Category Archives: Auto Industry Politics

Reports and insights into how auto manufacturers, auto dealers, and other industry players play politics. And how it affects you.

Car dealers block Tesla from competing in Texas

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Electric car manufacturer Tesla won raves from Consumer Reports. It snagged Car & Driver’s Car of the Year award. It earned top marks from the National Highway Traffic Safety Administration in crash test results. Plus — the company inspires loyalty among its customers bordering on fanaticism. So who could possibly want to block it from selling its cars?

Car dealers. In a remarkable culture clash, the new-age California-based company is being hammered by politically connected mega-dealers accustomed to padding their profits by engaging in a whole range of shady practices that harken back to horse-trading days.

In the latest skirmish, auto dealers succeeded in barring Tesla from being able to sell its popular cars in one of the nation’s largest car markets — the state of Texas.

One interesting analysis of Why Tesla lost the battle to car dealers in Texas

Dealers Diss Hillary

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Angry auto dealers are threatening to boycott the National Auto Dealers Association’s annual convention in New Orleans next January, thanks to the NADA’s decision to invite Hillary Clinton to keynote the event.

In comments posted on the Automotive News website, dealers are sounding off, unleashing an angry tirade. One commenter writes:

         “Re: Shrillary…have we forgotten the nefarious Rose Law Firm, Vincent Foster, “Travelgate”, cattle futures, White Water, the seizing of FBI files of conservatives…all before the Benghazi 3:00am phone call.    “Phony scandals” don’t come home in body bags !!”

Other comments:

     “NADA moves one giant step closer to irrelevance with the selection of Clinton as a speaker. What part of political neutrality do they not understand? Every dealer I know is outraged….”

     “This hag needs to emigrate – now that would make me VERY happy.”

According to the report in Automotive News, “a Georgia dealer consultant who writes columns for auto industry publications, says he was deluged by profane responses to his Facebook post asking people what they thought of NADA’s pick.”  (Automotive News, July 29, 2013)

According to Open Secrets, auto dealers have a history of lavish donations to political candidates and parties –predominantly to Republicans.  During the 2011- 2012 campaign cycle, auto dealers gave $1,473,925 to Romney, but only a relatively paltry $118,394 to Obama.

Ironically, during the Clinton presidency, auto sales burgeoned and car dealers flourished. In stark contrast, George Bush’s economic policies proved disastrous for the entire auto industry, resulting in the bankruptcies of GM and Chrysler, and record numbers of dealer closings.

Car dealers sue to keep car buyers captive, attack Tesla

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Ever wonder why you can’t just order a new car over the internet, directly from the manufacturer? Then pick it up at the factory, or a local showroom, like people do in Europe? It’s because U.S. auto dealers have used their political muscle to get laws passed in all 50 states that give them a special monopoly. Those state franchise laws insulate them from having to compete with manufacturers for your business.

Car dealers got the laws enacted because they know that, given a choice, most car buyers would never subject themselves to the typical car-buying experience.

Car dealers are now attacking electric car manufacturer Tesla in court and in state legislatures, seeking to bar the company from selling its highly-praised electric vehicles directly to the public. Tesla is wise to be wary of auto dealers. As a group, auto dealers are throwbacks to the era of horse-trading. They have been among the most aggressive opponents of advances in fuel economy standards. They also have a long history of opposing mandates to produce electric vehicles.

Car dealers repeatedly sued the U.S. Environmental Protection Agency, seeking to block higher fuel economy standards. They waged all-out war against improved fuel economy in Congress. The end result, of course, was that when the price of gas rose, the value of their gas-guzzling products tanked, leaving their customers upside down in their overpriced loans. Then we bailed them out, at taxpayer expense, including the $3 billion they got from “Cash for Clunkers.”

Plus auto dealers commonly engage in a laundry list of shady or downright illegal practices that add billions onto the price of financing cars — hard-earned money that could be spent to get a newer, safer, cleaner car.

Think you might like to have the freedom to buy directly from a manufacturer someday?  Now it’s only a pipe dream for car buyers in most states — unless you’re willing to travel to Europe — but someday it may become reality here in the U.S.

Read more: National Public Radio report

 

Good news for car buyers — Richard Cordray Confirmed!!

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At last, in a huge, sweet victory for struggling consumers, Richard Cordray has been confirmed as Director of the Consumer Financial Protection Bureau. The CFPB, first envisioned by now-Senator Elizabeth Warren, was created to be a watchdog for consumers in the financial marketplace.

Democratic legislators in Congress created the agency when they voted for the Dodd-Frank Wall Street Reform Act, in the wake of the largest financial meltdown since the great Depression.

Since then, Republicans in Congress have tried repeatedly to weaken the agency and put it under their thumbs. That way, they could tie it in knots and keep it from doing its job.  Republican senators had blocked Cordray’s nomination for years, and relented only when Democratic Senators forced their hand, by threatening to change the filibuster rules that had allowed the Republican minority, at the behest of powerful, unscrupulous special interests, to block a vote on Cordray’s nomination and other nominations to vitally important posts that directly affect the lives of  ordinary Americans.

