Rallying With Lake Elmo to Save Local Auto Dealers

Statement

Saturday, I joined several hundred Lake Elmo-area residents at a rally to save a profitable Chrysler dealership from forced closure. Fury Motors is one of 19 dealers that received its pink slip from the Obama Auto Task Force last month and will be forced to close down despite its profitability and its importance to the local economy.

As I said in my speech, this is just wrong. This is a fourth generation family business. They've paid their dues, run a smart business and worked hard and they're being forced to close because a task force led by a Washington appointee with no auto experience at all has arbitrarily chosen them to shut down. This is what happens when Congress and the President insert themselves as CEO, CFO, and Board of Directors for American industry.

What the Auto Task Force Model Might Mean for Health Care Reform:

Last Friday, the St. Cloud Times published a column I drafted on the Obama Auto Task Force's closure of auto dealerships across the country. Many of these are just like Fury Motors in Lake Elmo: profitable, smart businesses that were arbitrarily chosen for closure by a government task force with no auto business experience.

I am greatly concerned about the precedents we're setting and how this model could be applied to other major reforms on their way through Washington. If a "car czar" can arbitrarily choose car dealerships for closure, could a "health czar" arbitrarily decide what hospitals can remain open and what doctors can continue to practice?
Your turn: Obama's auto takeover shocks

The American experiment was born of the right of an individual to his and her own liberty and freedom; to control his or her own destiny. But today we are witnessing the dissolution of the dividing line between the private and public sector; between individual liberty and governmental authority.

Take the actions of the Obama administration's auto task force. Government has kicked private business out of the board room and installed itself as CEO, CFO and board of directors of American automobile manufacturing companies. It is making decisions about who to hire and who to fire, how much to budget for advertising, and what car lines to continue to manufacture. And, the "Car Czar" has given rise to two of the most stunningly brazen takings of our day.

First, the task force turned basic American legal principles upside down, leapfrogging unsecured debts of the United Auto Workers ahead of secured debts of legitimate bondholders. Secured creditors get preference in bankruptcy because they loaned money only on the contractual promise that if the debt was unpaid they would get back specific property. The administration may have considered its political promise to the UAW to supersede that contractual promise; but in doing so, it has set an ugly precedent.

That precedent, in fact, will give a labor union and the U.S. government a combined 89 percent stake in GM. And, with the additional $7.5 billion that the government just poured into GMAC (on top of the $5 billion previously "invested" in that company) the government owns more than a third (or 36 percent) of that GM-related car loan company.

If the company's losses continue to mount, the government's stock in GMAC could be converted to preferred stock, giving Uncle Sam a majority stake in the company that makes loans for the automaker that the U.S. pretty much owns.

Second, the task force sent out thousands of pink slips, arbitrarily closing down auto dealerships, at times turning over their assets and rights to other dealers.

Small businesses are the backbone of our nation's economy, yet the administration's task force is planning to eliminate close to 3,000 Chrysler and GM auto dealerships.

According to the National Automobile Dealers Associations, these closings are expected to put about 150,000 people out of work, potentially devastating many small towns.

These aren't necessarily unprofitable dealerships. In fact, many of them have been doing quite well even in the economic downturn, yet the administration will close them down.

This is simply astonishing, as neither the administration nor any government official should have this authority. But it also defies logic as eliminating dealerships will have no affect on the viability and bottom line of GM, nor Chrysler.

A NADA analysis finds that the overwhelming share of manufacturing revenue results directly from auto dealers - more than 90 percent of manufacturer revenue, in fact.

Reducing the number of dealerships as proposed will have a direct and dire effect on manufacturers' bottom lines, slashing their revenue and market share while doing nothing to improve their balance sheet in the short term.

On top of all this, the administration has also announced plans to accelerate plans to increase the fuel efficiency of cars by 2016 to 35.5 mpg. Automakers are strapped as it is, and they agreed to reach that very same standard by 2020 as a compromise with Congress. This new standard will increase the strain on these manufacturers. And, it will strain our pocketbooks to boot. The Associated Press reports that new fuel and emission standards for cars and trucks will increase the cost to consumers of about $1,300 per vehicle by 2016.

This administration and this Congress have put theory above real hardworking Americans, while standing rock-solid American legal principles on their head. If our "Car Czar" can throw a dart at a map and determine which car dealers don't deserve to be open, what business is next? Will the drive for socialized medicine mean that a "Health Czar" in Washington will determine which hospitals can remain open or which doctors can keep their practices?

The precedents we are setting are alarming and we must consider them carefully now before the consequences gain too much momentum to stop.

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