California Business Minute™

Hi, I am Tim Johnson and welcome to the California Business Minute.

While the American automakers General Motors and Chrysler received federal bail out
assistance, it appears that the obvious extension of these dollars have not found there
way to their dealerships.

In a letter from the president of the California New Car Dealers Association, Peter K. Welch
to the US Secretary of the Treasury Tim Geithner, he describes the situation as dire to the
future of the industry.

In 2008, 137 auto dealers in California closed their doors, (47 GM dealerships, 32 Chrysler
dealerships and 29 Ford dealerships). The Detroit News reported that just over 1,000 dealerships
closed their doors nationwide during the year illustrating that over 10 percent of the closing were
in California.  Since the first of the year, 23 new car dealerships have closed and the future looks
bleak. An Association survey illustrates that 131 dealerships are concerned that they may be
forced to close within the next six months. If that should happen that would mean the loss of
nearly 20 percent of the dealerships in the state in two years.

The culprit is financing.  The dealerships are feeling the credit crisis through their vehicle inventory
lenders otherwise known as ‘floorplan lenders’. Welch’s letter describes the actions as ‘draconian’
in that out of the recent survey, 54 dealerships responded that they have been given termination
notices.  Dealers are not receiving financial support. California dealers saw a 23 percent decline in
sales in 2008 compared to an 18 percent nationwide.  California dealers are carrying older models
that they cannot sell.  This backlog in inventory has exacerbated the problem and there appears to
be no consideration given to the dealership network by GM or Chrysler.

Left to fend for themselves, the Association has launched a campaign to raise attention for
assistance before a collapse of dealerships in California.

I am Tim Johnson and this has been the California Business Minute.

For more information go to the website for the California New Car Dealers Association at http://cncda.org/
or to read the letter from the Association to the Secretary of the Treasury go to
http://cncda.org/resources/CNCDA_Letter_to_Mr_Geithner_2-23-2009.pdf