Cordray’s confirmation is a huge victory for President Obama, US Senator Elizabeth Warren,  the consumer and labor movements and allied groups, and other pro-consumer forces who joined together to form Americans for Financial Reform. And for all the individual consumers who petitioned Congress and spoke up for letting the agency do its job.

Republican members of Congress, and some Democratic members, led by US Rep. Gary Peters of Michigan, granted auto dealers a special exemption from the Consumer Financial Protection Bureau’s authority, under the false claims that they don’t engage in lending themselves (they do), and that they’re not traded on Wall Street (many of them are).

However, the CFPB does have authority to police auto lending. It may also act to curb lenders from taking away consumers’ Constitutional rights when they purchase a car, trapping them with “arbitration” clauses that keep them captive to a secret, private “arbitration” system that the lenders control.

This is welcome news indeed for the car-buying public. The agency has already issued a warning to auto lenders not to keep engaging in discriminatory lending practices that result in minority car buyers paying more for financing — not based on their creditworthiness, but on race.

The agency may also issue rules to curb auto dealer markups on interest rates, that cost car buyers over $25.8 billion annually in excessive interest charges pocketed by dealers and lenders — money that could be spent on technology that saves lives and helps clean the air and slow climate change.

If you have a complaint about auto lending, here’s where to complain at the CFPB:

Consumer Financial Protection Bureau–file a complaint here

 

 

 

 

 

 

Auto dealers granted special exemption from Dodd-Frank based on lies

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Auto dealers are directly responsible for writing up the lion’s share of the $850 billion auto lending market. Like home mortgages, most of those loans are then packaged, securitized and sold on Wall Street to investors — spreading the risk around. New and used car dealers are also the leading source of consumer complaints to state and local consumer protection agencies and the Better Business Bureau.  They played a major role in the collapse of the economy and the recession.

Despite years of being warned by economic analysts that their predatory practices were a “house of cards” that would inevitably collapse, they failed to rein in their abuses. Instead, their practices went from bad to worse — including falsifying loan applications and forging signatures on documents, and selling cars they didn’t even own — massively defrauding the public, banks, and other dealerships.

So why aren’t they regulated under the Dodd-Frank Wall Street Reform Act?

Simple. It’s because they were granted a special exemption, by Congress. The claim that dealers made, to rationalize this special treatment, was that auto dealers are supposedly “Main Street, not Wall Street.” This talking point became their oft-repeated refrain with members of Congress and the press.  Never mind that it was laughably false.

Former U.S. Senator Sam Brownback (R-Kansas) presented the amendment to give the special exemption from Dodd-Frank to auto dealers, on the Senate Floor. Not surprisingly, he merely mouthed the car dealer line about their not being part of Wall Street.  He claimed that car dealers

“are the quintessential Main Street business throughout the country. There’s not a single auto dealer on Wall Street. None of them. Not a one. You can go up there today and try to buy a car and you can’t get one. These are Main Street businesses.”

Too bad what Sen. Brownback told his Senate colleagues was totally false.  A simple check of readily available public filings would have revealed that actually over 1,000 dealerships are owned by huge automotive dealership chains that are indeed traded on Wall Street.

Exhibit A: the behemoth AutoNation, based in Florida, which owns more than 215 dealerships, and took in over $13 billion during 2011. Bill Gates is one of the major investors who owns shares of AutoNation. Hardly most people’s idea of Main Street.

Here’s a link to Brownback’s floor speech, recorded by C-Span and posted on the U.S. Senate website. Sen. Brownback’s speech appears approximately 2 hours and 53 minutes after the recording starts:

May 24, 2010 Floor Debate over Dodd-Frank Wall Street Reform Act

Reality check:  Among the leading auto dealership chains that are publicly traded on Wall Street (revenue based on figures from Automotive News, March 12, 2012 — for the year 2011):

AutoNation — 215 dealerships, over $13 billion in revenue

AutoNation’s filings with the Securities and Exchange Commission

Penske Automotive Group — 145 dealerships, over $11 billion in revenue

Penke’s filings with the SEC

Sonic Automotive — 119 dealerships, over $7 billion in revenue

Sonic’s filings with the SEC

Asbury Automotive Group — 79 dealerships, over $4 billion in revenue

Asbury’s filings with SEC

Apparently Sen. Brownback was so gullible, he believed what the auto dealers told him and fell for their line about being Main Street, not Wall Street, without bothering to check the facts.  You can draw your own conclusions about his intelligence, or motives. Let’s just say that if you’re buying a car, he’s probably not someone you would want to ask for advice on how to get a good deal.

So — if you’re ripped off by an auto dealer, who would otherwise be policed by the new Consumer Financial Protection Bureau, created under Dodd-Frank, who do you have to blame?  Well, the dealer, of course. Plus former Sen. Brownback, who is now the Republican Governor of Kansas. Plus all the members of Congress who failed to stand up to the auto dealer lobby, whether because they were so ignorant about the business, or gullible, or just plain corrupted by auto dealer cash. Interestingly, all the Republicans voted to exempt the car dealers, who are among their biggest sources of campaign cash. Most Democrats voted against the exemption, which was opposed personally by President Obama.

And if you’re ripped off by an AutoNation dealership, you can blame one of their largest shareholders, who profits from their billions in revenue — Bill Gates.