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Auto Dealers Foresee Devastating Effects of GRT on Consumers and Business

May 2007
 Filed under: CAR CONSUMER INFO Car News | CAR CONSUMER INFO Headlines
CHICAGO, May 8 /PRNewswire-USNewswire/ -- The Chicago Automobile Trade Association (CATA) predicts that 25 percent of its 500 franchised new-car dealership members would close should Governor Blagojevich's proposed Gross Receipts Tax be implemented.

The business climate for dealers has been tenuous for a number of years. According to Auto Outlook, the CATA's marketing research publication, new retail light vehicle registrations in the Chicago area are predicted to decline 2.3 percent this year. The only good news is that the decline is well below the 6.6 percent drop in 2006, and the market has a good chance of improving in 2008-"if unimpeded," said Jerry Cizek, president of the CATA. He echoed concerns that are being loudly voiced across the state in protest to this tax, but lamented the possible fate of his association's members.
"It's no secret that the past few years have been tough in the automotive segment," continued Cizek. "Many of our dealers are walking a tightrope of profitability or loss. One of the biggest problems with this tax is that it would be levied whether a business is profitable or not. Our best estimates indicate that the GRT would force a tipping point and push a quarter of our dealerships over the edge, forcing them to close up shop.

"An average dealership in Illinois employs 67 workers," said Cizek. "If 200 such businesses close, the state would be burdened by more than $400 million to fund an average $28,000 unemployment compensation payout over 26 weeks -- and there would be 13,400 more Illinoisans without employer-supported health care coverage. I should point out that these numbers reflect only the impact of this tax upon dealerships. If extended throughout the rest of Illinois business, it doesn't take much imagination to realize that defeat of this initiative is imperative to our state's economic ability to thrive."

Chicago area new-car dealers were instantly aware of its grievous potential impact, according to CATA Chairman Bob Loquercio.

"This tax will close dealership doors, raise consumer costs, put employees out of work, and put their families at risk," said Loquercio. "The governor has been less than forthcoming with his portrayal of this tax. The retail automotive business deals in big-ticket items, but operates on a very low margin, often less than 1 percent.

"The governor portrays his GRT as making 'big business' pay its share of the load, but dealerships are not giant corporate monoliths," he continued. "For the most part, dealers are small, local firms who have done business in their community for decades. The closure of these stores would not only impact the state through increased unemployment, but also slash the sales tax revenues that are contributed directly back to the communities in which they operate."

Source: Chicago Automobile Trade Association

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