Alaska Politics Blog

This is the place to talk about Alaska politics, state, local, national. Public life in the Last Frontier has rarely been more interesting -- a full slate of federal and state elections, the influence of former Gov. Sarah Palin, the usual hardball Alaska politics. Come here for news, tidbits and information, and join the discussion. We encourage lively debate, but please keep it civil and stay on point. Don't use profanity, make crude comments or attack other posters. Posts that violate the Terms of Use will be deleted. Repeat offenders will lose their ability to post comments.

New Senate organization announced - 11/7/2012 12:48 pm

Homer Revealed - 8/22/2012 2:08 pm

Seven-day countdown - 5/25/2012 8:37 pm

Anchorage city clerk resigns (UPDATED) - 5/23/2012 10:51 am

Gara to seek re-election - 5/2/2012 2:04 pm

For one lawmaker: Good news - 4/27/2012 12:20 pm

Anticipation in the Capitol - 4/26/2012 11:38 am

Election Commission finds 1/2 of precincts ran out of ballots; recommends no investigation - 4/25/2012 5:08 pm

Is Obama closing Soldotna dealership? (UPDATED)

From Sean Cockerham in Anchorage –

Gov. Sarah Palin’s new statement criticizing Barack Obama blames the president for the closure of a Soldotna car dealership.

But the dealership tells me it’s not closing.

Here’s the relevant part of the statement Palin put out through SarahPAC.

“Today, we learned that Obama’s decisions continue to impact Alaskans; while we as taxpayers now own General Motors, Obama closes another dealership – this time in Soldotna as more of Alaskans’ hard-earned money and jobs are lost to big government.”

Hutchings Chevrolet in Soldotna did decide to terminate its General Motors franchise agreements.

“We’re terminating our GM franchise but we’re going to remain open for parts and service and used car sales,” General Manager Shawn Hutchings said when I called him about it.

This actually isn’t new. The Peninsula Clarion ran a story on May 10 saying the dealership was cutting its GM ties because the risk of remaining with GM was outweighing the potential reward.

I told Hutchings about the statement that Palin sent out.

“We had made the decision… but the Obama administration made a recommendation to GM that if they wanted to get any of their funding or loans moving forward that they would need to scale back their dealer body. And we did receive a letter on Friday saying that we were one of the dealerships they would be cutting. So that’s probably what that’s about,” he said.

UPDATE -- I just got a call from SarahPAC spokeswoman Meg Stapleton, who contacted Hutchings about this blog post. While I was talking to Stapleton, Hutchings sent me an email saying Palin is right.

His email said "the bottom line is this: Governor Palin is correct: Soldotna lost a new car dealership as part of the federal intervention. 44 local jobs were terminated. Over a million dollars in annual payroll was lost. The net effect to Soldotna is substantial. Obama's actions have directly impacted Alaska and Soldotna. The Governor is correct."

The May 10 Peninsula Clarion story said that "before the GM troubles began, Hutchings Chevrolet employed 72 people, back in September. Now that number is 28."

Click below to read Hutchings' explanation in that Clarion story for what happened.

Here's what the Peninsula Clarion wrote:

(Hutchings) said the current problems began for U.S. car makers last December when the secondary credit market funds dried up.

With that being the primary source of financing for auto manufacturers, they went to the federal government and said, "We're going to need some help," Hutchings said.

"All dealer inventories are floored ... with General Motors it's through GMAC," he said, explaining the new cars are actually owned by the corporation. The finance companies are not banks; they borrow from the secondary credit market.

When they no longer had access to the money, they said dealers could no longer finance anyone unless they had a 100 percent, perfect credit score.

In October, November and December, sales started slowing due to the tight credit requirements.

To illustrate the point, Hutchings said in 2007, 16.8 million new cars were sold in the United States; in 2008, the number was 13.7 million; and in the fourth quarter of 2008, the annualized pace was close to 10 million.

"Now it's around 8.5 to 9 million in the first quarter of this year," he said. "At the end of September (2008), we were up 8 percent year over year, but in the last quarter, we lost everything we gained."

The dealership orders vehicles based on its sales rate, and with a 90-day lag due to order processing, vehicle manufacturing and shipping to Alaska, Hutchings' inventory began to swell.

GMAC and the other car makers' finance companies started sending out letters saying they need to change.

Dealers were told to sell down their inventory as quick as possible and inject cash into the business or they would be given 90 days to find another finance company to handle their inventory.

"Then the Big 3 (General Motors, Ford and Chrysler) go to the government asking for help," Hutchings said. "Now no lending institutions have an appetite for the retail car business.

"The concern was how long are GM, Ford and the others going to be in business. Banks didn't want the risk and they didn't have the funds," Hutchings said.

Over the past five months, Hutchings Chevrolet has put together a financing plan to appease GMAC, but then, last Tuesday, GM said its original restructuring plan was not satisfying to the Obama Administration, and more drastic action was needed.

"GM must cut 2,600 of its 6,300 dealers in order to have access to any bridge loans (from the government)," Hutchings said.

General Motors said 1,100 dealers would be terminated immediately and 1,500 would be given the option to continue through 2010.

"We don't know which group we're in ... nobody does," Hutchings said.

Additionally Hutchings Chevrolet is sitting with about $250,000 in accounts receivables for car parts with GM, and if the car maker goes bankrupt June 1, Hutchings would not see any of that money.

"All GM dealers are faced with the same decisions. No one knows who's on the list at this time," Hutchings said.

© Copyright 2011, The Anchorage Daily News. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

JOIN THE CONVERSATION
Anchorage Daily News is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service