40 Chrysler dealerships at risk over financing flap

The National Automobile Dealers Association says as many as 40 Chrysler dealerships may be threatened with foreclosure because of the ongoing dispute between GMAC and Chrysler financial.

“The parties have taken inconsistent positions and dealers are stuck in the middle,” said Forrest McConnell, an official with NADA. The dealer group says the affected dealerships are viable but may be unable to get floorplan financing since the two finance houses can’t agree on their status as creditors. GMAC assumed the role of captive finance source for Chrysler Group dealers when the automaker came out of bankruptcy. The U.S> government ordered the change because GMAC, due to its status as a bank, had better access to capital than Chrysler Financial, which is owned by Cerberus Capital Management.

The problem is the dealers have existing floorplan loans and mortgages with Chrysler FInancial and have only until the middle of next month to get set up with GMAC for new financing. Without the floorplan loans, dealers will not be able to order fresh inventory. GMAC is asking for more collateral, saying the value of the vehicles isn’t enough, and Chrysler Financial refuses to give up its position as the creditor with first demands on assets.

In better times the dealers might have been able to borrow against the value of their property or get other financing from commercial banks. However, plunging real estate values have left some dealers owing more than their property is worth and, as one dealer noted, “…(T)here’s not a bank on the planet that will loan a dime to any Chrysler or GM dealer.”