The Michigan Daily - michigandaily.com
ThursdayOctober 2, 2008 - 7A
Tighter credit standards
squeeze car buyers
On paper, markets
saw $1 trillion loss on
Wednesday
NEW YORK (AP) - Dismal
September auto sales may be one
of the clearest signs yet that fal-
tering consumer confidence and
tighter credit are squeezing con-
sumer spending.
"It went from the housing mar-
ket to the car market," said Reg-
gie Chambers III, sales manager
at Anderson Automotive Group in
Baltimore.
Ford Motor Co., Toyota Motor
Corp., Chrysler LLC and Nissan
Motor Co. all reported U.S. sales
drops of more than 30 percent
yesterday; General Motors Corp.
said sales were down 16 percent.
The final two weeks of the month
were especially grim for car deal-
ers as stocks tumbled, Washing-
ton dickered and credit markets
froze.
To be sure, the auto industry
has been reeling all year, thanks
to falling home prices and record
gas prices, which soured buyers
on the light trucks and large
cars Detroit had depended on
for profitability. Now, the credit
crisis is making things worse,
as buyers struggle to qualify for
loans and automakers scale back
leasing.
The stock market roller coaster
made buyers even more nervous.
Stocks had a one-day loss, on
paper, of $1 trillion Monday, for
the first time in history. As the
market fell, some luxury vehicle
buyers called Toyota dealers ask-
ing for refunds on deposits they'd
made, said Don Esmond, senior
vice president of auto operations
REPORT
From Page 1A
woman Diane Brown said the
reported drop in alcohol and drug
violations was not a significant
change.
"It doesn't tend to be linear,
she said, adding that several
factors might have caused the
changes. "It's a bit of a bouncing
ball."
The handbook also provides
for Toyota in the U.S.
The past two weeks were "tan-
tamount, really, to a natural disas-
ter," said George Pipas, Ford's top
sales analyst. Showroom traffic
looked like it does around a large
storm, or in the weeks following
the Sept. 11 attacks, he said.
"There's just scare in the air,"
said Kitty Van Bortel, who owns
both a Ford dealership and a
Subaru dealership in Rochester,
N.Y. "My opinion would be that
sales are down because of the
unknown, and that's always the
worst. People really don't want to
make a large purchase not know-
ing what exactly is going to hap-
pen."
Ray Ciccolo, president of Vil-
lage Automotive Group, which
operates six dealerships in the
Boston area, said one lender has
asked him to guarantee more
loans, meaning that if the bor-
rower doesn't pay a set portion
of the loan, his company is on the
hook for that amount. In the past,
only borrowers with bad credit
required a guarantee.
Chief Executive Mike Jack-
son of AutoNation Inc., the larg-
est U.S. dealership group, said
tougher credit requirements from
banks and finance companies
- and limits on money to fund
leases - have cost the 250-store
chain 20 percent of its sales vol-
ume so far this year.
"Our standards have tight-
ened," said Todd Denbo, a lend-
ing product manager at Wells
Fargo & Co. "We want custom-
ers to come in, even though it's a
difficult time, and sit down with
a banker and find the right solu-
tion for them. It may not be the
auto loan that's the right fit for
the customer."
updated information on emergen-
cy resources available on and off
campus, University regulations
and state laws on campus safety.
Larceny cases on campus
remained the same, with 857 inci-
dents reported in both 2006 and
2007. Brown said students could
help reduce thefts by not leaving
property unattended.
"For the most part our campus
and community is relatively safe,"
Brown said. "But we need to be
smart."
Ryan Marx, co-owner of Labyrinth Comics and Games on State Street, said he struggled to find loan for the business prior to its opening. Marx, denied small business
loans at first, took out a personal loan to help finance the $75,000 start-up costs. "They totally dropped the ball on us," he said, referring to loan companies.
LOANS
From Page 1A
remained strong because the Uni-
versity is a source of new business
ideas.
"There are a lot of opportuni-
ties to spin off businesses based
on the research that's done at the
University," he said.
