“Dealers fear 'clunkers' may backfire on them - Greenville News” plus 4 more

Dealers fear 'clunkers' may backfire on them - Greenville News
Finding help gets tougher if car dealership is closed - Colorado Springs Gazette
For Private Equity, a Very Public Disaster - Star-Banner
Terry M. Fortner Joins LKQ Corporation as Vice President of Industry ... - dBusinessNews.com
Latest News - dBusinessNews.com

Dealers fear 'clunkers' may backfire on them - Greenville News

Posted: 09 Aug 2009 02:11 PM PDT

The federal government approved its cash-for-clunkers sequel last week, and supporters hope the $2 billion new installment will continue the surge in auto sales and boost demand for fuel-efficient vehicles.

The incentive program, begun last month, has been a boon to Upstate car dealers and consumers, generating much-needed sales for dealers and significant savings for car buyers.

But as they prepared for the extension, there was concern about the government's ability to handle the process of reimbursing dealers for the new-vehicle purchases and what happens to the industry once the program ends.

Ed Rich, general manager of Dick Brooks Honda in Greer, said his business sold between 45 and 50 vehicles in the first phase of the program, but has yet to receive any government allowances.

The program appears to be such a success that electronic paperwork has bogged down computer systems, slowed the government's payment process and created stockpiles of old vehicles that won't be scrapped until dealers receive their allowances, Rich said.

That's been the real stressing part is just having someone sitting there trying to dot every i' and cross every t' and get those in, he said. We've got them in, but there's no approvals, no money has been transferred to our account and we've had nothing to tell us that they've been turned down.

I think that the dealer network in the country would feel great if they (federal officials) would just get enough people there to look at those documents and have the expertise to not spend a day looking at them, but look at them and say, It's OK, it's OK, it's OK. Pay them,' Rich said.

Officials with the National Highway Traffic Safety Administration, which is governing the clunkers program, couldn't be reached for comment.

Officially known as the Car Allowance Rebate System, it received an additional $2 billion Friday, when President Obama signed into law legislation extending the program.

Obama welcomed the extension, saying it would aid economic recovery and help the troubled auto industry.

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Finding help gets tougher if car dealership is closed - Colorado Springs Gazette

Posted: 09 Aug 2009 01:50 PM PDT

Closures of General Motors and Chrysler dealerships don't mean customers are stalled when looking for service and warranty work, although they may hit a few bumps in their search for assistance.

For instance, Jim King, 62, of Colorado Springs bought a 2008 Dodge Ram 1500 at the Medved Autoplex in Castle Rock in December — six months before Chrysler closed 14 of the state's dealerships and GM severed franchise agreements with nearly 15 Colorado dealerships.

King chose the truck believing it had flex-fuel capability, which would allow it to run on E85, an ethanol fuel, gasoline or a blend of the two.

Trouble struck the first time King filled the truck with E85 fuel; the "check engine" light came on.

Mechanics at Colorado Springs Dodge revealed the problem: Despite what King was told, the truck was not a flex-fuel vehicle.

King was told to contact the dealer, but the dealer had been disenfranchised.

King called Chrysler's customer service hot line several times, but said he got no adequate response.

After inquiries from The Gazette to Chrysler's Midwest public relations manager, Wendy Orthman, King was put in touch with a resolution team.

"Talks are in progress, and we hope to resolve this to be satisfactory for him," Orthman said last week. "We will replace his vehicle with the E85 Dodge Ram he intended to purchase."

King's problem is unusual but any Chrysler dealer should be able to help customers of disenfranchised outlets, she said.

"Warranties remain valid," said Orthman. Customers do not need to pay for warranty work normally covered by the company if they go to an authorized Chrysler, Dodge or Jeep dealer.

Independent repair shops may perform routine warranty services that the customer usually pays for such as tire rotations and oil changes, said Rich White, executive director of the Car Care Council based in Bethesda, Md. Receipts should be saved to document maintenance in case of manufacturer warranty issues.

Colorado Department of Revenue's Auto Industry Division mediates complaints between the public and the auto industry. The department's Web site states buyers can pursue a complaint for a range of issues including warranty work included in the sales contract, lemon law grievances or alleged violations of the motor vehicle law. First, customers should try to resolve the problem with the dealer's general manager or owner.

