Respected members of Congress:
Last week, it was announced that General Motors is going to idle 15 plants for 9 weeks. The shutdown is aimed at cutting costs and shrinking a glut of unsold vehicles at dealers. This week, Chrysler declared bankruptcy. In December, we sent a letter to you asking that our voice be heard on the federal bailouts of the Detroit Big 3 as collectively our industry represents the largest single customer of General Motors, Ford and Chrysler.
The federal government has provided billions in aid to both GM and Chrysler. Cars remain unsold because consumers, rental car companies, leasing companies and others simply do not have the ability to borrow money in order to purchase cars.
We represent not only some of the largest brands in car rental, but also the local dealer than rents fives cars in the local suburban town. ALL of us feel the pain of this financial situation. We are hopeful that provisions in the TALF program will supply the financing we speak of, but with a AAA rating requirement it is difficult for even the largest companies to qualify.
The manufacturers need a long term solution, and the ACRA can be a part of that if the government acts to free up the credit markets. To put this in perspective, one of the largest car rental operators in the country stated in February 2009 that it had slightly more than 7,000 cars on order for the summer season, as compared to more than 75,000 for the corresponding period in 2008. Our industry wants to buy cars but we need the mechanism to do so.
The following could be an effective and efficient solution to the problem at hand. It will also guarantee that the money from the government is only utilized for - the production and sale of U.S.-based manufactured product sold to the American businessman.
- The financing arms of ANY of the U.S. based manufacturers are given credit funded by the Government to provide fleet financing for qualified borrowers.
- The funds will be loaned to car rental companies, leasing companies, and fleet purchasers who financially qualify under reasonable conditions set by the financing arms, similar to what existed as recently as last year.
- The money can only be used to finance vehicles that are being built on U.S. soil, helping the manufacturers create American jobs.
- The re-payment of the loans by the borrowers creates a direct repayment to the government. The government and the vehicle manufacturers financing arm share in the interest payments.
- New funding is only made available based upon the successful repayment of the initial obligations.
- Funding is available to ANY customer who financially qualifies with the financing arm of the manufacturer; it is not based upon the size of the organization, or the number of vehicles they intend to purchase. It is equally available to all.
This industry is ready to acquire the products manufacturers can produce and in doing so, create jobs and help revitalize the economy. We simply need the financing conduits to facilitate what we have collectively done as an industry since its inception almost 100 years ago.
The government has asked the Big 3 to come back to Washington and “state their case for viability. What better message can be delivered than to say the car rental industry would purchase up to 500,000 cars this year if the financing was made available?
These loans to car rental operators could be made at an interest rate, allowing for the financing arm to earn fees for possessing and managing the loan portfolio, and provide for the federal government to make a return on their money. In other words, what we are suggesting is that this credit facility/stimulus package would actually have no cost to the government, would stimulate the economy, help the Big 3, and create jobs.
The automobile industry is in a state of emergency. The manufacturers are calling all of us and offering good product and attractive pricing, and we simply do not have the ability to acquire fleet from them. Our industry is being paralyzed by the current situation.
Every car rental company has experienced a reduction in force. Our suppliers, many of which rely on the car rental industry for survival are suffering as well and some have already gone out of business. This trickledown effect we are experiencing devastates not only the value of the publicly held companies, but also the survival of the independent operator or the small business owner who is a franchisee or affiliate of one of the major brands.
We recognize the task before Congress is monumental. We encourage you to find a way to preserve our American manufacturing industry. We want to help Congress and our employees, vendors and customers as well. To do so, as part of any rescue plan that is ultimately put in place, we need your help in making sure the credit facilities to purchase the products of these manufacturers exist or the vehicles of the big 3cannot be ultimately sold.
Robert M. Barton, President
American Car Rental Association