Despite Ann Arbor's success,
Rogers said declining access to
loans and credit beginning in
2003 has landed most of Michi-
gan's small-business owners in
one of the worst credit markets to
date.
According to the latest SBAM
survey of Michigan small-busi-
ness owners, access to credit for
the purpose of business expan-
OILMAN
From Page 1A
but I can reduce it by 50 percent or
more."
To some in the audience, that
goal seemed a bit lofty.
LSA freshman Derek Sutton said
he found the plan is unrealistic
because of the scarcity of natural
gas, which Pickens said could serve
as a replacement for gasoline.
"Natural gas is still very fine in
WACHOVIA
From Page 1A
investments in the fund, some
fear they won't be able to pay the
salaries of their faculty and staff
or operating costs for the year.
Edward F. Leonard III, presi-
dent of Bethany College, a small,
sion is the lowest it has been in 14
years.
About 38 percent of Michigan's
small-business owners rated their
access to credit favorably, accord-
ing to the survey. In 2001, 71 per-
cent said they had favorable access
to credit, Rogers said.
Michigan is suffering more
than most states, Rogers said, but
the national market largely dic-
tates lending criteria. So even in
Ann Arbor, small businesses are
being held to tougher credit stan-
dards, he said.
At the Bank of Ann Arbor, that
means higher interest rates, addi-
tional collateral and shorter bor-
rowing periods for more recently
approved business loans, said
Larry Grace, the bank's first vice
president of commercial lending.
quantity," he said. "It's also open
to the global market, and it's not as
if only Americans are going to use
it."
Business School Prof. Andrew
Hoffman said the plan would at
least generate discussion concern-
ing the energy crisis.
"I see what he isdoing as partofa
broader conversation that we need
to have in this country abouthowto
handle energy sensibly," said Hoff-
man, adding that he didn't believe
the Pickens Plan alone could solve
private liberal arts college in
Kansas, told The Chronicle he
was worried about the school's
second semester, when the col-
lege often uses its short-term
funds to pay for different operat-
ing expenses.
"All colleges ride a cash roller
coaster," Leonard said. "But the
smaller colleges, like Bethany,
For business owners who can
afford to take on those extra costs,
Grace said, Bank of Ann Arbor has
continued to approve about the
same number of small-business
loans at roughly the same rate as
compared to recentyears.
Ryan Marx, a co-owner of
Labryinth Comics and Games,
said those tougher standards kept
him from obtaining a small-busi-
ness loan when he and his busi-
ness partners opened the State
Street store last year.
Facing start-up costs of about
$75,000, Marx said he was denied
small-business loans from the
SBA and a local investment group
because the store hadn't opened
yet, and he didn't have a high
enough credit score to secure the
loan on his own.
the nation's energy problem.
MSA's choice to invite Pickens
to campus was a surprise to some.
This time four years ago, Pickens
was creating headlines of his own.
Pickens helped re-elect President
Bushin2004bydonating$3million
for advertisements that accused
Bush's opponent, Sen. john Kerry,
of lying about his military record,
Most of the accusations turned out
to be false, but many credit them
with helping to tilt a close race in
Bush's favor.
we feel those bumps more than
others do."
After Wachovia's announce-
ment that it was freezing the
funds, Moody's Investors Service
said yesterday that it reviewed
the effect of Wachovia's deci-
sion - a review that could affect
colleges' credit ratings, The
Chronicle of Higher Education
"They totally dropped the ball
on us," Marx said. "So we got a
personal loan and did it that way."
With a $15,000 personal loan in
hand, Marx said he and the other
owners found ways to make up for
the $60,000 shortfall by cutting
costs and doing most of their own
renovations at the State Street
location.
The extra work delayed the
store's opening, and the smaller
loan meant they had less money
to buy their initial inventory, but
now that business is up and run-
ning, Marx said the preliminary
slowdown has been beneficial.
"In light of the last few weeks'
economic troubles, I'm a lot hap-
pier that I'm not beholden to a
lending institution for a $75,000
loan," he said.
Pickens had been a long-time
donor to the Republican Party, but
recently dropped his party affilia-
tion to re-brand himself and pro-
mote his new plan.
