Car Dealers Positioning Themselves for D2.8 C11 Payout

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.

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  • 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.

  • NormSV650 I knew GM could save Acura and keep them afloat!
  • Dukeisduke Only a half day? Wow! It's definitely changed. For the better? I don't know.
  • Ajla Are the sausage platter catering companies going to survive?
  • Chris P Bacon I have driven a few Alfa Stelvios, and they are fun on twisty roads. I love the looks, and that there just aren't a lot of them on the road. There was a time where they were leasing very very well, and I considered pulling the trigger on one. But then my local dealer closed, and is turning the building into a Mazda showroom. So my closest dealers are between 85-100 miles away. I've heard Alfa got their quality act together after 2019, and it's mostly common Stellantis parts these days. But since I don't have a local Alfa store to do the repairs, it's been a no go. I like the tonale, and since the Dodge is mostly Tonale, with access to a Dodge dealer for warranty work, I thought I might be interested. Sizewize, this thing falls right between the Compass and Cherokee, so it's not a penalty box. But I think at $30k, Dodge really stole Alfa's price point. It's literally the same car, Alfa could make money at $30k if Dodge can. Alfa might actually be able to attract some new customers if the Tonale was priced here. but at $37k to start for the Tonale, it's gonna sit on Alfa lots looking for a home. The Dodge really should be called the Fugazzi, not the Hornet.
  • Chris Tonn @maintenancecosts stay tuned. An XC90 Recharge arrived this week.