GMAC pulls Floorplan from two Pennsylvania Dealers

[XDCX]

Sadly, the fact that GMAC has pulled the Floorplan loan from two Pennsylvania Dealers is hardly newsworthy, it's been happening all over the country.

What makes this news report interesting is that one dealer is closing his operation while the other has elected to file a Chapter 11 Bankruptcy.

To the extent that a Chapter 11 filing allows that dealer to continue to operate his business and re-negotiate his debt, why don't more dealers take this route? I'm sure there must be a reason, but it sure looks like an attractive alternative to closing a dealership.

Here's a link to the news report: http://www.pittsburghlive.com/x/pitt.../s_609111.html

[Snowrider]

I lived and worked in this area before relocating to the upper Midwest. I know the dealers involved and feel for them.

Western PA is a tough place to slug it out in the car business. I was with a large Chevy franchise that ended up flooring with GMAC about 5 years ago. The disadvantage was the extra jing every month to pay the floor. The advantages included facility and health insurance at competitive rates plus availability of the lower credit tiers. In an urban location selling 200+ units per month, the extra profit from the D and E tier deals more than offset the costs.

Back to the dealers involved in the article. Frankly, you can't swing a dead cat by it's tail without whacking a GM franchise in the window in the Pittsburgh and Western PA area. I'm surprised these dealers lasted as long as they did. With Mega-GM dealers mere miles from their locations, it would not surprise me one bit if this isn't GMAC's way of thinning the herd in that geographic area. Of course I have no proof of that, but stranger things have happened, (UFO's, Elvis sightings, flying pigs, etc.)

[CL Pgh]

Originally Posted by Snowrider

Back to the dealers involved in the article. Frankly, you can't swing a dead cat by it's tail without whacking a GM franchise in the window in the Pittsburgh and Western PA area.

You're show'n your true colors... you really do know Pittsburgh! I rarely mention this as most people just don't believe it. But here's an example of SR's statement. Within 30mls of my store... there are #12 different CDJ dealerships! (a mix of single points & multi. stores)

Most people forget how RICH $$$ Pittsburgh was back in the 50's & 60's when the steel industry in Pittsburgh was just smoke'n. For years the richest City population in US. Oh yeah... the Big #3 handed out franchises like candy canes at Christmas around here! Everyone had one! Today: State franchise laws are the toughest in the Country. Properties have been paid off for years. Dealerships around here just don't seem to die easy.

[XDCX]

Originally Posted by CL Pgh

You're show'n your true colors... you really do know Pittsburgh! I rarely mention this as most people just don't believe it. But here's an example of SR's statement. Within 30mls of my store... there are #12 different CDJ dealerships! (a mix of single points & multi. stores)

Most people forget how RICH $$$ Pittsburgh was back in the 50's & 60's when the steel industry in Pittsburgh was just smoke'n. For years the richest City population in US. Oh yeah... the Big #3 handed out franchises like candy canes at Christmas around here! Everyone had one! Today: State franchise laws are the toughest in the Country. Properties have been paid off for years. Dealerships around here just don't seem to die easy.

I thought of this post last night when I was watching the Steeler Nation video.

It will be interesting to see how Detroit deals with their over-dealering problem. GM made news last week when they indicated that they wanted to close 400 stores per year in the next three years.

Part of me still thinks that GM and Chrysler want the TARP money and the ability to do a structured-bankruptcy.

[XDCX]

Originally Posted by Snowrider

With Mega-GM dealers mere miles from their locations, it would not surprise me one bit if this isn't GMAC's way of thinning the herd in that geographic area.

Although most of our topics on this forum have tended to focus on Chrysler, I believe that GM is treating their dealers far worse in terms of cash flow.

The fact that GM is still slow-paying dealer incentives after they received the TARP money is criminal in my opinion. It's no longer about GM not having the cash to pay incentives, it's about how many stores they can drive out of business.

[Snowrider]

Originally Posted by XDCX

Although most of our topics on this forum have tended to focus on Chrysler, I believe that GM is treating their dealers far worse in terms of cash flow.

The fact that GM is still slow-paying dealer incentives after they received the TARP money is criminal in my opinion. It's no longer about GM not having the cash to pay incentives, it's about how many stores they can drive out of business.

I see slow incentive reimbursements in both my Chrysler and GM stores. The owners are wary of such practices since that money is sitting out there as a non-asset backed receivable.

If either GM or Chrysler decide that chapter 11 is the way they have to go to reorganize, the dealers waiting for incentive money will be the first ones to get hurt. With GM incentives in December topping as much as $8000 per unit, and some high-lines even more, I can tell you that there's a whole bunch of money sitting out there that dealers are waiting for.

Combine the slow-pay incentives with the recent arm-twisting tactics of Chrysler trying to get orders and you have a true mexican standoff at the moment. The old adage of "no tickee, no laundry" applys at the moment with dealers waiting for money before they order any units.

[XDCX]

Originally Posted by Snowrider

I see slow incentive reimbursements in both my Chrysler and GM stores. The owners are wary of such practices since that money is sitting out there as a non-asset backed receivable.

If either GM or Chrysler decide that chapter 11 is the way they have to go to reorganize, the dealers waiting for incentive money will be the first ones to get hurt. With GM incentives in December topping as much as $8000 per unit, and some high-lines even more, I can tell you that there's a whole bunch of money sitting out there that dealers are waiting for.

Combine the slow-pay incentives with the recent arm-twisting tactics of Chrysler trying to get orders and you have a true mexican standoff at the moment. The old adage of "no tickee, no laundry" applys at the moment with dealers waiting for money before they order any units.

Excellent comments.

As we discussed in an earlier thread, there's no question that a Chapter 11 filing by an OEM would destroy their dealers. Very few would be able to survive the cash flow crisis.

When President Bush provided the Detroit 3 with access to TARP money the conversations about "pre-packaged bankruptcies" for the OEMs went away. Lately, however, I've been hearing some rumblings again - that's not good news.

Hopefully the Treasury will approve the Viability Plans for both GM and Chrysler and the economy will recover. If not, my bet is the topic of "pre-packaged bankruptcies" will move back to the front burner again.

[squinky65]

We just recently purchased a Chrysler franchise that had some serious struggles for a couple years before it closed, the two biggest issues I see with them right now is warranty payments and incentive payments. At the rate they pay, we will not be able to remain in business for very long. Working in a Ford franchise for 12 years, I was amazed at the additional costs that Chrysler puts on the dealers...ie..training for all personnel, special tool requirements, signage leases. I thought Ford was tough...nothing compared to Chrysler.

[XDCX]

Originally Posted by squinky65

We just recently purchased a Chrysler franchise that had some serious struggles for a couple years before it closed, the two biggest issues I see with them right now is warranty payments and incentive payments. At the rate they pay, we will not be able to remain in business for very long. Working in a Ford franchise for 12 years, I was amazed at the additional costs that Chrysler puts on the dealers...ie..training for all personnel, special tool requirements, signage leases. I thought Ford was tough...nothing compared to Chrysler.

squinky65 - Welcome to DealershipForum.com

It really is amazing how many monthly charges you incur when you hang a brand sign in front of your dealership, and I agree that Chrysler may be one of the worst.

It reminds me of a story I heard from a Chrysler Dealer that I know. He told me he laughed when his neighboring Toyota Dealer bought his first Chrysler Franchise. The Toyota dealer quipped that he had no idea there were OEMs that charged for sales brochures. The Chrysler dealer responded "Of course they charge for them, Hell it's one of their profit centers."