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Auto Dealers, Late to the Game, Rally for Big Three Rescue

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Auto Dealers, Late to the Game, Rally for Big Three Rescue

Some Reticence Lingers, as Federal Help Could Speed the Closure of Sales Networks -- but a 'Way of Life' Is Threatened

NEW CARROLLTON, Md. -- At a Chrysler dealership here Wednesday, dealers rallying in support of a government bailout for Detroit's Big Three grew emotional over the threat to "our way of life," as one put it.

But even as they backed Detroit's plea, they acknowledged being late to the lobbying effort.

"We probably should have done this across the country," Tammy Darvish, who owns the DarCars dealership that hosted the gathering, told a crowd that included a local seafood business, charity representatives and public officials.

The National Automobile Dealers Association says the nation's 20,000 auto dealers directly employ 1.1 million people, more than the three domestic auto makers combined, and as the nation's largest retail businesses, generated $693 billion in revenues last year. The public face of the auto industry, dealers have a business presence in every congressional district.

Only in the past two weeks have dealers put their full heft into a lobbying effort that has faltered, one reason why support for Detroit in Congress has been so tepid -- and remained so during Thursday's hearings.

One factor behind their reticence, some dealers say: Federal help could speed their demise. Analysts and the domestic auto makers themselves say their sprawling dealer networks need streamlining.

Plans to cut dealerships were spelled out in restructuring plans that all three companies presented to Congress. That puts dealers in an awkward spot.

MK-AT299B_DEALE_NS_20081204215618.gif On the other hand, a bankruptcy of one of the Big Three would cause enormous disruption.

"I think dealers have been lost in this equation some," said Michael Martin, dealer and owner of Dudley Martin Chevrolet and Saturn of Manassas, Va. "The tremendous effect we have on Main Street is something we need to bring to bear."

The Big Three's dealership structure is one reason they've been harder hit by the recession than foreign manufacturers, whose smaller networks have helped their bottom lines as auto sales have fallen.

State franchise laws protect dealerships, making it expensive for auto makers to close them. In an interview Wednesday, Ford Motor Co. Chief Executive Alan Mulally said that the number of Big Three dealers was still too high, but "There isn't enough money in the world to buy everybody out."

Ford expects to have cut its dealership base by 14% from 2005 to the end of this year, to 3,790 outlets.

General Motors Corp. hopes to reduce its dealerships by up to 1,800 -- to 4,000 outlets by 2012. Chief executive Rick Wagoner has pointed out that would leave GM with four times more outlets than Toyota Motor Corp.

Regardless of what happens in Congress, said Paul Melville, a principal at restructuring advisers Grant Thornton LLP who specialize in the auto industry, dealers have "to realize that they are part of the solution and they can't stand on the side."

When the auto makers first appeared in Washington to press for federal help, some dealers hung back, even as other sector players such as parts suppliers lobbied hard. Some say they wrongly assumed the auto makers would secure the funding with little problem.

"I think they probably should have made their case a little more clearly," said Mike Catron, a manager at DarCars in Rockville, Md. Until the auto makers were rejected, "we didn't realize the urgency."

Other dealers oppose a rescue. Some have questioned why the auto makers need a bailout.

"I'm somewhat conflicted supporting any requests for government assistance. ...If those companies were making a lot of money they wouldn't offer to pay more taxes or reduce the national debt," said Greg Kelly, president of the Kelly Automotive Group, which operates seven dealerships in Pennsylvania's Lehigh Valley, speaking before the auto makers' first appearance before Congress.

Mr. Kelly and others say the threat of bankruptcy at GM, Chrysler LLC or both has drawn dealers off the fence. Bolstered by recent industry research, they say Americans won't buy a car from a bankrupt company.

Next week, 150 dealers will fly to Washington to visit congressional offices, whether or not Congress decides to vote next week on the loans. "We're not having to persuade dealers" to lobby, said Annette Sykora, a Texas car dealer who heads NADA. "This is our livelihood."

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