DETROIT – The federal government needs to implement the $700 billion economic recovery plan as quickly as possible so that the nation's financial markets can break the credit freeze, the chairman of the National Automobile Dealers Association (NADA) said Tuesday.
"The rescue package is designed to free up credit markets. But it's too early to know whether the fix will work," said NADA Chairman Annette Sykora. "One thing is certain—this action is better than no action."
Sykora emphasized that it's becoming increasingly difficult both for dealers and consumers—even for those with good credit—to obtain financing. And the situation is contributing to shaky consumer confidence. More than 94 percent of buyers rely on financing when purchasing a vehicle.
"The credit crunch on Main Street is real," Sykora said. "If the country can break the credit freeze on Wall Street, then [dealers] can help revive the economy on Main Street."
"Credit is the lifeblood of our industry," Sykora added. "Dealerships need it to finance inventory from the manufacturers. Consumers need it to buy cars."
The current credit crisis coupled with other economic factors has already forced some auto dealers to close.
"We're likely to lose up to 700 dealerships this year," Sykora said. "Some of these [closings] stem from the challenges faced by the Detroit Three." Before the financial crisis set in, some profitable dealers closed because the value of their land was so high, Sykora added, but many other closings are being driven by the real-estate meltdown.
NADA, founded in 1917 and based in McLean, Va., represents about 20,000 new-car and -truck dealers, with nearly 43,000 separate franchises, domestic and import.