By Mike Boyer

Region’s dealers like support for warranties

President Barack Obama’s “tough love” approach with General Motors and Chrysler got favorable reviews Monday from Greater Cincinnati and Northern Kentucky dealers.

While disappointed that the president’s task force rejected the automakers’ restructuring plans, dealers said they were encouraged by Obama’s commitment to the industry and his willingness for the government to stand behind manufacturers’ warranties if they are forced to seek bankruptcy reorganization.

“General Motors isn’t going away, but it will be different most likely,” said Bob Pulte, a longtime Chevrolet dealer in Lebanon.

Meanwhile, auto industry analyst James Rubenstein, professor of geography at Miami University in Oxford, said he’s encouraged that Obama views the problem as the equivalent of a natural disaster – and that the president realizes that there’s more at stake than just GM and Chrysler.

Rubenstein said a collapse of GM and Chrysler would ripple beyond them and their 140,000 U.S. workers to hundreds of the 3,500 automotive supply plants, mainly in the Midwest, that supply parts to all automakers.

Obama asserted unprecedented government control over the auto industry Monday, bluntly rejecting turnaround plans by GM and Chrysler, demanding fresh concessions for long-term federal aid and raising the possibility of quick bankruptcy for either ailing auto giant.

To reassure consumers that their U.S.-made purchases will be protected even if the companies don’t survive, Obama took the extraordinary step of announcing that the government will back new car warranties issued by both GM and Chrysler.

In a decision that surprised lawmakers and analysts with its toughness, the president said at the White House that “we cannot continue to excuse poor decisions” and “cannot make the survival of our auto industry dependent on an unending flow of taxpayer dollars.”

The administration may use bankruptcy to “help them restructure quickly and emerge stronger,” he said.

Chrysler, judged by the administration as too small to survive, got 30 days’ worth of money to complete a partnership with Italy’s Fiat SpA or some other automaker.

GM got assurances of 60 days’ worth of federal financing to try and revise its turnaround plan under new management with heavy government participation.   That would involve concessions from its union workers and bondholders.

The administration engineered the ouster of longtime CEO Rick Wagoner over the weekend, an indication of its deep involvement in an industry that once stood as a symbol of American capitalism.

Fritz Henderson, GM’s president and chief operating officer, becomes CEO.  GM also will replace most of its board and must increase its reliance on fuel-efficient vehicles, under findings of the auto task force, headed by former investment banker Steven Rattner.

Chrysler CEO Robert Nardelli is keeping his position.

While some car dealers fear that consumers won’t buy cars of companies in bankruptcy, Bob Reichert, whose Kenwood Dealer Group includes both GM, Saturn and Chrysler franchises, said the government’s willingness to stand behind warranties should allay those concerns.

“Bankruptcy isn’t the end of the world,” Reichert said.

He also was encouraged by Obama’s efforts to spur car sales by endorsing the so-called auto-scrappage tax credit, giving an up to $10,000 tax credit to car buyers who trade in an older model for a new fuel-efficient one.

Pulte and Reichert said their dealeships are seeing an uptick in sales.

Tom Gill, a Florence Chevrolet dealer who features a “Buy American” theme in his advertising, said he was disappointed Obama didn’t accept the automakers’ restructuring plan but pleased with his endorsement of the domestic industry.

“It’s an awesome sign he believes in our auto industry,” he said.

The possibility of a bankruptcy reorganization at either GM or Chrysler “isn’t good news for their local auto dealerships,” said Rob Riggsbee, president of Inside Media Inc., a Newtown media research and buying agency.  A bankruptcy filing could accelerate the consolidation under way among smaller local dealerships, many of them long-held family franchises, he said.

Still, Rubenstein said, it’s unclear whether the president’s “carrot and stick” approach will work.

“He’s trying to walk a fine line between a bailout and a tough-love approach,” Rubenstein said.

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