Spat squeezes Chrysler dealers

A conflict between Chrysler Financial and GMAC is threatening about 40 otherwise viable Chrysler, Jeep and Dodge dealerships with loss of financing and possibly foreclosure, according to the National Automobile Dealers Association.

As part of Chrysler Group LLC’s bankruptcy restructuring, the U.S. Treasury agreed to guarantee floor plan loans —what dealers borrow to buy vehicles from the automaker — until Nov. 15, while GMAC absorbed the wholesale financing operations previously serviced by Chrysler Financial.

With that deadline less than three weeks away, GMAC has informed dealers it needs more collateral than simply the cars the dealers orders. For some dealers, the only way to raise the additional collateral is to draw on their mortgages.

But Chrysler Financial, which holds the mortgages on some of these dealerships, has refused to relinquish its stake in those properties without adequate compensation, too.

“The parties have taken inconsistent positions and dealers are stuck in the middle,” said Forrest McConnell, an official with NADA.

Compounding the showdown is a devastated commercial real estate market. If dealers wanted to sell their stores, they would get far less than what they owe Chrysler Financial for them.

Before last year’s financial meltdown, commercial banks might have provided an alternative for dealers.

“Today, there’s not a bank on the planet that will loan a dime to any Chrysler or GM dealer,” said Dick Huvaere, a Chrysler, Dodge and Jeep dealer in Richmond, Mich. GMAC could foreclose on his inventory if the issue is unresolved by the Nov. 15 deadline.

Chuck Eddy, a dealer in Youngstown, Ohio, and representative to NADA for all Chrysler dealers, said about 40 dealers are affected by the problem. “But they shouldn’t be at risk because they were viable before this,” Eddy said.

Spokesmen for GMAC, Chrysler Financial and Chrysler Group did not return phone calls for comment.

After Chrysler terminated 789 dealerships in June, closing even more stores could restrict access to the automaker’s vehicles in some metropolitan areas. It could also further depress low property values by dumping large parcels of suburban land on the market.

“I’m the guy who’s up all night because I have 100 employees whose livelihoods are at stake,” Huvaere said. – Freep

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