Chrysler claims to have a buyer for Motor Village of Los Angeles

[XDCX]

Originally Posted by Needhelp

Never mind, I just reread the statement: the stores went bankrupt, before Chryslers bankruptcy.

Chrysler was losing dealers at a rapid pace in California even before the bankruptcy. I created a thread back in 2008 listing all the Chrysler stores that closed in California - Chrysler ended up losing 22 dealerships. Here's a link to the original thread - click here

Then there were more California Chrysler dealers who were closed as part of the OLDCO terminations, others who couldn't make the Chrysler Financial to GMAC transitions and still others who couldn't survive Marchionne's "hibernation."

Hell, Chrysler's lucky they have any dealers left in California given the way the dealers have been treated.

[XDCX]

Originally Posted by crowe

Yes your honor, however aren’t we protected from this court since Chrysler filed bankruptcy & the US government chose Fiat to save Chrysler, the UAW & America. Excuse me but how much is the fine per transaction? Can we settle this with stock options or a gifted dealership?

Originally Posted by ohiobuckeyes

Quote of Week!!!

I'd have to agree - that is Quote of the Week material.

I especially liked the reference to a gifted dealership - that's appears to have been the currency of choice in the past.

[XDCX]

I heard that the California New Motor Vehicle Board had their hearing on September 27th and they are taking the testimony under advisement and will render a decision at a later date. It's still not clear when they will issue their decision.

I also heard that the meeting was open to the public and there was at least one Chrysler dealer who gave testimony against Chrysler's ownership of Motor Village of Los Angeles. I don't know who it was but I have a lot of respect for a dealer who's willing to take a public stand against the factory when they've crossed the line.

[XDCX]

Originally Posted by XDCX

I also heard that the meeting was open to the public and there was at least one Chrysler dealer who gave testimony against Chrysler's ownership of Motor Village of Los Angeles. I don't know who it was but I have a lot of respect for a dealer who's willing to take a public stand against the factory when they've crossed the line.

Automotive News provided an update and reported that it was David Ellis who made a statement against Motor Village of Los Angeles at the hearing held by the California New Motor Vehicle Board.

Ellis compared Chrysler's actions to those of a person who cheats and uses the HOV (High Occupancy Vehicle) lane to pass all of the other motorist who are stuck in traffic. Essentially Chrysler knew they were breaking the law but the means were justified by the end.

The report by AN also indicated that Chrysler is negotiating with the DMV toward a resolution which may include a fine. A worse-case scenario for Chrysler dealers would be a decision by the DMV to temporarily suspend Chrysler's ability to sell vehicles in California - let's hope Auburn Hills doesn't let the situation deteriorate to that point.

[XDCX]

Here's an excerpt from the testimony provided by one of Chrysler's attorneys:

Young told Alvarez and the seven-member board that Chrysler's management team has "put a number of controls in place" to "revamp the entire program so that nothing like this will ever happen again."

Chrysler's been running Motor Village of Los Angeles for almost 10 months and they just now figured out they were breaking the law?

Is it possible a company of Chrysler's size is that clueless or is that just a statement a company makes when they're in "damage control" mode?

[crowe]

Originally Posted by XDCX

Here's an excerpt from the testimony provided by one of Chrysler's attorneys:

Young told Alvarez and the seven-member board that Chrysler's management team has "put a number of controls in place" to "revamp the entire program so that nothing like this will ever happen again."

Chrysler's been running Motor Village of Los Angeles for almost 10 months and they just now figured out they were breaking the law?

Is it possible a company of Chrysler's size is that clueless or is that just a statement a company makes when they're in "damage control" mode?

When did ignorance of the law become a viable defense?
The surprising part of this story is the California DMV is allowing this dealership to continue operating.
If this was an independent dealer operating illegally I bet it would have been shut down a long time ago.
Thumbs up to David Ellis for standing up against Chrysler.

[XDCX]

Originally Posted by crowe

When did ignorance of the law become a viable defense?
The surprising part of this story is the California DMV is allowing this dealership to continue operating.
If this was an independent dealer operating illegally I bet it would have been shut down a long time ago.
Thumbs up to David Ellis for standing up against Chrysler.

It will be interesting to see how this all shakes out.

I think it's cool that the California DMV is also asking Chrysler to pay restitution to the three CJDR dealerships that are within the 10 mile zone that have been impacted by Motor Village.

In my opinion Chrysler took a calculated risk when they opened Motor Village and they lost. I hope the California New Motor Vehicle Board makes them pay a large enough fine that it will serve as a reminder the next time Auburn Hills thinks about rolling the dice.

On a final note, props to David Ellis. I wonder if he received much support from the other CJDR dealers in Southern California?

[79LilRedExpress]

I think it's cool that the California DMV is also asking Chrysler to pay restitution to the three CJDR dealerships that are within the 10 mile zone that have been impacted by Motor Village.

In the light of the internet and social media, all customers zip codes should be cross referenced and the dealers in those zip codes should also be compensated... oh I forgot, its not a perfect world... silly me.
.