Mark Couch, the department's public information officer, said complaints are reviewed within seven to 10 days to determine if an investigation is needed.

Buying a vehicle is a shared responsibility, Chrysler's Orthman said. "We encourage customers do a little extra homework to make sure they're getting the accessories they want." Flex-fuel vehicles are issued window stickers and yellow gas caps, she said, markers missing from King's truck that could have been a warning.

While King waits for the outcome of his talks with Chrysler, he said he's learned that perseverance pays when dealing with consumer problems: "Don't take no for an answer, if you feel you've been wronged, keep talking until you find the right person."

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For Private Equity, a Very Public Disaster - Star-Banner

Posted: 09 Aug 2009 10:15 AM PDT

But, even now, Mr. Feinberg, a man who can play a decent game of chess while blindfolded, is hard-pressed to pinpoint many mistakes. Sitting in his office on Park Avenue, far away from the detritus that surrounds Detroit, he grows pensive when asked what he has learned from his audacious — and failed — effort to privatize and resurrect the legendary and deeply troubled auto giant. "I don't know what we could have done differently," he says, crossing his arms on his chest. "From the day we bought it, we worked hard to improve it."

He pauses, pondering, as the clock ticks away. Then he shakes his head. "We were too optimistic on timing," he says. "Maybe what we should have done was not bought it."

Mr. Feinberg took over Chrysler almost exactly two years ago, promising to revive the company. Chrysler filed for bankruptcy protection at the end of April. So how he and his private equity firm, Cerberus Capital Management, choose to describe their journey with Chrysler is a delicate matter.

If he says he should have shelled out more money to help Chrysler, he could face the ire of investors who have already suffered heavy losses on his gambit. If he says he should have simply dumped Chrysler's auto arm, while clinging to its more promising finance unit, he could be accused of caring more about his wallet than he did about Chrysler's workers and the automaker's role in the economy.

Mr. Feinberg's education at the hands of Chrysler, the government and economic reality is emblematic of the limits private equity players have encountered as they've sought to reap outsize returns while also contending that they had the smarts and managerial prowess to repair companies of any size. Not too long ago, some pundits and analysts wondered whether private equity firms — backed with a rising tide of easy bank loans — could gain enough traction to make runs at seemingly untouchable behemoths like General Electric.

When Cerberus began poking around Detroit, some at the firm said they thought that the American automobile industry was going to be the biggest turnaround story in history. In sessions with potential investors in the last few years, the Cerberus team came across as passionate, skilled and incredibly confident that they could succeed where others had failed.

"I thought, wow, this really signals a real change in the landscape here," recalls a person who attended a Cerberus session who asked to remain anonymous because of agreements he signed. "I guess it gave me hope. The auto companies needed an enormous amount of capital, and where else was it going to come from?"

John W. Snow, a former Treasury secretary in the Bush administration and Cerberus's chairman, also heralded Cerberus as Chrysler's savior, likening the firm's investment to the government rescue of Chrysler in 1979.

"Over 25 years ago, when Chrysler faced bankruptcy, it turned to the United States government for assistance," Mr. Snow said at a National Press Club meeting in 2007. "Today, Chrysler again faces new financial challenges. But it is private investment stepping in to inject much-needed support."

Cerberus and its co-investors ultimately invested $7.4 billion in Chrysler, a sum now worth an estimated $1.4 billion. Ideally, Cerberus hoped to wed Chrysler's finance arm to another finance company it controlled, GMAC. To that end, the risks in Chrysler's auto business were something that the Cerberus team thought it could manage and that wouldn't stand in the way of making billions of dollars for investors.

"This will go down as one of the investments made at the very top of the credit bubble," Josh Lerner, a professor who studies private equity at the Harvard Business School. "They don't look good. This will be a black eye on their record." Indeed, GMAC and Chrysler became so weak that they needed $22.6 billion in government aid in the last year to stay afloat. For Chrysler and its workers, investors, business partners and customers, was all of that worth it?

Mr. Feinberg defends his actions, saying he did everything possible to help the company. Known for avoiding publicity, he says that he was naïve not to anticipate the public attention that would surround him once he bought Chrysler and that he would have avoided the investment had he known.

