By on July 23, 2009

More testimony over the fate of GM and Chrysler’s culled dealers yesterday revealed possible compromises, although consensus is still elusive. Chrysler VP and Associate General Counsel Lou Ann Van Der Wiele told the House Judiciary Committee (via the NYT) to ignore the pleas of Chrysler’s 789 slashed dealers, explaining that dealer reinstatement would be the end of Chrysler as we’re getting to know it. “Legislation aimed at reversing some of the painful but necessary actions taken during Old Carco’s bankruptcy will simply take Chrysler back to the future that Old Carco faced not long ago—and this time, without the option of a purchaser for substantially all of its assets. Complete liquidation, with all of its dire consequences, could follow.” But then, “complete liquidation with all its dire consequences” could follow if The New Chrysler ate the wrong tuna sandwich.

Meanwhile, GM took advantage of ChryCo’s histrionics to make itself look good by comparison. The General revealed that will pay a grand total of $600 million to its wound-down dealers, reports the Detroit News. That breaks down to $1,000 per vehicle, plus eight months of rent assistance. Plus, GM is offering its culled dealers the right of first proposal for new dealership openings.

Not that the offer to return to the bosom of the company at some undefined future point has dealers jumping for joy. “I would not trust GM’s right of first proposal, or any other deal, because they have not dealt morally or ethically with us,” Tamara Darvish of the Committee to Restore Dealer Rights tells Automotive News [sub]. “This is a very narrow offer, just one element of the overall set of issues,” adds NADA spokesman David Hyatt. “It would be a much better approach for us to wait for a broader package.” Funny how nobody is questioning why more dealerships would be opening at all. But, hey, at least GM is trying . . . Chrysler isn’t even offering hypothetical restitution.

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19 Comments on “Bailout Watch 572: What Will It Take to Get You Out of a Dealership Today?...”


  • avatar
    kaleun

    the only reason the dealers sue is that they want tax money. no one in his right mind wants to be a GM or Chrysler dealer if they had a choice they”d be Honda dealers or some other maker who still has some prospect of selling cars at a profit.

    I believe most culled dealers were the bottom of the service and sales numbers anyway. Go sell used cars, with those you make the most profit anyway. don’t wait for communism to rescue and subsidize you.

  • avatar
    The Walking Eye

    What I don’t get is why these dealers have to completely close up shop if they have their new Chrysler or GM vehicles taken away. Convert to a used car lot and service center and yell from the roof tops that you’ve got the same mechanics as yesterday when you were an offical franchisee.

    They may have to scale back, but they can at least attempt to keep open and then maybe see if Honda or Toyota would like to have a new dealer.

    Besides, I thought no one makes money on new car sales…

  • avatar
    EEGeek

    I believe most culled dealers were the bottom of the service and sales numbers anyway.

    Not necessarily. My mom has been friends for 30+ years with the owner of a GM dealership. One day in June he received a letter congratulating him for being the highest selling dealer in the state, despite being in a much smaller market than other dealers in larger cities. The very next day the letter terminating his dealership arrived.

    They could not tolerate him having a “foreign” brand in his showroom. Nicely done, GM, nicely done…

  • avatar
    superbadd75

    “I would not trust GM’s right of first proposal, or any other deal, because they have not dealt morally or ethically with us,”

    But they’d trust GM if they were allowed to be reinstated as dealers, even with the questionable (at best) dealer agreements they have to sign? At this point I’m not sure I’d trust GM even if they hadn’t disposed of any dealers. Having the same bunch of yahoos up there running the show proves how serious GM is about getting things done the right way. I do not have good feelings about their resurrection at all.

  • avatar
    FloorIt

    Curious, no mention of closed Ford dealerships even though there were some, just GM & Chry.

  • avatar

    Floorit, Ford has not terminated any dealers. They can’t due to state franchise laws. The recession has caused Ford dealers to go out of business but Ford did not dictate that dealers to close.

    Kaluen Fitzmall is a top rated dealer by many people on this site and they own many foreign deelerships including Toyota, Hyundai, Mazda, Nissan, Volkswagen Mitsubishi, Suzuki and Subaru. Among other things they have up front no haggle pricing.

    Its not communism to fight to keep your business from being closed . It is a false assumption to assume that they are losing money simply because they are a domestic branded dealership. To say its simply about tax money is ridiculous.

  • avatar
    jacad

    What part of this situation can some people not understand? GM and Chrysler, with government sanction, seized for all intents and purposes more than 3,000 small businesses from American citizens. Many of them were profitable, many had been there for thirty years or more, in most cases represented millions of dollars in investment, were ranked high in customer satisfaction, and above all else the owners were given no option.

