Chrysler Financial Threatens Dealers to End Run on Bank
TTAC has long predicted a supplier-led “run on the bank” scenario, whereby suppliers demand COD and destroy Chrysler, GM and (yes) Ford’s life-sustaining cash float. While the automakers have managed to stave-off that eventuality– as suppliers jostle for their position in line at the bailout buffet– it seems that Chrysler dealers are showing the same level of respect to the corporate mothership as the channel stuffing colossus has shown its dealers. The Wall Street Journal reports that “Chrysler LLC’s financing arm has warned dealers it may have to temporarily stop loans that dealers use to pay for stocking vehicles on their lots as a result of a recent wave of withdrawals from a fund used to pay off those loans. In a letter dated Dec. 12, Chrysler Financial Chief Executive Tom Gilman said dealers have been withdrawing up to $60 million a day from the fund…. Gilman said more than $1.5 billion has been withdrawn from the CMA [cash management account] fund since July.”
“Chrysler Financial allows dealers to put money into the cash management account and pays them 2% interest. The money is then used to make payments on the loans dealers take out to buy new cars.”
So Chrysler Financial has been using dealer cash to finance loans its pay to dealers to pay Chrysler for product. Makes sense to me. And now that dealers are withholding that cash…
“Suspending loans for purchasing new-vehicle inventories would be a tough blow for Chrysler. Dealers wouldn’t be able to order cars and Chrysler’s revenue could plunge, since auto makers book car sales when cars are shipped from plants to their dealers.”
And they say the English are the best at understatement.
Nothing surprising here. Dealers know the mothership is sinking. They know their steamer trunk is lost. But they'd like to grab their Reeboks while they can. One more Cerberus dealer rolled up the carpet yesterday in my neck of the woods. Think that leaves my metro area with 4.
Swirling the Toilet bowl. I maintain that one of the detroit 3 must die so the others may live. The pentastar was always my choice in that regard. Nissan has been talking about entering the commercial market for some time now and picking up a 3/4 ton and one ton truck production, along with associated diesels would work out quite nicely towards that goal. The new Ram is quite a nice truck (to my suprise), so I must admit that Nissan has to be the most likely choice to pickup that part of Dodge.
But my concern for Chrysler is this: If it is chopped up and sold in pieces, will there be enough to pay Nardelli his $100 million that he earned for his outstanding service as the Chrysler CEO, just like he did as the Home Despot?
One of the crazy things about the car business is that the manufacturers have been getting paid on delivery rather than net 30 or better as is customary with most manufacturer/retailer relationships. Floor planning was part of the system which made this all possible. The whole thing is a tangled web which is coming undone.