"I will not have anything to do
with either of these candidates
other than to advise them and try
to getthem focusedon what Ithink
is the biggest problem the country
has, which is energy," he said.
- Lindsay Kramer
contributed to this report.
reported.
However, Cunningham said
the assessment by Moody's would
not affect the University's credit
rating.
As of last week, the fund man-
aged about $9.3 billion in assets
for 900 colleges and roughly 100
private schools, The Chronicle
reported.
CANDIDATE
From Page 1A
In Ann Arbor, a first offenses for
possessingless thantwo ounces of
marijuana is only a civil infraction
and carries a $25 fine with no jail
time or probation.
"The city has taken a stance
on overbearing marijuana laws,"
Plourde said. "I don't see why we
shouldn't take a stance on over-
bearing alcohol for those who are
of adult age."
City Councilmember Sabra Bri-
ere (D-Ward 1) said the council
wouldn't likely pass such an ordi-
nance.
"He would have to show that
there was a benefit to the city
financially and culturally that
overrode the benefit from the cur-
rent penalty," she said.
In 1972, an ordinance pushed
by two Human Rights Party
council members made posses-
sion of less than two ounces of
marijuana a civil infraction with
a five-dollar fine. City Council
repealed the ordinance in June
1973. In 1974, a voter referendum
passed and amended the city
charter back to the way it was in
1971, when the offense accompa-
nied a civil infraction and a five-
dollar fine.
"He'd have to teach the city
council that there was a real
benefit to a slap-on-the-wrist as
opposed to a stop-in-your-tracks
punishment, which is the current
goal," Briere said.
Council Member Stephen
Rapundalo (D-Ward 2) said he's
ridden along with the Ann Arbor
party patrol and seen firsthand
how "rampant" underage drink-
ing is. But changing the current
penalty, he said, isn't necessarily
the best way to handle the prob-
lem.
"It certainly deserves a conver-
sation and a dialogue, but I'm not
convinced lowering the drinking
age won't stop the binge drinking
behavior," he said.
LSA junior Chris Chiles,
executive director of Students
for Sensible Drug Policy, said he
supports the idea of decriminal-
izing alcohol consumption for
those who are over 18. Chiles
said he thinks Plourde would
encounter heavy resistance
from the Ann Arbor Police
Department and City Council
members if he were to defeat
four-term incumbent Democrat
John Hieftje and the rest of the
slate of challengers.
Chiles said he was glad Plourde
was addressing the safety issues,
surrounding the current drinking
age.
"A drinking age at 18 would
provide amuch safer environment
for college students and it would
increase the focus on health and
education in our community," he
said.
Plourde said he's attended par-
ties at which people were danger-
ously intoxicated, but then refused
to go to the hospital out of fear of
the consequences of an MIP cita-
tion.
Plourde's push comes on the
heels of a nationwide effort to
lower the drinking age by a coali-
tion of more than 100 college lead-
ers. The administrators signed a
petition calling for a lower drink-
ing age because they say the cur-
rent law creates "a culture of
dangerous, clandestine 'binge-
drinking."'
University President Mary Sue
Coleman declined to sign the peti-
tion.
"I certainly respect people
who want to stimulate a dis-
cussion and I think that's what
the Amethyst Initiative was all
about," Coleman told The Michi-
gan Daily last month. "What I
disagree with is the notion that
lowering the drinking age is
going to somehow alleviate the
problem."
Plourde said he's never been
cited for underage drinking, but
has numerous friends and rela-
tives who've gotten MIP citations.
"In fact, I.probably know more
people who have been charged
with an MIP than who haven't,"
Plourde said.
When asked if he was usingthis
proposal to garner the support of
University students, Plourde said,
"of course. This is something I
think should happen, so I'm push-
ing it."
Briere said she saw Plourde's
proposal as pandering to a specific
voting bloc, because she hasn't
heard an outcry from city resi-
dents to change the law.
"My concern is that this feels
like an effort to get people who are
18 or 19 to vote for the candidate
rather than actually implement
it," she said.
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