We’ve said it before: both Chrysler and GM have been using GMAC as their “bag man”: withdrawing credit from dealers to kill them without messy political blowback. This despite the Small Business Administration’s new federal loan guarantee program for beleaguered car dealers. The Wall Street Journal reports that where the feds giveth, GMAC is still taking away. “GMAC LLC is suspending wholesale financing for certain Chrysler Group LLC dealers it considers to be too risky to lend to, GMAC and Chrysler confirmed Wednesday. The move could ultimately push more Chrysler dealers out of business and hurt the company’s ability to sell vehicles.” That last bit’s pretty funny—providing you’re not a Chrysler dealer. Anyway, the WSJ runs the numbers or at least tries . . .
About 60% of the roughly 2,400 dealers who survived Chrysler’s bankruptcy applied for interim wholesale financing with GMAC, according to Chrysler. So far about 6% — more than 80 — have been informed that their wholesale financing has been temporarily suspended, the company said.
So how many ChyrCo dealers face GMAC’s hit squad? In the spirit of transparency proclaimed by fellow bailout buffet binge eater GM—forgetting for a moment that GMAC is also a recipient of billions of dollars worth of TARP aid—Chrysler refused to state how many dealers are under the gun or how many the lender has equipped with cement overshoes. But we do learn that the hits will keep happening right until the end of the year: “The company said it will need about six months to complete the vetting process.”
Meanwhile, how mafia is this?
GMAC said the process was part of normal due diligence. It needs to shore up its own financial position by avoiding risks it cannot afford, said spokesman Mike Stoller . . . .
Mr. Stoller said GMAC wasn’t working with Chrysler on this effort and that it had “no particular goal in mind” for the number of dealers to continue to receive loans.
According to GMAC, suspended dealers typically have 30 days to improve their balance sheets or they must find another company to provide them wholesale lending.
The WSJ ends its expose with a piercing glimpse into the obvious, in a bold attempt to shore-up its suspicion that the dealer cull works to Fiatsler’s disadvantage.
Chrysler expects to have most of its surviving plants running again by July, and will need dealers to buy cars so the company can begin generating revenue.
And if they didn’t weed out the high risk or bad pay dealers, what would you say then? Seems like normal (or what should be normal) business practice to me.
Palmer Dodge/Chrysler/Jeep had been operating in Indianapolis since 1957. They were moving Dodge/Jeep from an older location, to a nice new location. They left Hyundai at the old location. I drove past their new store three weeks ago – beautiful buildings, all new signs, a large “Grand Opening” sign out front. Lot was loaded with nice new Chrysler product. And guess what. Last week, they ran a full page ad in the paper, saying they apologized to their customers, but Chrysler had pulled the plug on them. What a waste. They had to have invested millions in their new location, as soon as it opened, they are shut down.
GM and Chrysler will die because their management is terminally stupid. No one, not even the full backing of the US government, can overcome this level of stupidity.
Green shoots? I think that green color we’re seeing is the zombies’ skin.
Matt51 :
June 24th, 2009 at 10:09 pm
Palmer Dodge/Chrysler/Jeep had been operating in Indianapolis since 1957. They were moving Dodge/Jeep from an older location, to a nice new location. They left Hyundai at the old location.
It sounds like there is going to be a nice Hyundai store in the new location.
I wonder if it’s occurred to Detroit that a lot of these dealers are going to be selling imports further eroding their market share?
I wonder if it’s occurred to Detroit that a lot of these dealers are going to be selling imports further eroding their market share?
Nope.
Matt51 is absolutely right about Palmer Dodge. That dealer was seemingly doing exactly what Chrysler said they wanted, consolidating Dodge, Chrysler & Jeep in a nice new facility with no imports. What did they get in return? the rug pulled out from under them. (I wonder if the DF’s making the dealer culling decision even knew that Palmer had recently relocated and remodeled its Indy West facility?)
Although I didn’t buy my car there, Palmer Dodge was the dealer closest to my work, where I got my Grand Caravan serviced. I have absolutely no reason to buy a Chrysler product now. I don’t have anywhere to get it serviced without going 7 miles in each direction out of my way.
