday that 35 per cent of applicants for loans are being turned down.

No comments: