Car Dealers Positioning Themselves for D2.8 C11 Payout

Robert Farago
by Robert Farago
car dealers positioning themselves for d2 8 c11 payout

When it comes to “why can’t U.S. car companies kill their dead brands?” TTAC has always pointed the finger straight at America’s 50-state patchwork of franchise laws. If GM killed, I dunno, Saab, every Saab dealer in these here United States would drag The General’s ass down to the local courthouse demanding—and receiving—reparations. Lest we forget, Oldsmobile’s termination cost GM a billion dollars back when a billion dollars was a lot of money. If, however, Chrysler, GM or Ford filed for Chapter 11, they could kill brands and dealers at will—without paying ex-dealers anything more than the cost of their inventory. And maybe not even that. Franchised dealers can see the writing on the wall, and they’re not happy. So they’re proactively legislating a new post-C11 deal for themselves—inflating the claims against the automakers’ assets, increasing the likelihood that the D2.8’s bondholders will file for same.

A new Virginia law would require bankrupt carmakers to pay Old Dominion dealers’ rent/mortagage/land value for three years. And get this: provision 1569-5b (Termination Assistance) of the act requires manufacturers to pay “fair market value of the dealership” up to its value two years ago.

In a letter to the Virginia Auto Dealers Association (VADA), Charles Territo, spokesman for the manufacturers’ lobby group Automotive Alliance, points out that the VADA has lost its mind (paraphrasing).

The legislative proposal is akin to consumers saying the housing/financing crisis was not their fault, so the government should reimburse them for the lost value of their 401(k)s in the past year. Furthermore, the fair market value may be significantly higher than any investment by a dealer. Such legislation requiring manufacturers to pay the “fair market value” of dealerships will further exacerbate the plight of manufacturers struggling to stay in business by requiring huge payments to dealers in any necessary contraction of the product offerings.

Territo told TTAC that VA is only the first state making this misguided move. Legislators in Colorado, Indiana, Maine, Louisiana, Maryland, Montana, New Hampshire, Texas, Utah, Virginia, Vermont and Washington are all considering a similar law.

TTAC’s go-to guy on bankruptcy law says the dealers’ claims would never stand up in federal court. However, Mr. Tilton points out that the higher the claims against the automaker, the greater the chances the bondholders will pull the plug to avoid them. Sometimes the road to hell is paved with bad intentions, as well as good.

Robert Farago
Robert Farago

More by Robert Farago

Join the conversation
2 of 23 comments
  • Timjz Timjz on Feb 11, 2009

    I’m pretty sure this was the Hummer store in Milwaukee. The dealership has since been totally remodeled & is now a used car center. The funny thing was they put in a Smart car dealership about 100 feet from the Hummer store. This pic was taken before the Toyota(?) dealership was put in (where the trees are on the right side of the pic).

  • Fallout11 Fallout11 on Feb 17, 2009

    To effortlessly prune both dead brands AND excessive dealerships, all that is necessary is to do what Chrysler did with Plymouth....stop making any. Problem solved. No payouts required. Empty dealerships either go out of business (since they have nothing to sell) or sell other, still-manufactured vehicles.

  • Kat Laneaux @VoGhost - Not getting into politics. Let me say this though. I wouldn't trust Trump as far as I can throw him. His history precedes his actions and I am so not ok with it. The devil is the master of lies, unfortunately Trump is not far behind him. The guy is so desperate to stay in office, he might as well be Mussolini, or Putin. He just wants power and to be idolized. It's not about working for the people, he doesn't care about us. Put a camera on him and he wants the glory. As I said, his actions speak louder than words.
  • ToolGuy "Mr. President, no government agency, no think tank, and no polling firm knows more about the automobile customer than us. We talk to customers every day. As retail automotive dealerships, we are agnostic as to what we sell. Our business is to provide customers with vehicles that meet the needs of their budgets and lifestyles.”• How many lies can you fit into one paragraph?
  • Spamvw Three on the tree, even Generation X would have a hard time stealing one of those.
  • ToolGuy This trend of cyan wheels needs to end NOW.
  • Kwik_Shift Interesting nugget(s) of EV follies.