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Local car dealers cringe, hope for better news

December 12, 2008

Indianapolis-area auto dealers kept their ears open this morning for news of how the Bush administration would react to Congress' failure to reach a rescue package for Detroit automakers.

Shadeland Dodge owner Kevin Beltz, despite darting through the service department on his way to a manager's meeting, managed to catch a few details from TV reports about the Treasury Department's intent to provide bridge loans to automakers.

"Treasury won't let the automakers fail," he said.

The administration said today it was ready to step in and prevent the industry from collapsing after the Senate refused to pass a rescue bill endorsed by the White House and Congressional Democrats. The most obvious source of help is the Wall Street bailout fund.

"The current weakened state of the economy is such that it could not withstand a body blow like a disorderly bankruptcy in the auto industry," White House press secretary Dana Perino said.

Treasury spokeswoman Brookly McLaughlin said, "Because Congress failed to act, we will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry."

The Wall Street bailout fund was one of the few remaining options for General Motors Corp. and Chrysler LLC, which have said they could run out of cash within weeks. President Bush originally refused to use the bailout fund to help the automakers, insisting that help come from Congress. But the White House said it must reconsider after the Senate failed to agree on a $14 billion rescue plan.

Beltz of Shadeland Dodge said perpetual media attention to the plight of automakers worries consumers.

"People want to have confidence in who they're buying a vehicle from," said Beltz. "We just have to get to some sense of normalcy."

Beltz and Chrysler counterpart Kevin Kahlo, owner of Kahlo Chrysler Jeep in Noblesville and Knightstown, said fundamental changes are needed in the auto industry beyond whatever short-term financing package is reached.

Kahlo noted that the United Autoworkers Union has refused to consider wage cuts until the current contract expires in 2011. Union pay and benefits, which are higher than those of foreign rivals, along with retiree pension and health obligations, are among the biggest threats to the viability of domestic car companies.

Some members of Congress who oppose the bailout say automakers should reject those labor contracts through bankruptcy if unions won't budge.

"I'd prefer everyone gives a little," said Kahlo, who warns of disaster if automakers fail. "It wouldn't be a trickle-down affect, it will be a flash-flood affect."'

Dealers generally were confident that Washington ultimately will help automakers but warned the delay has consequences for the dealer body.

Weeks of negative fodder about viability of domestic car companies and inability of Congress to act makes consumers more confused than ever, said Mary Murphy, executive director of the Automobile Dealers Association of Indiana.

"All of our dealers are trying to avoid layoffs."

The Associated Press contributed to this story.

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