Lapas attēli
PDF
ePub

tition in the automobile industry. Obviously, their real concern is no to increase competition in the industry, or to prevent unemployment, but to reduce competition in the finance and insurance industries where they compete.

We submit that if there is a need for more competition in the motor vehicle industry (which we deny), or if a radical change in competitive conditions should occur, then the Government should make full use of the antitrust tools now available. It should not adopt legislation that would deny an important industry an essential means of serving the consumer and promoting the sales of motor vehicles. Finally, if this subcommittee should conclude that legislative action is essential, then we strongly urge that the proper direction for such action lies, not in this economically doubtful legislative proposal known as H.R. 71, but in legislation that would require all finance companies, including affiliated companies, to offer their facilities in their operating areas to all automobile dealers on proportionately equal and nondiscriminatory terms. The effect of such legislation would be to eliminate any possible inequality among manufacturers and their dealers; but unlike H.R. 71, it would not increase the price of credit and insurance to dealers and consumers.

THE ASSERTED "UNFAIR" COMPETITION OFFERED BY AFFILIATED FINANCE

COMPANIES

Finally, the proponents of H.R. 71 contend that because of their connection with motor vehicle manufacturers, affiliated finance and insurance companies have advantages over unaffiliated companies, and that their competition, therefore, is unfair and should be prohibited.

While we admit that affiliated finance and insurance companies may have some advantages, we do not think that they are large or important, and we deny that the competition offered by affiliated companies is in any way unfair to the unaffiliated.

The most commanding fact, we think, of all in assessing the advantages of affiliation virtually has been ignored by the proponents of H.R. 71. In connection with the discussion of the doctrine of res adjudicata, there have been, it is true, oblique references to the antitrust consent decrees against Chrysler, Ford, and General Motors; but the proponents have carefully avoided discussing the terms of the decrees. The fact is, of course, that the decrees are strict and all encompassing; and they effectively control the daily conduct of those manufacturers in relation to their dealers.

Under the Ford decree, for example, we are enjoined from recommending, endorsing, or advertising Ford Motor Credit Co., or any other finance company to any of our dealers or to the public. There is a strict prohibition against joint visits to our dealers by company personnel and personnel of the Ford Motor Credit Co. Certain types of marketing and sales assistance, if given to the Ford Motor Credit Co., would have to be made available to other finance companies. In practical effect, although Ford has the right under the consent decree to own the Ford Motor Credit Co., that company must stand on its own in soliciting business; it must rely on the sales efforts of its own marketing personnel to persuade Ford Motor Co. dealers to use its wholesale and retail financing services.

Overall, Ford is thus required to maintain scrupulously fair, nondiscriminatory and noncoercive conduct toward its dealers, as are General Motors and Chrysler.

Moreover, dealers are already fully protected against coercion by the manufacturers in the selection of sources for financing. Congress has specifically dealt with this kind of problem in the Automobile Dealer Franchise Act of 1956. Additionally, the Department of Justice would no doubt invoke the existing antitrust laws if manufacturers were to attempt to coerce dealers in their selection of financing.

There has been much talk in the hearings before this subcommittee about the events that preceded the beginning of this litigation in 1938. That was a 1938 conspiracy; rather, one charged in 1938.

But even Paul Jones, chairman of the Executive Committee, American Finance Conference, who appeared earlier in these hearings, admitted that neither GMAC nor FMCC now engages in the practices that resulted in the indictments of 1938 (transcript pp. 124, 131). In this area, he has retreated to safer ground; he now says that the "affiliated credit companies are entrenched" and need not engage in such practices (transcript p. 125). Obviously, FMCC is not entrenched; it barely has commenced operations.

Apparently, it is the position of the proponents that the names of the affiliated companies and the fact of affiliation are sufficient to give them an unfair advantage over unaffiliated companies.

That position, that argument, that contention, has been discussed at some length in these hearings. If the argument were valid as a factual matter, it seems to us that GMAC, after 40 years in the business, surely would have more than 42 percent of the financed new car retail sales of General Motors dealers. Our own experience with FMCC belies the existence of any such advantage; our finance company has not found it easy to penetrate the market. If the advantage of affiliation carried the weight attributed to it, FMCC would now have more than the 7 percent of the financed new car retail credit business of Ford Co. dealers which it has been able to garner in the areas where it has opened offices.

