US car dealers have reinforced their reputation in recent weeks as one of the most potent lobby groups in Washington by persuading Congress to exclude them from the financial services reform bill now in its final stages of passage.

“Dealers are an effective force in Washington because all 435 of us have car dealers in our districts”, says John Campbell, a Republican member of the House financial services committee and himself a former car dealer.

Comparing the dealers’ clout with real estate agents, insurance brokers and community bankers, Mr Campbell adds that “almost every member of Congress knows a few car dealers personally”.

The dealers won another big victory last autumn by forcing General Motors and Chrysler to reconsider the termination of 3,400 dealers as part of the court-supervised restructuring of the two carmakers.

To the exasperation of senior management in Detroit, Congress set up an arbitration process for aggrieved dealers. GM has offered to rescind 666 of its termination notices, subject to various conditions. Chrysler has lost 17 arbitrations and won 47 since the proceedings began in April.

The dealers’ tactics have included regular “fly-ins” organised by the National Automobile Dealers’ Association, in which scores of car dealers from across the US descend on Washington.

The proceedings typically kick off with a dinner, followed the next day by a string of carefully targeted calls on members of Congress and government officials. The fly-ins have been reinforced by phone calls, e-mails, newspaper advertisements and, not least, campaign donations.

The typical dealer is not only a wealthy, independent businessman (or, increasingly, woman), but has the advantage of deep connections in the local community through customers and employees.

According to one congressional aide, black members of Congress are especially sympathetic to African-American dealers, who are among the most successful black entrepreneurs.

Many dealers sponsor local baseball, soccer and softball teams, and are big donors to local charities. “Being good corporate citizens is important,” says Ed Tonkin, Nada’s current chairman, whose family owns more than a dozen dealerships in Portland, Oregon.

Mr Tonkin says his dealerships raised $250,000 (€198,000, £166,000) for cash-strapped local schools by donating part of the profit from every vehicle sale. His father, who started the business 50 years ago this month, is a former board member of Portland’s public transport agency.

The politicians are all too aware that dealers’ local connections can translate into a lot of votes. Mr Campbell observes that “it’s not only the dealer who calls, but also the salesman and the technician”.

Under the original financial reform bill, car dealerships would have been policed, like banks, by the new Consumer Financial Protection Bureau. The White House, the Pentagon and consumer advocates, among others, argued that car buyers need protection from dealers’ deceptive tactics in arranging vehicle loans and leases.

But Nada countered that its 18,000 members were only intermediaries, connecting buyers with lenders. It warned that the new agency would make it harder and more expensive for car buyers to gain access to credit.

Contrasting the dealers’ clout to the problems faced by Wall Street investment banks, oil companies and even Detroit carmakers in Washington, the congressional aide notes that when it comes to lobbying in the current political climate, “the closer you get to Main Street, the better you’re going to do”.

No fewer than 59 of the 71 members of the House financial services committee voted to exclude the dealers from the financial reform law. In one sign of their reluctance to clash with the dealers, eight members who initially opposed the exemption switched their votes once they saw which way the tide was flowing.

Flush from their recent successes, the dealers now have their sights set on such issues as a forthcoming overhaul of the federal tax code and proposals to tighten vehicle safety standards prompted by Toyota’s mass recalls earlier this year. Expect more fly-ins.

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