"I always view the press as something for guys who were trying to do big things," he says, perhaps overlooking that Chrysler was, indeed, a very big thing.

DON JOHNSON, a former Chrysler employee, says he worked on initial production of the Jeep Liberty at a plant in Toledo, Ohio, in summer 2007, when Cerberus won the right to buy Chrysler from Daimler of Germany.

To the surprise of some, Mr. Feinberg managed to woo the support of the United Automobile Workers for the deal. But Mr. Johnson says he was always skeptical about the carmaker's new owners. "Cerberus did not have a clue about the automotive industry," he says. "I don't think anything could have been worse."

Still, if you peel back Mr. Johnson's argument, you quickly find a story of an automaker that was already in peril by the time Cerberus came on the scene. For example, he says the body shop at his plant couldn't produce Jeep frames fast enough to keep up with the paint and assembly lines. Instead of fixing the problem, he says, the factory paid the body shop workers overtime to come in Sundays to keep up.

Cerberus took the helm about a week after Mr. Johnson's team ran into problems with the Jeep. When Mr. Feinberg addressed workers at a town hall meeting at Chrysler's headquarters in Auburn Hills, Mich., shortly after the deal, he spoke of his long love of American manufacturing, according to workers who attended the speech. In particular, he said he was proud to repatriate Chrysler's ownership from Germany.

"Steve saw this as a huge patriotic opportunity, in addition to a great investment," says Robert L. Nardelli, the former Home Depot chief executive whom Cerberus installed at Chrysler's helm.

Although some investors doubt that anything other than profits drove Mr. Feinberg's investment, many say they believe that he was authentically excited by the prospect of reviving an American corporate icon — a theme that Mr. Feinberg is happy to support.

Surrounded by rifles, a motorcycle and model cars in his office, Mr. Feinberg mentions family members who have served in Iraq and a brother-in-law who worked at G.M. He apologizes for rambling and explains his motivation for investing in Chrysler: "I love this country," he says. "I feel it's been great to me. I had a great chance."

Still, Mr. Feinberg, 49, has spent years as a dealmaker. The son of a steel salesman, he graduated from Princeton in 1982, where he studied politics. He went into finance so he could pay off his student loans. He worked at Drexel Burnham, the investment bank made famous by Michael R. Milken before it collapsed, and then, after a brief stop at a smaller firm, he was a co-founder of Cerberus in 1992.

For years, Cerberus was largely a trading shop specializing in distressed debt. But by the mid- 1990s, Mr. Feinberg expanded into buying and selling distressed companies and hired dozens of seasoned corporate executives to run them. Chrysler was the biggest prize he had ever bagged, and many co-investors say they always believed Cerberus's stake in Chrysler's auto operation was never the main reason the firm was interested in the company.

According to five people who heard Cerberus's Chrysler pitch, all of whom requested anonymity because of confidentiality agreements, Mr. Feinberg's deputies valued the financing unit more than the auto operation. In fact, the deputies believed, the finance unit's value covered the cost of buying Chrysler, making the car company something of a bonus — if that part of the investment worked out, great; if not, Cerberus could still profit on the finance unit.

Mr. Feinberg says he believed the automobile operation had great potential value, perhaps even more than the finance arm if Cerberus could put the automaker on the right track. But that meant he and Mr. Nardelli (who had never overseen a car company) had to effectively manage the auto operation — no small feat.

By October, only three months into Cerberus's tenure, Mr. Johnson says it was becoming obvious to him and other workers that trouble was ahead. "We went from three shifts to two shifts to one shift within a year," Mr. Johnson recalls. "Then there was just down week after down week."

To reduce expenses, Mr. Nardelli cut excess factory capacity and billions of dollars in fixed costs. He improved the interiors of several models, which bolstered some of its approval ratings.

But there still wasn't a strong demand for Chrysler's product line, which was packed with large vehicles like minivans and S.U.V.'s at a time when skyrocketing gas prices were making consumers interested in more fuel-efficient cars.

The company was aware that its lineup was far too limited. And Cerberus sent Chrysler executives around the world to seek partnerships with foreign automakers like Nissan. The hope was that those companies would help provide a broader product line for dealers.