[XDCX]

Originally Posted by 79LilRedExpress

In the light of the internet and social media, all customers zip codes should be cross referenced and the dealers in those zip codes should also be compensated... oh I forgot, its not a perfect world... silly me.
.

It has all the makings of a nice Class Action Lawsuit.

I wonder if there are any out-of-work attorneys in Southern California who are looking for cases?

[XDCX]

I was reading the print edition of Automotive News and noticed that Grady refused to specify the rent factor for Motor Village but he stated they'll have a rent that's competitive with what private dealers pay themselves on bank loans.

What's that supposed to mean? What rate do dealers pay themselves on bank loans?

Maybe I'm too much of a skeptic but I wonder if Auburn Hills will try to use the low CD (Certificate of Deposit) rates to justify a low rent for Motor Village? Some CD rates are as low as 0.50% per year - that's low enough to make a $30 Million facility affordable.

[57years]

As an aside, under IRS rules, even if the rate charged by contract and negotiated in a free market manner, is below the "Federal Imputed Rate", the IRS will atune the difference between the rate as "income" to the lessee. Frankly, when the lessee is losing money, the inputed rate difference can't increase taxes on non existant taxable income, so I don't know if this has any bareing on your thoughts. It really becomes a question of "Is it real (dealer) money or play (factory) money" that is at stake?

[XDCX]

Originally Posted by 57years

As an aside, under IRS rules, even if the rate charged by contract and negotiated in a free market manner, is below the "Federal Imputed Rate", the IRS will atune the difference between the rate as "income" to the lessee. Frankly, when the lessee is losing money, the inputed rate difference can't increase taxes on non existant taxable income, so I don't know if this has any bareing on your thoughts. It really becomes a question of "Is it real (dealer) money or play (factory) money" that is at stake?

I follow your point and agree that if the lessee is losing money the fact that Auburn Hills may be subsidizing the rent for Motor Village is a non-issue in the eyes of the IRS.

That said, it won't be a non-issue for the California DMV if they determine Motor Village of Los Angeles has an unfair competitive advantage because Chrysler's subsidizing their rent. The question is, what is Chrysler charging Mr. Lin for rent and how does that compare to similar properties?

In fairness to Chrysler, maybe the rent they're going to charge Mr. Lin is competitive and this in a non-issue. It was the wording that Grady used that makes me suspicious - why wouldn't he simply say the rent is competitive and market-based and stop there? Why did he add the statement about the interest rate dealers charge themselves on bank loans? What does that even mean?

[rd3311]

Why did he add the statement about the interest rate dealers charge themselves on bank loans? What does that even mean?

In the 1970's Chrysler suggested to dealers who were building new facilities at that time to purchase the property personally, build the facility, but still maintain title personally (Chrysler Credit as well did these deals).

The thinking was of course to protect the owner from any litigation against the dealership business, as well as maintaining the property as an asset after a buy/sell to rent to purchasing dealership business owner.

A Dealer could charge the store rent and bury a salary there as well for taxes.

At that time most of dealership real estate notes were SBA guaranteed if it was done with a local bank like Southeast or SunBank.

Chrysler Credit did not do many real estate loans due to lack of funding (remember full repurchase agreements for retail paper?) until after 1985.

VW also had this philosophy, I remember a VW region dealer placement manager tell me "the future rental income and later when you sell the property, that is your retirement income".

[XDCX]

Originally Posted by rd3311

In the 1970's Chrysler suggested to dealers who were building new facilities at that time to purchase the property personally, build the facility, but still maintain title personally (Chrysler Credit as well did these deals).

The thinking was of course to protect the owner from any litigation against the dealership business, as well as maintaining the property as an asset after a buy/sell to rent to purchasing dealership business owner.

A Dealer could charge the store rent and bury a salary there as well for taxes.

At that time most of dealership real estate notes were SBA guaranteed if it was done with a local bank like Southeast or SunBank.

Chrysler Credit did not do many real estate loans due to lack of funding (remember full repurchase agreements for retail paper?) until after 1985.

VW also had this philosophy, I remember a VW region dealer placement manager tell me "the future rental income and later when you sell the property, that is your retirement income".

Thanks for the information.

I've known a lot of dealers who decided to be their own landlord for the reasons you cited above. I think it's smart to keep the two assets (the business and the real estate) separate so the business cannot wipe out the dealer's real estate holding.

That said, what interest rate would most dealers charge themselves for the real estate loan? Would it tend to be above the market rate or below it?

[XDCX]

In a previous post I mentioned the California DMV is suggesting Chrysler may need to compensate dealers that are within 10 miles of Motor Village of Los Angeles.

Here are the three dealers:

• Glendale Chrysler, Jeep, Dodge
• California Superstores Chrysler, Jeep, Dodge
• CarMax Chrysler, Jeep, Dodge

Concerning California Superstores, this is the same group that has also attracted the attention of the California New Car Dealers Association. It has been alleged that Chrysler is working with this group to back-fill several open points and Auburn Hills is sub-venting the rent at these locations.

I think I'll create a new thread on California Superstores in AREA 51 later this afternoon.