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Monday, September 27, 2010

Nitrogen Scam and Cover-up by PB County Commission?

Regular readers of my blog and Hometown News column will know that I’ve been spreading the word about the “nitrogen in tires” scam for several years. My first column was “Don’t Pay for Nitrogen in Your Tires in early 2007. Subsequently I wrote “Nitrogen and Shark Cartilage”, “Nitrogen Scam Foisted on Palm Tran”, and most recently “Tests Say Nitrogen Doesn’t Improve Fuel Economy in PB County Buses”.

Just to bring new readers up to speed on this issue, I’ll summarize my position on the false claims that buying Nitrogen to put in your tires will improve your fuel economy, lengthen tire life, and improve your driving safety.

(1) Over three years ago, Consumer Reports magazine revealed the results of a yearlong test of the effectiveness of Nitrogen to improve fuel economy. They concluded that Nitrogen was worthless in improving fuel economy, tire wear, or safety.

(2) In 2007, Chuck Cohen, the executive director of the Palm Tran, the PB County bus system, announced that he was investing $60,000 of taxpayers’ money in equipment to put Nitrogen in all tires on his buses to “save the taxpayers” lots of money on diesel fuel and tires. He said that there was a study being conducted to judge whether this idea was a good one. When the results of the study were revealed about one year later, the conclusion was “From the previous data analysis we conclude that there is yet no observable effect in the fuel efficiency due to nitrogen tire inflation for group of buses in this experiment.” It was after this that I wrote my last column on this subject.

(3) Astoundingly, when I followed up with Chuck Cohen do learn when he would stop wasting our money putting Nitrogen in his bus tires, he told me that he didn’t like the results of the test and was going to conduct another. He told me that he would make public the results of the second round of tests within the year. That was almost two years ago and no test results so far.

(4) Finally, my main interest in the Nitrogen scam is that so many car owners are paying car dealers to put Nitrogen in their tires. One dealer in Stuart actually was charging $199. Many dealers are adding Nitrogen to the price on the window sticker and many others are selling it in the service drive.

The thing that really angers me most about what Palm Beach County is doing is that it provides unscrupulous car dealers with an argument to sell Nitrogen to their unsuspecting customers. If the customer asks why she has to pay an extra $150 because the dealer added Nitrogen to the tires in the car she’s buying, the salesman simply says, “Do you think Palm Beach County would be using Nitrogen in their bus tires if it wasn’t a good idea?” By the way, the Palm Beach County Sheriff’s department opted not to use Nitrogen in their tires.

The local municipalities are nearly bankrupt and all of them are cutting back on city and county workers and services to us taxpayers. Recently Port St. Lucie laid off a large number of police officers. Why don’t they look inward and stop wasting our money on the Nitrogen scam?

Monday, September 20, 2010

“Tell- All” Book by Auto Czar, Steven Rattner

When I heard a few weeks ago that Steven Rattner was writing Overhall, “an insider’s account of the Obama Administration’s emergency rescue of the auto industry”, I couldn’t wait to read the book. It was supposed to be released by the publisher in October and I pre-ordered it on immediately. I was so excited when I got an email from Amazon telling me that the book had been released early and it came in the mail on Thursday, September 16. I began reading it immediately and finished it over the weekend.

What a letdown! I guess the purpose of this column is to save you $27 in the bookstore or $17.95 on Amazon. Do not buy this book unless you would like to read some cute quotations from President Obama like “Why should we save GM?” and “Why can’t GM build a Corolla”...Or from the President’s Chief of Staff, Rahm Emmanuel, “F**k the U.A.W.!”

The author, Steven Rattner, obviously had two reasons for writing this book. The first and most obvious was to make a lot of money and that goes without saying. The second one is pretty obvious too which is to tell the World how he singlehandedly saved the American auto industry.