But there was not time for any of the efforts to bear fruit. Chrysler was burning through cash.

"Once the car market stalled, the cash in the auto market evaporated," says Maryann Keller, a longtime auto analyst and consultant, of Chrysler's predicament. "The cash was leaving their balance sheet, and they weren't selling cars to make money they could invest."

That situation was made worse by hefty interest payments on more than $10 billion in debt that Cerberus arranged for Chrysler as part of the takeover, which left the automaker carrying piles of debt just as auto sales were about to plummet. While many private equity deals involved saddling companies with debt to pay off investors, Chrysler needed to take on more debt because it had so little cash on hand to finance its operations, some analysts say. The company paid back some of the debt in November 2007.

Ms. Keller says that the company that Mr. Feinberg took over was already suffering from myriad problems: a bad cost structure, a limited product line and no pipeline of more diverse offerings. In short, she says, Cerberus had simply bought "a basket case."

At the beginning of 2008, Mr. Feinberg sized up his investment in a private letter to his investors. "We do not need to be heroes to earn a good return on the investment in Chrysler," he wrote. "We do not need to transition the car industry or even to return Chrysler to a much stronger relative position in the U.S. car market in order to be successful."

His letter sent a chill around New York, where dozens of hedge funds had joined in his Chrysler bet. Although these firms had agreed to let Cerberus control decisions involving their investments, there was fear about how his harsh words might affect the industry's image. After all, such a steely, hard-headed look at Chrysler didn't mesh with the patriotic tone of Cerberus's other statements about the company. Nor did it comport with the private equity industry's broader arguments that its investments were good not only for its firms, but also for America.

Cerberus, meanwhile, was unable to stop Chrysler's downward spiral. Last fall, Chrysler and General Motors tried to merge their operations, a scenario Mr. Feinberg supported, but a deal could not be struck. And in November, Chrysler announced a huge employee buyout. Mr. Johnson, the worker at the Toledo plant, joined thousands of others who signed up.

"There was absolutely no hope" among employees accepting the buyouts, he says.

Mr. Feinberg says that he sympathizes with Mr. Johnson, but that he also believes business restructurings are, unfortunately, often brutal affairs. "It's demoralizing when things go down," he says. "But that's a turnaround, you know. Some guys make it; some guys don't want to deal with it. This was the most difficult environment. You couldn't think of a worse storm for an employee to have to live through."

It was also, as it turns out, a bad storm for Chrysler's owners.

MR. FEINBERG, a longtime free-market enthusiast and a Republican who never envisioned himself needing the government for help, suddenly found himself running a company that needed federal support to stay alive.

By early last December, with Chrysler bleeding cash, he had become a vocal presence in Washington, circulating around Congressional offices to get his story out. He even offered to put tens of millions of his own money into Chrysler, a move that would have been largely symbolic.

"He said his dad was a blue-collar manufacturing type," says Senator Bob Corker, Republican of Tennessee, who often spoke with Mr. Feinberg. "You sit there and you talk to Steve, and you can tell he's from a background that greatly understands what the American worker is all about."

But Mr. Feinberg soon found himself negotiating with government officials who understood what Wall Street was all about.

When Congress did not pass a rescue bill for the automakers, the Treasury Department stepped in, using financial authority it had already assumed from its bailout of the banking system. Cerberus's fate moved into the hands of Steven Shafran, a Goldman Sachs alumnus who represented the government and was regarded inside Treasury as a tough negotiator.

Mr. Shafran forced Cerberus to accept a painfully low valuation of its GMAC stake. He also quashed arguments by Cerberus that Chrysler's financial arm shouldn't be responsible for paying back bailout funds provided to Chrysler's auto operation.

At some point in December, Mr. Feinberg began to realize that Cerberus's investment in Chrysler's auto operations was largely unsalvageable. In a phone call with Mr. Shafran about 2 a.m. on Dec. 19, he offered to simply give the car company to the government, according to five people briefed on the call.

Mr. Feinberg says he was offering Cerberus's stake in the auto company to the government as a bargaining chit for negotiating with bankers, the union and others. But some Treasury officials were worried that he was simply trying to avoid leaving the finance unit on the hook for $2 billion of the $4 billion the auto operation received in federal aid.

