Good news, everyone! A finance company whose risky investments in auto and real estate loans required it to beg for $6B in bailout cash is at the ready to teach you the secrets of smart financial planning. According to a release at PR Newswire, GMAC “has bolstered its effort to provide consumers with personal finance education with a $20,000 grant to InCharge® Education Foundation, Inc. (ICEF). The funding will be used to co-sponsor a series of financial literacy courses throughout the country in 2009. The courses, named ‘Smart Edge by GMAC,’ are designed to help people make better financial decisions by providing them with information about budgeting, real estate and automotive finance, insurance, credit reports, credit scoring, and other tools.” Lesson number one? Pay your CEO $11.6M even if you’ve been bleeding red ink all year. Lesson number two? Savagely screw over the people your business relies on.
GM and GMAC have stripped All American Buick Pontiac GMC of Marshall County, Texas, of its entire inventory after a court overturned a restraining order against the automaker and its finance arm, reports the Marshall News Messenger. All American’s lawyers have hit back, filing a a federal complaint alleging fraudulent inducement, fraud, fraudulent misrepresentation, fraud by nondisclosure and promissory estoppel (known to you and me as an “action which prevents a party from acting in a certain way because the first party promised not to, and the second party relied on that promise and acted upon it”).
According to the lawsuit, GMC did not halt vehicle shipments during the recent sales downturn. “Rather, GMC continued to ship vehicles to All American until its floor plan was maxed out at 100 percent. The floor plan interest commenced the day the vehicles were put in transport.” The suit also claims GMC began requiring dealerships to pay up front for all ordered parts. Meanwhile, GMAC required All American to pay additional money for all used cars that were sold as well as reductions on used cars. Finally, GMC stopped paying dealer rebates due on new vehicle sales on a weekly basis, opting instead to pay them every third week. “This particularly hurt All American’s cash flow as GMAC required sold vehicles to be paid off in three days,” the lawsuit claims. “By doing this, the defendants were able to make it appear as if their financial strength was solid at the expense of their dealers.”
Connectmidmissouri.com reports that local dealer Lloyd Belt is facing similar problems with GMAC, alledging that the finance firm told Belt he needed to sell cars faster, and pulled their cars and their financing when sales didn’t improve. Belt believes it is cheaper for GMAC, to stop financing dealerships and push them out of business than it is for GM to buy out the dealerships, a charge GMAC denies. Interestingly, Belt’s Chrysler vehicles were the first to be pulled from his lot. GMAC is partially owned by Cerberus, which also owns Chrysler. Coincidence? Probably not.
This is GM’s attrition plan in action. Pull the flooring line and voila, no more dealer.
GM is insolvent in part because it has too many dealers, diluting the brands and destroying pricing power.
However, among others, the dealers lobbied incredibly heavily for GM and GMAC to be bailed out, so GM could not use Chapter 11 to reduce dealer counts.
GM still has way too many dealers. Conveniently, many of those dealers are legitimately not credit worthy. It’s about time this happened.
Dealers being forced out by GM playing hardball?
Boooo effing hoo. Cry me a river. Not.
There’s something substantially and fatally flawed with a business that has its potential customers rooting for its failure.
Some car makers really need to reexamine how they sell cars, and how they treat customers. For GM, completely amending this is job number one, and should be given priority before anything else they dream of doing.
A longstanding GMAC field representative told me in confidence a few weeks ago. “I hate my job now, having to go in a demand things from dealers. I’m going on 28 years. I hope I can last at least two more until retirement.” I know one GM dealer point that this representative serviced has shuttered it’s operations. Another one close by is on the verge of collapse.
I wonder if the dealers are surprised at the lack of empathy for their situation from the public?
Sure Cerberus is squeezing them thru GMAC – why not?
The retail channel has been reduced to screwing and taking advantage of the customer. Why would GMAC – or the manufactures for that matter treat the dealers any different then they treat the individual consumer?
This might be bad news for GM dealers, but at least they now have this going for them:
http://www.abnetwork.com/autonews/poll9.php
“89% of dealers surveyed agreed that the news has a negative effect on customers as well as employees.”
“We all know that if your dealership were able to present 100% of your products and services to 100% of your prospects 100% of the time your dealership’s revenue would dramatically increase.”
Holy shit.
Step 1, save money over the next few years
Step 2, look for a nice, pre-owned car…maybe three to five years old
Step 3, buy said car in cash
Step 4, Repeat steps 1-3 every five to seven years and never pay interest or take the major hit in depreciation again.
But then, I suppose that really wouldn’t help GMAC too much, would it?
Sources report that these courses are already filled with AIG executives.
John
Wow, GMAC’s really sticking it to the people that give them a reason to exist! Way to go, I guess they’re taking a page from the UAW playbook. There was a Buick/Pontiac/GMC store here that recently closed its doors after 50-something years in business, wonder if this had anything to do with it? And the shit gets deeper…
@Stein X Leikanger
…For GM, completely amending this is job number one…
No wait, I thought it was quality. Or was that job 1 at Ford?
(For those who remember the old commercials).
Sorry. The world is running out of Yuppie Union Cards.
I’d suggest that the powers that be either lobby for a massive ‘clunker’ bill or get ready to become de facto ‘Buy Here – Pay Here’ lots.
@McDoughnut
Cerebrus is putting the squeeze on dealers so that they can bring down GM, permitting Chrysler to receive a larger piece of the bailout pie.
GM was screwed once it let its financing arm get into the hands of a particularly nasty, and politically connected, competitor.
Stein,
“There’s something substantially and fatally flawed with a business that has its potential customers rooting for its failure.”
That is an interesting statement. It seems true, but then I thought of the oil companies. In fact, if you sell a necessity, you are likely not loved by much of your customer base. In this case though, you are really on to something because people DO actually like some of the manufacturers.
They rarely like their dealer, but that’s a legislative problem. The dealers, having been legislated into necessity, do not have to add value to the chain. However, they all DO have to compete with each other. I don’t think all competition is necessarily good. It’s not really a free market, so the results aren’t working the way we would expect.
Wow, GMAC’s really sticking it to the people that give them a reason to exist!
I have no sympathy for the dealers so long as they have all their sweetheart state legislation protecting them. You know, they could even be right that the vast majority of people don’t want to buy direct, that dealers are helpful and necessary, and whatever. But as long as they have their legally enforced markets that make it illegal to buy direct, they’re not just credible to me. On anything.
Yes, I’m a little more ticked-off because I am the type of guy who likes to order cars and wishes he could do so without the middleman.
@ johnthacker: I prefer picking a car from the lot because dealers get desperate when something’s been sitting around a while. I’ve gotten some good deals that way. If you get a set price, like GM employee pricing, then it doesn’t really matter. Inquiring about that 2008 model when the ’09s are rolling off the truck really helps motivate a dealer. Besides, I don’t always know exactly what package I want, or if I’ll like a color on a vehicle (I would have never bought a silver Trailblazer until I saw mine), or even if I’ll like the way a car drives. Dealers are good to have, and they’re not all scheisters. You just have to find a good one that you can work well with. For example, there’s a Chevy place here in our area that I’d recommend to anyone for their honesty and willingness to work a deal and I drove past 2 others to buy my truck there. It’s not about the dealership, it’s about who runs it.