I’ve been saying it for months now and will keep saying it: The dealer cull is going to reduce sales a lot more than GM and Chrysler seem to realize. It is also going to undercut the highly profitable spare parts business.
Palmer Dodge should put up big signs advertising the fact that they are still happy to do any and all non-warranty service and repairs on Chrysler products. They can advertise that they are now cutting their service prices an average of 20% thanks to no longer paying for overpriced “factory” parts. I’m sure the local NAPA dealer will be happy to keep them supplied with parts.
While NUMMI is ramping down production of the Vibe, they are ramping up production of the Corolla. Who else thinks Toyota is betting on stealing more market share from the domestics.
I think Jimmy2x called it: “And if they didn’t weed out the high risk or bad pay dealers, what would you say then? Seems like normal (or what should be normal) business practice to me.”
If GMAC didn’t cull, we’d have stories about the government propping up weak dealers.
It may be strange that GMAC is lending money to Chrysler dealers, but keep in mind that GM’s share of GMAC is less than 10%. Cerebus owns more of GMAC than they do. It’s unlikely that GMAC is operating with a “hey, we’ll nuke Chrysler dealers so GM can prosper” attitude. More likely, GMAC is under the usual regulatory red tape, which probably includes keeping its own loans and accounts at a certain risk level.
They’re clipping marginal dealers. I’m sure there are plenty out there with inventory that isn’t worth as much as it used to be, with declining sales, and with weak prospects. If someone came to you with a business like that and asked for money, would you lend to them?
I know zip about Palmer Dodge, but a great dealer on the outside doesn’t mean a sound balance sheet. Maybe Palmer’s overleveraged, maybe its sales have nosedived, maybe it’s stuck with a lot of expensive inventory that has bleak hopes of moving. I don’t think it’s fair to take it out on Chrysler…sure, there are plenty of reasons not to buy a Chrysler, but a dealer’s relationship with the credit markets shouldn’t be one of them.
Let’s put a different spin on this: if these dealers really were solvent, promising enterprises, then they should have no problem acquiring financing elsewhere.
I am consistently amazed at the number of people who come to the defense of Chrysler dealers on this site.
BTW – Here in Pittsburgh, a dealer that was told to close their two locations convinced Chrysler that they would consolidate to one location so they can stay in business. They fought and won!
I am consistently amazed at the number of people who come to the defense of Chrysler dealers on this site.
You should read the Washington Post whose writers continue to cry in their collective beers for those poor, defenseless dealers who do not deserve this fate. The dealers did everything the mean company asked us, and what did we get in return? Thrown to the curb like garbage. Boo hoo.
Spare me with the poor dealer routine. They have buggered the American consumer since the inception of the dealer network and buggered the auto companies since the inception of state franchise laws.
I am glad these dealers are getting buggered themselves if, for no other reason, then they prevent consumers from buying cars through the (four square less) internet. Boo hoo, you greedy bastards.
I haven’t time to read the article, so I’ll comment on that later.
The picture is striking in a not-so “out there” way. I appreciate good 3d graphic artwork. I find it fascinating to see what things are important in a given artist’s mind’s eye; things such as the use of shadow, light, specularity, reflection, and refraction.
This picture is not so realistic to my mind, but that doesn’t make it bad. Interesting, the use of skyscrapers in the background and the inclusion of trees and soot-covered street-facing building surfaces. It’s a clear and bright morning (or possibly evening), but the air’s not clean here. I found it interesting that the artist thought to use shadow to shroud some of the people and to include litter in the sunshine on the sidewalk and street.
It turned out that our local Dodge dealer closed last week because the owner is 86 and wanted to retire.
Of course in normal times someone would have been waiting to buy the dealership and it wouldn’t have closed.
And on the painting…every vehicle looks GM. Time, about 1949 – new 49 Caddy, plenty of 30’s cars still seen.
I guess part of my skepticism comes from them focusing on volume, rather than profitability or location or ability to expand or any number of things when determining who stays and who goes.