01-06-2009, 06:18 PM | #1 |
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Dealer files Chapter 11 due to GM Cash Flow Problems
A long time GM Dealer in Georgia indicates that he has filed for Chapter 11 Bankruptcy because of GM's decision to delay Incentive Payments.
The dealer reports that GM owes him $140K in Incentive Payments and that's money that he needs to stay current with his creditors. Chapter 11 Bankruptcy allows the dealership to reorganize while they're protected from their creditors. Sadly, this is exactly what many people here thought would happen when the news was first reported that GM would delay their Incentive Payments to their dealers. Here's a link to the news report: http://www.13wmaz.com/article/200901.../90102021/1005 Here's a link to the actual Bankruptcy Filing: http://www.13wmaz.com/assets/pdf/CO12539012.PDF It looks like JM&A is one of the largest unsecured creditors - I'm guessing that's for Service Contracts that have been issued but not paid for. |
01-06-2009, 07:36 PM | #2 |
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For sure GM's delay in paying rebates combined with GMAC's curtailments will certainly put many dealers into a cash strapped and cash starved position. While GM is delaying incentives by two weeks they are in many cases not paying all the money that is due on a particular delivery, but rather delaying portions of rebates due for another week or two, further straining dealers. From a dealer's viewpoint it looks like Project 2000 without the costs associated with it.
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01-06-2009, 08:39 PM | #3 | |
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Quote:
Think of how many GM dealers must be in the same situation right now - these are the issues that keep dealers awake at night. Now that GM has the TARP money they have no reason to "slow pay" their incentives. I wonder if they'll do the right thing and reverse their policy? If not, it makes you wonder if they didn't have another agenda besides cash flow. |
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01-06-2009, 09:05 PM | #4 |
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Does GM still pay incentives via checks?
I just read another news report where the dealer principal stated that GM has been making the incentive payments via a two-party check made payable to the dealership and GMAC.
Does GM still issue checks for incentive payments, or did the newspaper misquote the dealer? In the age of Electronic Transfers I cannot imagine that GM would still be issuing checks. Regardless, it sounds like GMAC is in the middle of the incentive payment mess with the dealership - they get paid first then the dealer gets any remaining funds. Here's a link to the news report: http://www.macon.com/198/story/573411.html |
01-07-2009, 06:17 AM | #5 |
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I think they misquoted the dealer. We recieve our funds via electronic transfer into our open account.
I agree this incentive payment program is a mess. With dealers having allready reduced cash flows and then this with incentives I believe we will see more of these types of filings. To the other point made about JM&A being one of his biggest creditors. This could be that next big problem. I know that JM&A is very well funded with no debt, but most service contract companies are not as well funded. Most states have laws that put the service contract on the provider even if the dealer does not pay. How many $50,000 hit can most of these service contract companies take and survive? |
01-07-2009, 12:20 PM | #6 | |
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Concerning JM&A and all the other Service Contract companies, that's an interesting point. I could be wrong, but my understanding is that the Finance Company is on the hook if the dealer sells a Service Contract but doesn't remit payment. |
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01-12-2009, 10:34 PM | #7 |
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Dealership is now closed
The latest news reports indicate that the dealership is now closed.
I thought that the Chapter 11 process would allow the dealer an opportunity to reorganize but I guess that's not the case. Here's a link to the latest news report: http://www.13wmaz.com/article/20090112/NEWS01/90112023 |
01-14-2009, 12:25 PM | #8 |
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GM and GMAC made a settlement offer and closed store
The Dealer Principal indicated in a news report that he agreed to close the store and end his Chapter 11 reorganization hopes when he received a settlement offer from GM and GMAC. In the offer, GM and GMAC agreed to assume the dealership's new and used car inventory and absolve the Dealer Principal from any financial liability associated with liquidating the inventory.
It's an interesting settlement offer and I can see how a dealer would see it as an attractive option as opposed to a long drawn-out Chapter 11 Bankruptcy battle. Here's s link to the news report: http://www.macon.com/197/story/585987.html |
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