Minn. auto dealers optimistic about Obama plan

Minnesota's auto dealer lots have been emptying out, and it's not because armies of customers are driving off with new cars.

In the last five years, about 70 dealerships have gone under due to weak sales, many of them just in the past 7 months.

But the Obama administration's latest plans to promote car purchases could help some of those dealers, according to Scott Lambert of the Minnesota Automobile Dealers Association. He called President Obama's announcement about warranty guarantees and other plans "a milestone."

"I think overall, everybody thinks this is a positive development," Lambert said.

The warranty program comes as GM and Chrysler are edging closer to bankruptcy. Both companies have resisted a bankruptcy reorganization, arguing consumers will not buy a vehicle from a bankrupt company out of concern that the warranty wouldn't be honored.

Obama's plan eliminates that concern. It says that any domestic automaker, including Ford, which has maintained a much stronger balance sheet, could participate in the program. Lambert thinks the warranty program will make a big difference.

"While there's still some uncertainty about the companies and what the companies are going to look like, the Obama administration's recognition of the fact that customers want to know are they going to have a car that's warrantied is a positive step," Lambert said.

But a quick trip yesterday to a few Twin Cities auto dealers suggests that the impact of the program might be hard to gauge.

"I didn't hear about the warranty. Did that come out today?"

Ted Skluzacek is a retiree, out shopping for a new car at a GM dealership in Inver Grove Heights. He's a self-declared "GM person" and was planning to buy a car no matter what. Of course, if he had been concerned about a potential bankruptcy he probably wouldn't be out car shopping. But in any case, Skluzacek said he has faith in GM's longevity.

"I think they're going to be around for a while one way or another," Skluzacek said. "But it's good to know that the warranty is going to be guaranteed."

Yesterday, President Obama offered his support for another proposal to boost sales of energy efficient vehicles. He promoted another possible tax credit, this one modeled on programs in Germany. It would give consumers a $5,000 tax credit incentive to trade in older, less fuel efficient cars for more efficient ones.

"And that would drive business right through the roof," said Paul Walser, head of Twin Cities-based Walser Automotive Group.

Walser's group runs domestic and foreign dealerships throughout the metro area. Walser said the "swappage" program has a lot of potential. But he is concerned such programs will borrow sales from tomorrow to make them happen today.

"What we don't want in this industry, similar to any other, is these giant peaks [and] valleys where all of a sudden everybody's buying a car one day and no one is buying a car the next day," Walser said.

As for what Obama's done so far, Walser welcomes the departure of GM CEO Rick Wagoner and isn't sure the warranty program will make much difference either way.

Regardless of what the government does, Walser thinks the auto dealers, GM dealers in particular, need to consolidate. Closing dealerships will mean more job losses, but many industry experts think it's the only way the existing dealers can stay profitable.

Editor's note: This story has been amended from its original version to remove some comments from a consumer.

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