Thanks to epic leasing losses, bad loans and Chrysler’s declining market share, Chrysler Financial has been taking a beating on the Street, with a capital B. A month ago, ChryCo Financial struggled to re-new its loans on Wall Street, only managing to raise $24b of the $30b it wanted to stay in business. It now appears that the conditions of the re-fi include the end of the leasing (done) and new terms for Chrysler dealers. Automotive News reports that the lender has told dealers it will jack-up their floorplan interest rates by an unspecified amount and force them to pay off older, unsold vehicles. More specifically, “Dealers will be required to pay monthly fees on new-car inventory 180 days old and older. The fees start at $10 per unit, go to $15 at 270 days and $25 at 360 days. 2008 and older units more than 360 days old must be paid off at 10 percent a month. All used cars more than 180 days old must be paid off.” This is bad news for Chryco dealers; they won’t be able to get alternative wholesale financing elsewhere on better terms. It also means they’re going to be very careful on inventory. And that’s bad news for Chrysler’s factories (i.e. Chrysler). Other captive floorplan lenders, like GMAC, may soon follow suit. All of which means its hardly likely sales have “bottomed out,” although it’s for sure that dealers will have to do something to get rid of old inventory. As in price cuts.
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This is one of (many) reasons the dealers have been marking down trucks 30-50%.
“…and older units more than 360 days old must be paid off at 10 percent a month”.
Wow.
When you have write a contract provision to force dealers to pay off inventory that’s been sitting on the lots growing weeds for over a year, you got problems.
It would be a great time to buy a Chrysler, if they had cars anyone would actually buy. With the exception of the Wrangler and Challenger, they got nothin’. Look for the Challenger to hit the wall within 12 months after all the early adopters get theirs.
Thew new vans are ugly and have serious quality issues, like bumper covers that warp so badly you can’t open/close the hatch without stepping on the cover to make clearance. Or interior plastics that make the Chinese laugh.
The 300 is done, the Sebring never was, and the Aspen, well, “Hey!, we got a hybrid!” won’t move that turkey off the lots.
The Journey could be a (minor) contender, but they haven’t given it much marketing support.
Nitro? Compass? Commander? No thanks.
Bad days at the Pentastar.
In a side story, Chrysler has a new CEO…
http://www.theonion.com/content/news_briefs/chrysler_names_83_lebaron
Trimming dealerships? By a thousand cuts?
I actually wrote an email to my local Chrysler-Dodge-Jeep dealer (who I actually like – the same outfit sells Hyundai at a different store and they’re straight shooters). I said – you know, you really should think about replacing the Chrysler franchises with something else.
Like maybe Suzuki, Mitsubishi or Lexus (all open in our area).
He actually has even worse problems. He’s also the Pontiac-Buick-GMC and also Saturn dealer here in town.
Manufacturers return the interest the dealer has to pay on floor plan loans for the first 90-days by issuing them a holdback check every 90 days.
The amount is based on the either the base MSRP or total MSRP or the base invoice or total invoice less destination charges and averages between 2-percent and 3-percent depending on the manufacturer.
Menno: Where do you live? Sounds like there might be deals to be had on an Enclave, VUE, Wrangler, Aura, G8, Astra, Solstice… Regards, inept123
Well, inept123, it doesn’t matter that I live in northwestern Michigan; pretty much any GM or Chrysler dealer would probably give you the “deal” of a lifetime to take one of their millstones from their necks for money.
Your statement could indicate that I would actually ever want to buy an Enclave, VUE, Wrangler, Aura, G8, Astra or Solstice…. that would not be accurate!
No point in buying a car from a company which is going to be gone in a few months to years.
Wow – shades of how GM, Ford and Chrysler dealers spoke of Studebaker, Kaiser, Packard, Hudson, etc. 45 to 50 years ago – and made it a self-fulfilling prophesy, eh?
Here’s why:
http://ml-implode.com/viewnews/2008-09-09_GMACinpossibleBankuptcymode.html
Cerberus own 51% of GMAC with GM owning the rest.
The Residential Capital unit is shutting down offices and taking big losses. Put that together with the losses on SUV and truck residuals and the end may be near for GMAC.
GMAC was GM’s cash cow wasn’t it? I think it just died.
I this is going to be the norm for them and GM and Ford, then wouldn’t it make sense for large mega dealers to self finance through bonds? Or at least consider it?
Wasn’t Chrysler forcing unordered cars and trucks onto the dealers, now they are going to make them pay through the nose for product they never really wanted because they already had inventory that wasn’t selling. I see a lot more dealers closing up shop.
Great, penalize the dealers who are stuck holding the bag with excess factory output. Damn fools never should have taken those Jeep Commanders in the first place :(. “Never give a sucker an even break” (W.C. Fields) seems to be Cerberus’ motto.
