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

[DealerEx]

Originally Posted by XDCX

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?

Charging yourself rent used to be the common approach if you were incorporated...it allowed you to siphon money out of the Corp. into personal income before it was taxed at the corp. level, as well as shielding the asset from legal action against the corporation. The only problem with that scenario developed back in 2001/2002 when DCX wrote up a new Master Loan Agreement they wanted all the dealers to sign...claiming it just "cleaned up some of the language and allowed them to perfect their rights under the UCC regulations". They inserted a couple of new paragraphs in it that stated the dealer gave CFC and "unconditional PERSONAL guarantee" to cover "any and all obligations" they deemed the dealership owed them. They had never had that before. Whole new ballgame there...all the dealers that signed that agreement, (about 90%), put all their PERSONAL assets on the line to cover any debt the corporation couldn't. That worked out pretty good for DCX/CFC in 2009...they could look at what a dealer owed them versus what the total potential assets in play were before they decided which dealers to close. As an example, they look at dealers A & B, whose liabilities to them (floorplan, parts acct, etc..) were both $1 million: Dealer A had been in business for 30 years and had no debt, owned everything free and clear, including the facility, whereas Dealer B still owed money on his facility, home, etc...totaling $800,000. CFC calculates that if they force both of them to dump their inventories in 3 weeks (May15th-June 9th), they will wind up taking a potential $400,000 loss compared to what they owe DCX....which one do you think they will be more likely to terminate? Just sayin'....that type of analysis, might explain why so many of the 789, were smaller, longtime dealers, many in older facilities, that had zero or very little personal debt...DCX & CFC knew they would have no financial risk in closing those dealers...they already had a ruling from the BK judge that NEWCO would be shielded from any lawsuit and they had claim on the dealers personal assets in case the dealer tried to walk away and leave them holding the bag on his open accounts. It's like the old saying, "if you owe your banker enough money, he HAS to be nice to you".

[XDCX]

Originally Posted by DealerEx

It's like the old saying, "if you owe your banker enough money, he HAS to be nice to you".

I agree with you 100% and there's little question in my mind that the level of exposure Chrysler Financial had played a big role in determining whether a Chrysler dealer lived or died when the OLDCO list was being generated.

[The StraightShooter]

DealerEx is exactly right. Look at the 2 extremes:

Tacoma Dodge- High Volume dealer who owned there own dirt and paid cash for there inventory no floorplan- Terminated

Zangara Dodge- A ponzi disaster, had been defunct for some time prior to BK- NewCo assumed his Executory Contract i.e. Franchise

...Only In America

[rd3311]

which one do you think they will be more likely to terminate? Just sayin'....that type of analysis, might explain why so many of the 789, were smaller, longtime dealers, many in older facilities, that had zero or very little personal debt...DCX & CFC knew they would have no financial risk in closing those dealers...

Another spin on this goes back to 1987 when Chrysler revised their franchise agreements by putting in a clause that the dealer waives his right for arbitration in any dispute with Chrysler.

I refused to sign this, and so did my father who had a 1971 franchise agreement..

When the AMC dealers were absorbed in 1987, many of them as well refused to sign the revised agreement giving the right to arbitration away.

This would also explain as well why many older dealers got tossed when Chrysler had the chance to void the old agreements in BK.

[steve_biegler]

Your right rd3311. We did not sign either, our agreement went back to "Rambler" 1956.

[gingersnap]

Agree to disagree I guess for me We own everything free and clear were not cut. Then 2 years force us to build a new place to get Dodge still don't understand. We are no longer a dealer anymore anyways. on our TERMS.

[possum]

We too, were a Rambler Dealer, and had the OLD agreement.

[XDCX]

Originally Posted by gingersnap

Agree to disagree I guess for me We own everything free and clear were not cut.

I think were mostly on the same page. While I acknowledge smaller dealers with no debt were allowed to move forward to NEWCO, I believe Chrysler allowed other dealers to move forward to NEWCO simply because Chrysler Financial didn't want to incur a loss.

Zangara Dodge is the perfect example - there was no reason why a dealership that was closed should have been moved forward to NEWCO.

[DealerEx]

Originally Posted by gingersnap

Agree to disagree I guess for me We own everything free and clear were not cut. Then 2 years force us to build a new place to get Dodge still don't understand. We are no longer a dealer anymore anyways. on our TERMS.

I wasn't suggesting that it was a factor in every case...but in situations where they had to decide between 2 or more dealers in an area, if they felt they were at risk to lose money because one dealer carried a substantial debt while another had little or none, it would certainly be a factor they would have looked at. In another situation I'm familiar with, they closed 3 separate dealerships in the same town...all of which had been dealers there for 27 to 42 years, and had no debt. 30 days later they awarded all three franchises to a former chain dealer who agreed to build a new $$$ Millenium facility. Knowing that all of the terminated dealers had plenty of assets, they didn't have to worry about one of them saying, "OK, you're stealing my business? Well here are the keys to all YOUR cars...I'm out of here and I'm not paying you another cent on anything I owe you!"

[Jeff Duvall]

Just came across this you tube video, about half way through it check out Peter Grady's comments about violation of the franchise laws. I think this was shot almost 1 year ago. http://www.youtube.com/watch?v=Gy0DJ_yXoF4

[Txflyer]

Originally Posted by Jeff Duvall

Just came across this you tube video, about half way through it check out Peter Grady's comments about violation of the franchise laws. I think this was shout almost 1 year ago. http://www.youtube.com/watch?v=Gy0DJ_yXoF4

Watching this video, then remembering what was done to so many of the dealers (and is STILL being done) makes me want to puke.

[Jeff Duvall]

I did puke

[JoeRocket]

http://www.autoblog.com/2011/11/09/c...ca-dealership/

[DealerEx]

Originally Posted by JoeRocket

http://www.autoblog.com/2011/11/09/c...ca-dealership/

What really sickens me is reading the comments following the article. All, but one person writing believes that Chrysler should be able to operate a factory store in that location, even though they acknowlege it is direct violation of the law, and blame the franchised dealers for passing the laws that Chrysler was violating. When you read those asinine comments you realize why there was no outcry over all the dealerships being forced to close...these idiots are not capable of understanding the concept of franchise laws and just don't give a damn about government facilitated theft of private property and businesses because it wasn't THEIR business.

[jeepdealer]

Originally Posted by DealerEx

What really sickens me is reading the comments following the article. All, but one person writing believes that Chrysler should be able to operate a factory store in that location, even though they acknowlege it is direct violation of the law, and blame the franchised dealers for passing the laws that Chrysler was violating. When you read those asinine comments you realize why there was no outcry over all the dealerships being forced to close...these idiots are not capable of understanding the concept of franchise laws and just don't give a damn about government facilitated theft of private property and businesses because it wasn't THEIR business.

I believe those comments reflect the opinions of those with little or no experience of running a business let alone the five businesses which operate under the typical dealer's roof. While on the surface the comparison to the Apple retailers seems to be fair one, the average dealership has exponentially more processes than your basic McDonald's let alone an Apple retailer. At the end of the day, many would agree that Apple's success is due to its product not its retail model.

Also, I would argue that the manufacturer is far better served by investing its capital in developing new products in this rapidly changing environment as opposed to tying it up in retail real estate and facilities which, for the most part, have, for the time being, lost a good deal of value.