Treasury officials declined Mr. Feinberg's offer and also were so wary of his motives that they put in a rule requiring that federal bailout money provided to Chrysler's financial arm could be used only to help Chrysler's auto unit. Despite all of that back and forth, Mr. Shafran says he believes that Cerberus behaved professionally. "They were prepared to work closely with us to ensure a smooth landing for the car company," he says.

When the Obama administration took over this year, Mr. Feinberg got a second chance to negotiate. He faced yet another Wall Street refugee trying to save the auto industry, Steven Rattner, as well as Ron Bloom, a former banker who worked more recently for the United Steelworkers union.

Mr. Feinberg was particularly focused on decreasing the $2 billion guarantee the previous administration had wrung out of Chrysler's financial arm. He eventually knocked that amount down by hundreds of millions of dollars after agreeing to give up some other things the government wanted — something Mr. Feinberg regards as a fair outcome.

"Basically," Mr. Bloom says, "they realized they made a poor investment and wanted to end it in a decent way." Chrysler filed for bankruptcy protection on April 30 to help clear the way for a merger with the Italian automaker Fiat.

Cerberus now values its Chrysler stake at 19 cents on the dollar. It is a humbling and embarrassing figure for Mr. Feinberg. But it's better than zero cents on the dollar, which is what his stake might have been worth had the government not bailed him out.

Mr. Feinberg and his colleagues at Cerberus maintain to this day that their time at Chrysler was, in part, a reflection of their patriotism — a view that some analysts find hard to swallow.

"It's hard to believe that any of these firms — including Cerberus — will be viewed as patriots in 10 years," said John Rogers, a private equity analyst at Moody's Investors Service, "because I don't think their impact on any of these companies will be seen as so positive for the overall economy."

Mr. Feinberg still begs to differ, saying his experience at Chrysler has left him feeling like a good citizen.

"There were times we could have been tougher and pushed harder and gotten more," he says, "but it wasn't the right thing for the country."

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Terry M. Fortner Joins LKQ Corporation as Vice President of Industry ... - dBusinessNews.com

Posted: 09 Aug 2009 07:52 AM PDT

Chicago -

CHICAGO -- LKQ Corporation today announced that Terry M. Fortner has joined the company as Vice President of Industry Relations and Market Development. In this role, he will be responsible for the development, implementation and coordination of LKQ's product offerings and services to the auto insurance and collision repair industries.

Joseph Holsten, LKQ's President and Chief Executive Officer, commented, "Terry is recognized and respected by the insurance auto physical damage industry as a proven innovator and leader." He added, "The auto insurance industry is poised for a marked increase in its commitment to alternative parts programs. Terry will add valuable insights into the systems and service offerings LKQ will need to develop and deliver to meet the needs of the insurance industry, and the thousands of appraisers and body shops across the U.S. and Canada."

Mr. Fortner held a number of leadership positions over his 32 year career with Nationwide Insurance, most recently as Vice President of Material Damage Claims. He has been active in the insurance auto physical damage industry through his involvement with a number of industry organizations including: CCC Insurance Advisory Council, COPART Advisory Council, ABPA Award, and CIECA. He was a member of the I-Car International Board of Directors, and currently serves on the executive committee of the I-Car Educational Foundation Board of Trustees.

Outside of the industry, Mr. Fortner is a director of the Ronald McDonald House of Charities of Central Ohio where he holds the position of Treasurer. He is a graduate of Western Carolina University with a Bachelor of Science degree in Business Administration.

About LKQ Corporation

LKQ Corporation is the largest nationwide provider of aftermarket collision replacement products, recycled OEM products and refurbished OEM collision replacement products such as wheels, bumper covers and lights which are used to repair light vehicles. LKQ operates approximately 280 facilities offering its customers a broad range of replacement systems, components, and parts to repair automobiles and light, medium and heavy-duty trucks.

CONTACT: LKQ Corporation Sarah Lewensohn, Director, Investor Relations (312) 621-2793

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Automotive Repairs

Minggu, 09 Agustus 2009

“Dealers fear 'clunkers' may backfire on them - Greenville News” plus 4 more

“Dealers fear 'clunkers' may backfire on them - Greenville News” plus 4 more

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