We found that our dealers prefer to stay where they are getting good rates with the companies with which they have done business for years.

One good reason is, of course, that the entrance of Ford Motor Credit Co. as a competitive factor has resulted in reduced rates in many of these areas where our offices have been opened.

The CHAIRMAN. You do not mention the wholesale financing business.

Mr. YNTEMA. We have agreed to supply it for the record.

Mr. GOSSETT. It is a very small percentage, Mr. Chairman. We have done little better in wholesale. We find that our dealers do not want to be saved, many of them.

In these areas where FMCC has opened offices, the rates have come right down and the dealers are getting good rates.

But let us assume for the purpose of argument that affiliated finance companies do have certain inherent advantages over unaffiliated companies. These may include a well-known name, and a good credit rating and sources of capital. (It should be observed in passing that

larger independent finance companies have most of these advantages and, in addition, have continuity in the business.) You cannot push CIT or CCC around. They are very well established companies and they are only two of several large companies, and the banks, as you know, have a very strong position in this business.

The question is, however, whether such advantages are unfair when held by affiliated companies and whether they would justify the enactment of such drastic legislation as H.R. 71.

Clearly, unless the advantages are unfair, no legislative action is justified. But if competitive unfairness exists there is a clear basis for action under existing laws. You do not need a new law.

The CHAIRMAN. You know, Mr. Gossett, I think, while you are talking here, there is no effort on the part of this committee, there is no purpose in any legislation to destroy GMAC or the Ford Finance Co.

They could continue on their merry way, only that they shall be severed. And if, for example, GMAC were severed from General Motors, they would, to a greater degree, supply credit to Ford dealers, to Rambler dealers, to Studebaker-Packard dealers, and everyone else. They would go into the general credit business.

There is no intention to destroy those companies.

Mr. GOSSETT. I know; but what you are doing, Mr. Chairman, by H.R. 71, would be to remove those companies as subsidiaries of the manufacturers, and the manufacturers are the ones who keep the rates down.

The CHAIRMAN. Why would not GMAC continue to do what it did before!

Mr. GOSSETT. Well, they might

The CHAIRMAN. If that is a practical, profitable policy, they certainly would continue to do that.

Mr. GOSSETT. One can assume that they would, but we do not think they would.

The CHAIRMAN. What?

Mr. GOSSETT. We do not think they would.

The CHAIRMAN. You do not think they would?

Mr. GOSSETT. No: we do not.

The CHAIRMAN. They have maintained that policy all these years while they were a subsidiary of General Motors, and that seems to be good business for them.

Now, GMAC might widen its horizons and do business, not only with GM dealers, but with Ford dealers and all other car dealers. They would do more business, and the more business they do, very likely, the lower their rates would go.

Mr. GOSSETT. Of course, Mr. Chairman, I know that is your theory, and I hope it would be so, but our experience here is not that way.

Just let me finish, now. We had a situation, GMAC was charging lower rates to GM dealers, and our dealers were being "skunked" all around the country. In some areas our dealers were paying $150 more for financing and insurance than a GM dealer was paying. So we went to a big finance company that served many of our dealers, and we said:

"Why don't you meet GMAC rates, because our dealers are not competitive!"

And they laughed at us. They turned their backs. They were not willing to do that.

Now, what basis is there for assuming that if these finance companies are put out on their own, GMAC and FMCC, that they will have the same low-rate policy that they now have as subsidiaries of the manufacturers?

Mr. McCULLOCH. Mr. Chairman, I would like to ask what time the representatives of Ford Motor Co. went to the independent sales finance companies and suggested that they make their rates competitive with GMAC?

Mr. GOSSETT. Did you ask when?

Mr. MCCULLOCH. When was it, about when?

Mr. GOSSETT. It was 1957 or 1958, just before we went into the business. I think as early as 1956 we started this process of trying to get them to be competitive. We realized that we could not continue to compete effectively, our dealers could not, if they were under this handicap.

