Cities mull bailouts of car dealerships
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KAI RYSSDAL: It’s been 77 years since a company other than General Motors was the biggest automaker in the world. But GM officially lost that title today. We learned that last year GM sold half a million fewer cars than Toyota.
‘Course, in this market, it’s not like Toyota’s doing so great, either. One of its executives said today, “Hey, market share doesn’t pay the bills.”
Carmakers are hurting. Car dealers are hurting, too. And that’s putting a bigger dent than you might think in some local economies. Marketplace’s Rico Gagliano reports on one California town that’s trying to cushion the blow.
RICO GAGLIANO: Victorville is a city of 100,000 in the Southern California desert. And Victorville Motors has sold Chryslers and Jeeps there for 30 years. But that didn’t count for much when the financial crisis hit and car sales dropped. City Councilman Mike Rothschild:
MIKE ROTHSCHILD: They could not borrow money from the bank — Chrysler’s financial arm, and they went to all the local banks as well. You know, they tried every avenue.
That wasn’t just a problem for Victorville Motors. It was a problem for the whole town.
ROTHSCHILD: We’ve got an auto mall of several dealerships, about seven. They generate over half of our sales-tax money, and sales tax is the biggest issue for this city because we don’t have any property tax in Victorville.
So last month, City Council voted to loan taxpayer money to Victorville Motors — 200 grand. Call it a mini-bailout. It’s among the first towns to do so, but it may not be the last. Yesterday, the California city of Redlands considered a relief package for its dealerships. Dave Kushma of Automotive News says towns everywhere may have similar decisions to make.
DAVE KUSHMA: There are 20,000 new-vehicle dealerships across the country. And in many cases they are the largest employer in a community, they make a lot of charitable contributions. The Detroit Three automakers have too many dealerships and they’re trying consciously to reduce the number.
By as much as 10 percent over the next year. And Kushma says even if local governments give dealers loans, there’s still the problem of public resentment. He says many assumed the Big Three would extend credit to struggling dealerships, using money they got from their federal bailout.
In Los Angeles, I’m Rico Gagliano for Marketplace.
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