TESTIMONY OF CHARLES O. SWIFT, SWIFT DODGE - SACRAMENTO, CALIFORNIA BEFORE THE COMMITTEE ON BANKING, HOUSING AND URBAN AFFAIRS, UNITED STATES SENATE

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1 TESTIMONY OF CHARLES O. SWIFT, SWIFT DODGE - SACRAMENTO, CALIFORNIA BEFORE THE COMMITTEE ON BANKING, HOUSING AND URBAN AFFAIRS, UNITED STATES SENATE Mr. Chairman and subcommittee members. My name is Chuck Swift. I am the owner of Swift Dodge located in Sacramento, California. I have been in the retail automobile business for the past 33 years, 17 of those years selling Ford products and 14 years in Sacramento as a Dodge dealer. Nine of the past ten years, my dealership has been the largest volume Chrysler dealership in the United States. In addition to Swift Dodge, I own or control three additional Dodge or Chrysler dealerships in California and Nevada. I am a member and have served as Chairman of several new car dealer associations, and I served as Chairman of the National Dodge Dealer Council in I am providing you with all of this information only to try to convince you that I am knowledgeable about the retail automobile marketplace. In an effort to point out to you the impact of a Chrysler failure on my community and our state, I will use only the statistics for Swift Dodge in Sacramento. Swift Dodge has at

2 -2- the present time 138 employees; at the same period last year we employed 187. Some of the other Swift Dodge statistical figures for 1978 are as follows: total sales: $37,500,000 state sales tax collected: 360,000 state and federal corp. income taxes: 165,000 payroll 2,900,000 company and employee social security and withholding tax contributions: 901,000 local property taxes paid: 48,000 Even just our one dealership's closing could have an impact on over 500 people (our employees and their families) plus at least that number among our suppliers and subcontractors. This would have a significant impact on our local economy, and that would be multiplied several dozen times in California alone if Chrysler failed. Many of our employees are highly skilled in the sales and service of Chrysler products, and although most of them could be retrained and find other jobs, there would be a substantial period of time of family disruption, including loss of income and subsequent cost to the state and federal governments for unemployment insurance and welfare fox an indefinite period of time. A Chrysler shutdown would have a particularly adverse im pact on dealers in California since our state has a law that prohibits the issuance of a new car or truck franchise in any

3 -3- area that is within a ten-mile radius of a dealer of the same make. Therefore almost every large metropolitan area Dodge or Chrysler dealer would be denied the opportunity to secure another franchise by reason of this regulation (and certainly, Swift Dodge would not need 18 acres and 100 services stalls to operate as a used car outlet.1 ). I want to backtrack at this point and try to give you some perspective on just how suddenly Chrysler's problems came upon them this year. The California gasoline shortages created an immediate dislocation in the retail marketplace. Before the gasoline shortages and the sudden customer reactions they produced, Toyota, Datsun, Ford, and yes, Dodge and Chrysler-Plymouth dealers, were all still struggling to unload their carryover 1978 models of subcompact, high-gas-mileage cars that had been a glut on the market. At the same time, Dodge dealers sold more vans in California than Ford and Chevrolet dealers combined. We were also sales leaders in the four-wheel-drive and recreational vehicle segment of the retail market. Those sales simply collapsed and our normal 60-day supply of new vehicles became, temporarily, a 60-year supply I And even today, this segment of the market has not improved a great deal. Since Chrysler f s California dealers represent 10% of total Chrysler sales, and a much higher ratio of the profitable van, R.V., and truck sales, Chrysler's strength in the marketplace vanished overnight in California. As the gas scare spread to Washington and other parts of the country in June, Chrysler felt a severe national effect.

4 -4- Today our California Dodge and Chrysler-Plymouth dealers must rely primarily on profits generated from the sales of Mitsubishi imports (and that potential is now threatened by the termination of the Japanese letters of credit financing those imports) and the Omni/Horizon domestic subcompact model whose production is limited by a shortage of engines (and which has been almost non-existent in California for several months this year because of California emission control requirements). Adding to the above problems for these dealers are the extremely high money costs for inventory and capital loans, the impact of our current inflation rates and all-time high interest rates for buyers, the hesitancy of today's new car or truck buyer to purchase a Chrysler product given the almost daily dose of discouraging news about Chrysler, and last but not least, the effects of the current economic recession, which may not be real in some economists' minds, but is certainly real for automobile dealers I Our final element of pending disaster for the dealers and their employees, and something that hasn't received much comment, is the growing losses dealers are suffering from repossessions. California and many other parts of the United States are "recourse" markets where the dealer must repurchase repossessed vehicles and pay off any unpaid balance to the financing institution, usually at a substantial loss to the dealer. Many buyers are looking at the higher cost of gas, the fact that they did not buy an economy car, and their loss of purchasing power and saying to

5 -5- the dealers "here you take it back it's all yours!'" The problem is getting worse because of uncertainties over Chrysler's future. As an indication, Swift Dodge's total losses on repossessions for 1977 were $55,000. We are approaching three times that figure ($138,000) for the first nine months of 1979; and in October, our repossession losses were an additional $33,000. In other words, our October repossessions were more than 600% above the average monthly amount for The announcement of a Chrysler bankruptcy would increase this already horrendous problem dramatically. For some of our California Chrysler dealers, it is already too late even today to avoid business failure. If a government loan guarantee plan is not approved before year's end, I believe you can expect many more of the dealerships to close by mid The administration has stated, "All parties must make sacrifices." I can tell you the dealers have made tremendous sacrifices this year in an effort to help Chrysler and have committed once again in October to buy vehicles they don't need in inventory for the months of November and December to help keep Chrysler plants in production. The dealers purchased additional cars last March and April to help; they added their own money to the factory rebates; most of them have increased their advertising budgets; and the majority have operated at little or no profit, or at a loss for An example of the sacrifices that have been made by the dealers is that the 220 California dealers' cash position

6 -6- has deteriorated by over 50% in the past year, and in the majority of instances, their net worth has decreased. These dealers have continued to do more than their share, but each day that passes without a committment to Chrysler continues to drain their current resources, and further decreases their ability to help Chrysler from a financial standpoint. So please, from a strong advocate of free enterprise I ask you to help Chrysler through the current difficult period of time. I have seen their future products, met and talked with their new management, and firmly believe that given the opportunity, they will succeed, and you will have saved the United States government and taxpayers a lot of money. A loan guarantee program would cost the government nothing, would preserve thousands of small independent businesses in every state and many more thousands of jobs for their employees. Members of the Committee, thank you for listening. I will be happy to answer any questions you may have.

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