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The Grim State of Affairs for Car Dealerships

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BusinessWeek, in a good piece on the falling fortunes of car dealerships asks the following question, "Why has Congress not shown much interest so far in the plight of dealers, despite the fact that many dealers are big political donors?" The dealers may be big political donors, but they're failure to secure a bailout may stem from their contributions going to the wrong party.

Car Dealership Contributions to Congressional Candidates, by Party (2007-2008)
Dems: Dems: $1,933,501 $1,933,501
Repubs: Repubs: $4,866,533$4,866,533
Others: Other: $2,248 $2,248
In the 2008 election cycle, car dealerships made 71.5% of their congressional campaign contributions to Republican candidates. The average contribution to a Republican candidate was nearly twice as high ($11,973 vs. $6,658) as the average contribution for a Democratic candidate. Excluding lawmakers running for the presidency (Barack Obama, Hillary Clinton, John McCain, and Joe Biden), the top eleven recipients were Republicans. Only two Democrats, Reps. Ron Klein and Charles Rangel, received enough contributions to knock them into the top 20.

In a Congress dominated by the Democratic Party, getting your voice heard when you've consistently contributed to the minority party may prove difficult. This may prove particularly troubling when your industry is in the dire straights that the American car dealership industry is in at this moment. Chrysler just sent out letters to 789 of its dealerships ending their franchise. General Motors is expected to follow suit on Friday by revoking the franchises of 1,000 to 1,200 dealerships.

Car dealerships, led by the National Automobile Dealers Association (NADA), are sending over a hundred representative to Washington in a large lobbying campaign to push for federal relief for their businesses. So far this year, the industry has spent $1.14 million on lobbying expenses. That puts them on pace to match their record-setting lobbying year of 2008 ($4.48 million).

Still, all this lobbying may find the dealers coming up short. After all, they have to deal with the decades-long cultivation of a bad image. As BusinessWeek says, "As bad as GM’s image is with many carbuyers, the image of car dealers with just about everyone falls below lawyers and even journalists when it comes to public esteem." What part of public entertainment has not parlayed the grifting car salesman into a source of derision or comedy? And what congressman wants to be known for supporting an industry with such a poor reputation?

Still even more problematic is the overreach of American dealerships. The market for American cars has shrunk dramatically, but the number of dealerships has not. BusinessWeek states that the market share for American cars has shrunk from 90% to 45%-50%. No amount of lobbying or campaign contributions will save your business when you are over-extended to the point American car dealerships currently are.