Cape & Islands News

Cape car dealers await Congress's bailout decision

Say economic fallout of automakers' failure would hammer U.S. economy
Honda dealer asserts Detroit companies must change their business model

By James Kinsella

When representatives of Detroit's Big Three automakers appeared before Congress last week to ask for a $25 billion bailout, a number of Cape Codders were even more interested than most other Cape residents.

Owners, managers and workers at Puritan Pontiac Buick GMC, Ford of Hyannis and Premier Cape Cod, which hold Dodge, Chrysler and Jeep vehicle franchises, were hoping that the federal government would agree to provide financial help for the struggling Detroit automakers.

Congress, however, provided no immediate relief, apparently as turned off by the individual private jets that each of the Big Three's executives rode in on as the lack of detailed plans for putting the requested aid to good use.

"The consequences are staggering. In this country, there are so many jobs involved... We have got to get something."
                  - Richard Covington
                     Ford of Hyannis

The Big Three - General Motors, Ford and Chrysler - have until Tuesday, Dec. 2 to present a plan to Congress on how they would use the money.

The Cape business people who sell Big Three vehicles say they understand the need for a plan, as well as the massive economic fallout if one or more of the carmakers fail.

"The consequences are staggering," said Richard Covington, president of Ford of Hyannis. "In this country, there are so many jobs involved... We have got to get something."

"If the government can't help the carmakers return to success, Joe Laham, owner of Premier Cape Cod said, "someone is going to pay" - not only the workers at the Big Three and their suppliers who lose their jobs, but other Americans who will have to cover their unemployment benefits.

The dealers also said the Big Three executives didn't really have a choice in how they traveled to Washington, D.C. - that their employment contracts specify their manner of travel so as to protect their security for the corporations.

That being said, the dealers say they understand how members of Congress and their constituents would react to the private-jet travel at a time when so many people are hurting.

They also appreciate that Congress wanted a better, more detailed plan as to how the companies planned to use the money to turn their operations around.

"It's like applying for a job without a resume."
- Joe Laham, of Premier Cape Cod, on executives' failed plea

Jim Costas, one of the owners of Puritan Pontiac, said he wasn't disappointed by Congress's rejection of the executives, but he was surprised that the executives weren't more in tune with the mood of Congress and the country.

Laham said of the executives' approach: "It's like applying for a job without a resume."

The dealer said Congress made the right decision to insist on a better, more detailed plan.

What is hurting the auto industry, Laham said, is what is hurting the housing and other industries across America: the sharp tightening of credit.

These days, he said, even people who have good credit scores are being getting turned down for financing because of broader concerns about their long-term financial security.

One observer who said Detroit has to embark on a new approach is Jay Goodwin, one of the owners of Hyannis Honda.

"I think Congress was on the right track," Goodwin said Friday. "The Big Three companies all have been failing with their business models for years."

To give the automakers money now, Goodwin said, would be completely irresponsible.

He sees bankruptcy reorganization as the only way for the Detroit automakers to free themselves from union contracts that he said hurts their ability to compete in the marketplace.

"The Big Three companies all have been failing with their business models for years."
                           - Jay Goodwin
                              Hyannis Honda

In contrast, Goodwin said, Honda and Toyota don't need help, given their strong balance sheets and abundance of cash.

At the same time, he sees the dire straits of the Detroit automakers as "extremely tragic" for the entire nation.

Nothing would be better, he said, than to have a healthy Big Three, even if that means his own dealership would face more competition for customers. "Competition makes everyone better," he said.

Laham said Congress should base its aid to each automaker on what that particular company is prepared to offer. For example, he said Chrysler's leader, Robert Nardelli, is prepared to slash his compensation to help put a deal together.

At present, Costas said, business is slow as people wait to see what Congress does.

"Obviously, whatever decision the government makes depends on whatever the three leaders come back with," he said.

Even though the Big Three's executives didn't initially get the help they sought, Covington anticipates Congress eventually will provide aid.

"I'm one of those guys who believe they are going to get help," Covington said.