When rumors began circulating over two years ago that the government was looking for an “auto czar’ to rescue Detroit, GM, Chrysler, and the UAW…not necessarily in that order, I jokingly sent my resume to President Obama. I had a hunch that they would pick somebody without a clue about auto manufacturing or retailing and that it would be a politically motivated choice. Boy was I right! Steven Rattner’s background is as a journalist for the NY Times, writer of Op-ed articles for various newspapers, investment banking, but his key endeavor was as a professional Washington D.C. insider and fundraiser for the Democratic Party. He dates back to Jimmy Carter, counts Al Gore as a close friend, and was a big fund raiser for Bill Clinton, Hillary Clinton, and, last but not least, Barrack Obama. His appointment as auto czar was to pay off a political I.O.U.

I surprisingly agree with some of what he has to say in the book. He fully understands that General Motors and Chrysler dug their own graves by mismanagement and then tried to blame their woes on the great global recession. It’s his lack of understanding of business, capitalism, and the free market system which allows him to conclude that running a business badly is no reason for a company to fail.
He inexplicably thinks that the American auto industry is represented by GM and Chrysler. How can he believe that Ford, Toyota, Honda, Volkswagen, BMW, Mercedes, Hyundai, Nissan don’t represent the American auto industry far more importantly than GM and Chrysler? These other manufacturers build better cars according to all objective third parties like Consumer Reports and JD Powers. Many of these manufacturers build most of their cars in America using American part suppliers and American workers. You can argue that “the profits are sent overseas’, but the profits go to the stockholders. Any American can buy stock in Toyota or any other foreign owned company. The American car-buyer would get along just fine without GM and Chrysler products. As far as the United Auto Workers union is concerned, they would be forced to earn their money rather than “bask in the sun of entitlements” they demanded and received from GM and Chrysler.

Steven Rattner says there’s a good chance GM and Chrysler are going to survive but then again what else can he say? He hedges a bit on whether or not we taxpayers will get back all of the $80B we gave them. I can see why he’s nervous about that. About the time he was finishing his book, Ed Whitacre (GM CEO #3 in the last year and a half) said GM would sell their IPO stock before the election and raise enough to pay back all of the money owned the taxpayers. But GM CEO #4, Dan Ackerson, suddenly replaced Whitacre and now he says GM won’t be able to repay all of the money like Ed said and won’t be going public with the IPO this year after all.

Oh, I almost forgot. Steven Rattner suddenly resigned as Auto Czar when it was made public that his investment company, Quandrangle, is under investigation by the New York Attorney General. It seems that Rattner’s company had been making payments to an indicted intermediary, Hank Morris. Morris is an associate of the New York state pension plan and was helping Quandrangle raise money from the New York state pension plan. Maybe the taxpayers will have to bail out Rattner next?

Wednesday, September 15, 2010


“Cash for Clunkers” aka CARS, the government stimulus program for the auto manufactures and dealers last August was generally regarded as one of the more effective stimulus programs of the Obama administration. It cost us taxpayers $3 Billion but it sold almost one million new cars. There are arguments on how many extra new cars it sold and how many of those that were sold would have been sold eventually anyway. But, overall, it is generally considered a far more effective stimulus than TARP and certainly a lot less expensive.

What puzzles me is why there is so little media coverage of the fact that most customers who bought new cars under this program did not receive a fair trade-in for their clunker. There was a class action lawsuit filed in New York against one of the largest dealer groups in the country on this point and the Oregon Attorney General has ruled that all car dealers must pay their clunker customers what they received from the salvage yards to which they sold the clunker. Both of these incidences received virtually no national or local media coverage.

In my judgment, the clear intent of the Cash for Clunkers program was that the buyer should receive a trade-in allowance commensurate with the value of her clunker, just like a normal sale with a trade-in would. Unfortunately, the government did not make this abundantly clear and therefore most car dealers took advantage of this “loophole”. Most car dealers allowed hundreds of dollars less than they actually sold the clunkers to salvage yards for. Some dealers gave their clunker customers absolutely nothing for their trades.

I read in the auto manufacturer/dealer trade publication, Automotive News, that the average trade-in allowance estimate for clunkers was $75. Since the government did allow the dealer to keep $50 for administrative costs, this meant that the average clunker customer netted $25. I sold 286 new Toytota in the clunker program and my average sale to the salvage yards was for $445. If this average applied nationally to the one million clunkers, this would mean that car buyers under the clunker program were underpaid on their trade-ins by about $400 million.

