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40 Chrysler dealerships at risk over financing flap

by Bill Cawthon on

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.”

Bill Cawthon grew up in the auto industry in the 1950s. His Dad worked for Chrysler and Bill spent a number of Saturdays down on the plant floor at Dodge Main in Hamtramck. Bill is also the U.S. market correspondent for, a British auto industry publication, and a member of the Texas Auto Writers Association, which has named the Jeep Grand Cherokee the “SUV of Texas” several times and named the Ram 1500 as the “Truck of Texas” two years running.

Bill has owned five Plymouths (including the only 1962 “Texan”), one Dodge and one Chrysler and is still trying to figure out how to justify a Wrangler. He also has owned at least one of every 1:87 scale model of a Chrysler product. You can reach him directly at (206) 888-7324 or by using the form.

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