So we went to them and said: "Why don't you reduce your rates in the areas where the banks do not compete?"

You see, in the areas where the banks compete, the rates were competitive and our dealers were able to get along, but in the country areas where the small dealers operate, they could not compete effectively with General Motors dealers because the rates were on the average $65 higher; and, as I have said, in some areas, $150 difference; and so they could not compete effectively.

Mr. McCULLOCH. If the independent sales finance companies had followed your suggestion, would you have proceeded

Mr. GOSSETT. No, sir.

Mr. McCULLOCH (continuing). To organize the Ford Motor Credit Co.?

Mr. GOSSETT. No, sir.

Mr. McCULLOCH. And gone into this field?

Mr. GOSSETT. No, sir.

Mr. YNTEMA. Mr. McCulloch, may I speak to this?

I was personally in charge of this, and I would like to tell you why we did it. Immediately after the war, there was a shortage of automobiles, and we had no problem selling automobiles.

In the middle 1950's, the supply began to catch up to demand. This then became an important problem to us, a very important problem

to us.

It was at that time that we talked to the finance companies, asked them to get the rates down, and they absolutely bluntly refused to do so. They admitted their rates were higher, and they refused to reduce them.

Mr. MEADER. Dr. Yntema, I think you testified that you went to one company, CIT. You didn't name it in your original statement, but you did supply the name.

Mr. YNTEMA. CIT?

Mr. MEADER. Yes. Did you just go to one?

Mr. YNTEMA. No, we went to CCC, also. Those are the two largest independent companies. If either one of those would have acted, we would have got, of course, the kind of response that we wanted. We didn't go and visit each independent company. CIT was the

major source of credit to Ford dealers, and so we went to talk to them first. We talked to them on several occasions. There was a large meeting at which the head of CIT was present, and, in effect, he simply laughed at us. He didn't believe that we would enter the field. He was just interested in keeping up the rates. This is our experience.

Mr. GOSSETT. So we find, Mr. Chairman, little reason to believe that if we had unaffiliated companies the rates would be low. We think they would be as high as the traffic would bear.

Mr. MEADER. Did they give a reason for refusing to be competitive with GMAC?

Mr. YNTEMA. The general attitude was "we don't have to." They were in a position of power; they didn't have effective competition. There was no particular reason. We pointed out we were at a disadvantage and their general attitude was "Well, so what?"

Mr. MEADER. Dr. Yntema, while you are there, somewhere in your statement you, I think, predicted, I believe that is the word you used, that the American Finance Conference would bring pressure to bear upon GMAC and FMCC if they became independent finance companies to harmonize their rates with the rest of the independent unaffiliated finance companies. Do you have any basis for that prediction?

Mr. YNTEMA. What I have observed in the present situation is that there has been a great deal of propaganda and lobbying on the part of the American Finance Conference in support of this bill.

Mr. MEADER. If they did, if the American Finance Conference or other independent unaffiliated finance companies did seek to conspire in price fixing on finance rates, wouldn't that be a violation of the antitrust laws?

Mr. YNTEMA. That certainly would be a violation, but there are

ways

Mr. MEADER. What could they do to compel GMAC or to bring pressure as you say on FMCC and GMAC to get their rates in line with other unaffiliated companies?

Mr. YNTEMA. One of the ways of doing this would be to bring up some kind of a trumped-up antitrust action. Others would be to get hearings held on the subject and get antitrust action threatening to break up GMAC, because GMAC would be a very large factor in this business. All I am pointing out, there are many ways to bring pressure without conspiracy.

Mr. MEADER. If the antitrust laws would be used for that purpose, it would require connivance with Government officials, would it not? Mr. YNTEMA. Not necessarily. I would think it would be possible for them to persuade someone to make a speech or, if necessary, to hold an investigation. But they might not need this.

It is also possible to let it be known that this kind of behavior is not considered proper. I am not alleging conspiracy or anything like

that.

There have been strong pressures propagandawise on this case; statements that have been made, that there is a "white paper" by the American Finance Conference that in our judgment contains many statements that are untrue and misleading. This is the type of thing

« iepriekšējāTurpināt »