By Eric Gershon, Hartford Courant
Published on November 22, 2008

The Beach Boys played overhead as fleets of shiny cars gleamed inside the Connecticut Convention Center Friday — a carefree setting offering little hint of the U.S. auto industry’s accelerating free-fall.

Among the hundreds of cars on display at this year’s Connecticut International Auto Show are the Dodge Challenger muscle car and a hybrid version of GMC’s Yukon, one of several reinventions of gas-guzzling SUVs. There is even a new Hummer, the H3T pickup truck.

But with Thursday’s rejection by Congress — at least for the moment — of a proposed $25 billion in loans for Detroit’s Big Three carmakers, the U.S. auto industry is verging on collapse. GM and Chrysler have said they might not have sufficient cash to last into next year. Millions of jobs hang in the balance.

If the auto show doesn’t reflect the desperation of the auto industry, the circumstances of Connecticut’s car dealers do. Since the start of the year, about 20 dealer locations in Connecticut have closed or been consolidated, leaving the state with about 305 locations selling new cars, according to James T. Fleming, president of the Connecticut Automotive Retailers Association.

Dealers here have eliminated 700 jobs in 2008, reducing the total dealer employment to about 14,300, he said.

Without federal assistance for the auto industry, Fleming said, “I think we will see more.”

Ken Crowley of Crowley Automotive Group, said his sales are down 30 to 40 percent from last year, when the group had total sales of $166 million.

To minimize further losses and stimulate sales, the retailers association has approached the governor and legislators about reducing the state’s 6 percent sales tax to as little as 3 percent for cars, at least through December.

The idea is under review, Fleming said, but there is no certainty that legislators or the governor will advance the idea at Monday’s special legislative session dedicated to closing a multibillion-dollar state budget gap.

Car dealers, about a dozen of whom met with Sen. Christopher J. Dodd at his Hartford office Friday, also want federal tax laws changed to make interest and sales tax on car loans deductible, Fleming said.

Most of all, they want the federal government to use some of the $700 billion Congress authorized for resuscitating the financial markets to help banks and other credit providers that specifically help dealers buy inventory.

“Manufacturers are making cars that dealers have no cash to buy,” Fleming said.

Speaking after his private meeting with the dealers, Dodd said he is working with other congressional Democrats on a plan to assist Detroit automakers that should be ready by early December, when automakers are supposed to report back to Congress. He offered no specifics.

Like other Democrats, Dodd said he could not support massive loans to the automakers without more detail about how they could use the money for long-term stability.

Dodd said he would prefer to avoid bankruptcy for the carmakers, but would consider “pre-packaged” bankruptcy, in which reorganization details are worked out before entering Chapter 11 proceedings. He did not rule out the possibility of a loan.

The senator also expressed frustration with President-elect Barack Obama, saying that Obama and his transition team should immediately take a more active role in addressing the nation’s economic problems, including the crisis facing the automakers.

“I think the Obama team needs to step up,” he said. “We need to hear from them. … I don’t think you can wait until January 20th on this.”

Obama has said little publicly about the automakers’ situation, other than that some sort of government help is in order.

Crowley, who met with Dodd, said afterward that he would prefer that the government make loans to the automakers rather than allow them to enter bankruptcy. Several dealers’ representatives said bankruptcy might scare away already scarce consumers.

Whatever solution emerges from Congress should aid dealers and the automakers, he said.

The car show got off to a slow start Friday morning, with at least as many cars present — more than 300, representing more than 30 brands, according to organizers — as visitors. Turnout is traditionally higher during the weekend.
Gary Rouillard, a retired stockbroker from West Hartford, said he came to the show in part to escape the steady stream of grim news about the U.S. auto industry.

“I wanted to stop thinking about it,” he said as he stood in a sea of Toyotas.