One has to ask, why the media is ignoring this at least ethical violation which has cost American car buyers hundreds of millions of dollars. I can think of only one reason and that is the fact that car dealers and manufacturers are among the largest advertisers. Asking the same question of why the NHTSA doesn’t take action I can think of only one reason too. That is that the National Automobile Dealers Association, NADA, is a very powerful lobbying group. They are so powerful that they were able to at least temporarily halt the cancellation of GM and Chrysler dealers by GM and Ford which was mandated under the government bailout program.

The amount that a clunker was sold to a salvage yard for is a matter of public information and should be available from NHTSA under the Freedom of Information Act. If you bought a car under this program, you might be interested to know how much you should have received as a trade-in vs. how much you actually received. I’m working on accessing this information and I will advise all of my readers when I’m successful.

Tuesday, September 07, 2010

What to do if you are Treated Badly by a Car Dealer

Hopefully the sales or service experience with your car dealer went well. But, sometimes they don’t. Now what? The advice I give you applies to all business transactions, not just car dealerships.

Your first step should be to communicate your complaint ASAP to the General Manager or, preferably, the owner. Be sure that you are talking to the real owner or the real general manger. A General Manager is over all employees in the entire company. A general “sales” manager is not a General Manager. If you can’t reach the owner (Many car dealerships are either publicly owned or owned by absentee owners), ask to see the General Manager. Often times the owner or General Manager is not aware of everything that goes on with all of their customers and employees. They might have new employee that should not have been hired or received inadequate training. Or, they may simply have a “rotten apple” that should not be working there. The ease and speed with which you can meet and speak to a General Manager or an owner is a pretty good measure of the integrity of the company as whole. If the owner or General Manager cares enough about her customers to allow total access, it is probably a very good place to do business. In fact, it is a good idea to find this out before you do business.

If you cannot reach the owner or General Manager, contact the manufacturer who franchises the dealership. Car dealers have a contract with the manufacturer called a franchise agreement and this contractual agreement requires that they treat their customers with courtesy, efficiency and integrity. Most manufacturers have a customer hotline that allows you to call and register a complaint directly. The owner or General Manager of the dealership will be made aware of your complaint. As you might guess, the manufacturer has quite of bit of clout with their dealer. If a dealer does not live up to his side of the contract, his franchise could be canceled or not renewed.

The third step I recommend, if numbers one and two don’t work, is to contact a consumer agency like The Better Business Bureau or the County Office of Consumer Affairs. These agencies will send your complaint to the dealership and request a written reply. No car dealership or business wants an unanswered complaint in the file of a governmental or private consumer agency.

The 4th step is to call the Florida Department of Motor Vehicles, DMV, and/or the Florida Attorney General’s office. These are extreme steps to be used for serious, even illegal, activities. The DMV has the power to suspend or cancel a dealer’s motor vehicle retail license, putting him out of business. The Attorney General’s Office can file criminal charges and assess large fines, even jail terms. The DMV phone number is (850) 617-2000 and the Attorney General’s phone number is 866-966-7226.

Your last resort is to contact an attorney. I list this last because hiring an attorney just about eliminates the possibility that you can quickly, amicably and inexpensively resolve your differences with the car dealer. Be very careful which attorney you choose. Try to choose one that is primarily interested in helping you and not in generating large fees for himself. Under the Florida Unfair and Deceptive Trade Practices Act, an attorney is entitled to his fees and costs from the defendant in a lawsuit if he wins. These fees can be much larger than the amount of your claim, motivating an unethical attorney to spend more time than is needed and dragging out a case to generate more fees than are necessary. This can be very dangerous for you because the car dealer’s attorney’s fees run roughly parallel to your lawyer’s and you can be held liable for those if you lose the case.

Hopefully you never have to resort to the final step of hiring a lawyer. In trying steps one, two, three and four try to present your complaint as concisely and politely as possible. You have every right to be angry when you are taken advantage of, but try to let your anger subside before you speak to or write to someone about your problem. We all react negatively to someone who is profane, raises his voice, or is sarcastic. Your goal of communicating and resolving your complaint is best reached by communicating clearly, politely and concisely.