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Dealer Management | Dealer/GM News | Finance & Insurance News | Inventory Management | Pre-Owned Sales & Marketing Strategies
February 1, 2010

All Roads Lead to Rome (Washington, DC)

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Dealer Management | Dealer/GM News | Finance & Insurance News | Inventory Management | Pre-Owned Sales & Marketing Strategies
February 1, 2010

All Roads Lead to Rome (Washington, DC)

I was recently on a trip to Sao Paulo, Brazil doing a used car school for Fenabrave (Brazil’s NADA). On the way to Brazil, while waiting in line at the food garden in the airport, I met a gentleman from Germany also traveling to Brazil. He and I struck up a conversation and ended up sitting together at a table and talking about the global economy. He was telling me which economies are booming and that he felt very sorry that America is suffering what many countries have already been through and were now coming out of. I asked him, “What is the general business person’s opinion globally of America?” He made the most profound statement that I think I have ever heard and I wanted to share this and think about it with you in this article. His comment to me was, “When any country has an extremely large, non-productive or retired population that has funded entitlements by its government to allow a lifestyle better than the lower middle class of any other country in the working world, all roads will lead to Rome.” I asked him at that time, “So is the general opinion that our government subsidies and our corporate retirees are drawing down too many dollars to allow a new work force to progress?” And he said yes. He said, ”The entitlements from union type corporations and government entitlements to the society of unemployed could certainly create a drain on all entities involved.”

I thought about that all the way from Atlanta to Brazil and how this would relate to our industry. I remembered early in my career calling in a deal, as a sales manager, to Chrysler credit and having the manager of the branch (while I was trying to get this deal bought) tell me that when he looked at an application he knew that America’s equity was in a family’s automobile and a family’s home. After I thought about his comment, every time I would call in a deal that was questionable I would discuss with him the equity in the car they were trading, and where their home was to show that the individual had liquidity. I think, in my humble opinion that one of the eroding factors that started this snowball, quite honestly, was leasing. Leasing afforded the American public the vehicles that otherwise they could have never afforded. It also eroded, for the most part, the ownership of equity within the family unit. As lease payments lowered the out go of a normal car payment, the expenditure of a nicer home took shape, driving up real estate values. And then dot.com boomed. More companies opened IPOs from two-person offices than at any other time in our Wall Street history. These software companies exploded on Wall Street, with everybody making money. Everybody’s portfolio looking grand, everybody’s equities were in paper on Wall Street, rather than equities in automobiles and homes. Everybody wanted to upgrade their home, and everybody wanted to upgrade their vehicle. We had an explosion in building, but we did not have a labor force to keep up with the demands of contractors, so we had a populous from Mexico that came in to work to keep up with the demand. If everyone on unemployment went to work I still don’t think we would have been able to keep up with the demands. So I don’t think you can actually blame those unemployed with the total drain

Eventually every bubble has to burst. One of the first things that hit us was off-lease cars coming back. The hard part was off-lease disposal coming to reality. The holders of the lease papers realized that the cars they had leased with residuals that did not hold created a deficit they could not control, and I don’t have to tell you how the rest spiraled out of control.

Right now, that German gentleman’s comment could not ring any truer than all roads leading to Washington, D.C. The downfall of Rome was government control of banks, industry and entitlements. We have one thing left no one can take away from us and that is a vote. Whatever we do, let’s send no Congressperson back to Congress that runs next year. I have never done a political article but after my meeting on the plane, I felt it was time.

 

 

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