Welcome to A Chrysler Dealer's World

A dealer writes:

Say I order a pickup truck from the Chrysler mothership: an ’09 Dodge Mega Cab Cummins 4×4. MSRP: $59k. Invoice: $53k. Hold back: $2,400. Chrysler bills my bank for invoice ($53k). My bank gets the title and pays for truck. [ED: this is also known as floor-planning or flooring.] I take delivery of the truck, I sell the truck. Two weeks later, my floor-planning bank transfers the funds to Chrysler. First, I have to pay off the flooring liability: the Ram’s invoice price ($53k). Then I wait for the factory rebate money. That’s why it costs so much to operate a franchise dealership: the operating capital requirment is huge. We are fronting the manufacturer’s cash flow by overpaying for the units when we (the dealer) buy them from factory.

Let’s say the factory-to-dealer and factory-to-customer incentives add up to $10k. So I sell the Ram to a customer for invoice less rebates. Purchase price: $43k. Chrysler sends me the $10k rebate about three weeks after I report the unit as sold. (That’s $10k on one truck. Average incentives today are around $7k.)

Bottom line: a Chrysler dealer is looking at the number of units in stock multiplied by the $8k payable from Chrysler to the dealer. That’s IF the dealer sells all these cars in given timeframe. If, however, Chrysler files for Chapter 7 or Chapter 11 . . .

Chrysler isn’t going to pay the dealer incentives. So now my cost basis is actual invoice—which is WAY-the-NSFW too high to get the cars sold based on market conditions. In this scenario, the dealer takes it in the derriere big-time (pardon my French) as they try to sell off the remaining stock. Even if the federal government steps in and protects Chrysler customers’ warranties (so it’s safe to buy the leftovers), the rebates aren’t there. So the s**t’s still way off the money.

Consider the amount of floorplan interest paid by the dealer on the unearned rebate ($10k) alone. In other words, the REAL MSRP is/should be $49k and REAL INVOICE is $43k. But I have to pay interest on $10k of bulls**t while I owned this unit, until I receive my rebates from Chrysler.

Why doesn’t Chrysler just cheapen up the invoice amount, instead of having the dealers pay full boat now and get their rebate money later? Guess who the dealers use—or used to use—to provide the floor-planning loans? Chrysler Financial. The interest on the $10k part of the loan is staggering.

Think about the number of Chrysler units in stock across the country. [ED: At the end of January, Chrysler had 359,980 units of inventory.]

The system has worked in Chrysler and Chrysler Financial Services’ favor for decades. Now that the company is staring death in the face, guess who Jim Press wants to carry the can? The dealers. You might not have much sympathy for us, but you should have even less for Chrysler.