Chrysler has become the most despicable of the Detroit based auto companies.
Gardiner Westbound…maybe I am a bit sluggish today, but could you elaborate a bit further? I don’t understand the significance of what you are saying.
thx
Now would be a great time to buy a Wrangler 2D.
The Charger/Magnum wouldn’t be a bad buy either.
Every day I pass a small/mid chrysler dealer on my daily trip to the Post Office.
The cars appear to move. The small truck-lets appear to move. Otherwise, they have lots of trucks in the lot…many more than a store of this size would normally.
If they have to start paying off some 100 vehicles, they will close. Wow.
Maybe I can fire sale a work truck…didn’t plan on it, but a new pickup for 10k ? Buy for those Home Depot runs and give it to the kids when they get older. Oh, maybe not….based on the quality of a Durango I was subjected to recently.
I often drive from Billings,MT to Bozeman, MT. It’s a 200 mile shot, @ 100 mph. We’ve had Taurus (bland but smooth), the Infiniti FX 35 (rental car from heaven, and fun on the montanabahn), but last time we got a Durango. The plastics were sub Hyundai first generation. The wiring is hair thin, the connectors also as cheap as possible. Soundproofing is nil, and the wind noise made my wife keep checking to see if any windows were a crack open. The 4.6 liter V-8 was not state of the art…indeed it was inexcuseable after living a week with a Tundra’s happy V8. Under the hood, the plastics on this 14k mile vehicle were discolored and warped (!) Worst was the fact that the shocks were already played out.
You can make cars very, very cheap to build, but you can’t force anyone to buy them.
If I could justify to my wife on trading in one of our current Jeeps, I’d do so today. I’d love to replace my wife’s Liberty for a Grand Cherokee Limited with a HEMI. Screw gas prices. :)
If I was a Chrysler/Dodge/Jeep dealer, I’d be jumping ship right about now!
Chrysler’s current lineup is horrendous, with only few competitive products:
1 – The Chrysler 300 fad is over.
2 – Ditto the PT Cruiser, which is propping up the economy end, but hasn’t had a redesign since it was introduced.
3 – The Sebring has flopped, and forever doomed to rental car fleets.
4 – It’s still on their website, but hasn’t the Crossfire been discontinued?
Dodge isn’t looking healthier:
1 – The Challenger may succeed initially, but after the MOPARheads and aging-men-trying-to-relive-their-youth demographic gets a hand on it, sales will slow down.
2 – The Charger’s future is looking bleak.
3 – We all know how things are going for Dodge trucks.
4 – The Viper may be sold off.
5 – I can’t speak too much of the Avenger, but if it’s supposed to be filling the Neon’s spot as an economy car, 30 hwy mpg ain’t much to brag about.
I’m not well-acquainted with the Jeep brand and its offerings (as well as most SUVs), so I’ll refrain from discussing them. But, with very little research, I came up with 9 reasons to drop my little hypothetical Chrysler/Dodge dealership. Not a good sign!
Burden me with monthly fees because customers won’t buy uncompetitive products? No thank you!
Well, at least Chrysler still apparently please some portion of 2% of the population…
http://www.theautochannel.com/news/2008/09/09/099047.html
I don’t know where or how happy endings came up with that, but it is hilarious!!! Maybe GM should appoint a 1972 Vega as CEO. That car did about as good a job as Lutz is doing now!!
Depending on how the bailout is structured, e.g. how soon are the goodies available and are they transferable to a buyer, the value of Chrysler will soon be at its max. I expect the Cerberus bunch to be flogging the hell out of it.
Gardiner Westbound…maybe I am a bit sluggish today, but could you elaborate a bit further? I don’t understand the significance of what you are saying. – NickR
Car sales at every level are a shell game. Chrysler’s latest scheme cannot be assessed without knowing what is happening with other dealer incentives. I doubt it can gut them without violating franchise laws and contracts.
A fuller discussion of dealer holdback, one of numerous incentives and bonuses to dealers, is available here. http://tinyurl.com/5vds3h
Hmmm…
Replacing a 1/8th decent Liberty (depending on generation) with a Jeep GC HEMI (in name only) says ya need to prove to SOMEONE that your JEEP is worth buying!
It wasnt worth buying 5yrs ago when all they had was the GC and the Cherokee and the Wrangler.
NOW!…
Ya got 3 entry level vehicles (Liberty, Compass, Patriot).
2 top level vehicles (the Commander and ANCIENT GC) with the Wrangler gaining weight, size and losing efficiency!
But when you compare all of the vehicles.. what is the actual difference.. in any one of them?!
Chrysler.. needs to gut the jeep brand and or the majority of what it sells.. like a HOUSE IN KATRINAS PATH!
I hate to say it..
But Chrysler was better…..6+YRS AGO!
They didnt have such obnoxious OVERLAP but the never upgraded their vehicles.