    Service and used car sales operations without a new car franchise do not need the same physical plant GM or Chrysler requires and for the most part are not profitable. There are not some other franchises just waiting around for the asking for these dealers in 99% of the cases. What now you do with your five million dollar building? In case you haven’t looked lately, the real estate market is not exactly booming!

  • avatar
    Steven Lang

    ‘Bankruptcy’

    It doesn’t matter how the numbers end up or how you play them. Once a car company has filed for Chapter 11, dealers will be cut.

    That’s it. End of story.

  • avatar

    Speaking for myself alone, I love hearing the dealers squeal. I especially love the sound, knowing they are going to die. In the near future when I see them at Interstate ramps with signs saying “Will sell nothing at an unconscionably high price for food.” I will quietly celebrate on the rare occasions I remember it isn’t good practice to hit them.

  • avatar
    motownr

    angrystan:

    What kind of whack job takes pleasure in this sort of thing?

    Ever wonder who the real losers are in this?

    Maybe the many older workers who will never again find equal employment? Try working for the same company for 30 years, being over 50, and trying to find a job in one of the countless small towns across the country where dealers were wiped off the map.

    If you pay taxes (questionable), you may wish to know that taxpayers are on the hook for all of this stupidity.

    GM and Chrysler have literally walked away from installed base coverage in the millions. The plan, of course, is foolproof–they’re going to take the franchises they nabbed and reopen with puppets in place.

    Except that it’s not turning out to be so simple…take up reading, and buy a local paper: chances are good you’ll find the dealer closings getting more press than the White House’s health care plan. Really–in small towns, people are TICKED.

    Of course, lower revenues for the Bailed/Failed could never come home to hurt us…right?

  • avatar
    superbadd75

    @ angrystan : Seriously, not every dealership in the world is evil, and many of the dealerships being eliminated are owned and staffed by decent people with bills to pay and families to feed. You and everyone else cheering the deaths of these dealerships would do good to realize that for every dealership lost, a community is affected. I do believe that some dealerships had to go, there are far too many competing for the same (shrinking pool of) business, but to cheer their demise is wrong. Sure, many car salesmen are sleazy, many dealerships play games to make a sale, and many service departments sell work that’s not needed. To think that they’re all like that is rather narrow minded.

  • avatar
    motownr

    To return to civil discussion with normal people:

    The stupidity at Chrysler is that many of the terminated dealers were profitable, long established firms. They just happened to be competing with huge new stores–often backed by Chrysler Realty and Chrysler franchise funds–that had/have huge overheads. When you know this, it’s less of a wonder why Chrysler acted as they did–the big stores they had a stake in couldn’t compete with the smaller stores.

    Which store do you think is more likely to have the kinds of behavior that chases repeat customers away? The guys who have been selling to the same people for decades–or the new arrivals levered to the hilt?

  • avatar
    FloorIt

    Sherman Lin:
    Thanks, you’re correct. I looked further into it, since Ford isn’t in Ch11, dealers can’t be closed by Ford.

  • avatar
    superbadd75

    @ motownr: Several of the dealers closed in my area were actually pretty fresh remodels, but I think their problem was that they weren’t selling all 3 lines. Strangely enough though, regarding that, is the fact that 2 of the stores I’m thinking of were in very close proximity to opposite Chrysler brands, competing for the same clients. One Dodge dealer that was left open, for example, has a very shabby old showroom, run down looking facilities, and yet it’s literally within 2 miles of a freshly updated (completed last year) Chrysler-Jeep franchise that was shut down. There was no doubt a game plan, but I don’t think it’s about whose facilities are nicer, who’s got loans from Chry-fi that they might lose out on, or any of that. There absolutely had to be some people in the politicos’ pockets that had at least something to do with the closures. Money changed hands somewhere.

  • avatar
    motownr

    Superbadd:

    I agree that the terminations didn’t have to do with the checklist Chrysler has floated. I could give you a dozen even more questionable examples.

    That’s the reason for the uproar: there is no logic to the closings, and the justifications ring hollow.

    What’s tragic for taxpayers is that the real damage is prospective–Press may have prevailed in the power struggle, but he is finished as a leader respected by the CJD dealers. If you’ve seen any of his public appearances, you’ll know what I’m talking about. The guy comes across as a liar. Why he’s taken the path of being the mouthpiece for such a divisive issue I have no idea–it’s cost him the support of even the surviving dealers. A career destroyed in a matter of months.

    Imagine trying to run a car company when the audience at every dealer meeting includes people who you screwed–many of the terminated dealers have other Chrysler stores.

  • avatar
    sully1411

    Amazing how misinformed many of you are about the auto bankruptcy and the effect on dealers and our country. Please try to understand …Anyone who purchases a franchise i.e. Starbucks or auto dealers are protected my state laws. Bankruptcy has terminated franchise agreements which means the money paid to sell a product is gone along with their right to do business. Chrysler & GM are not required to compensate or return the cost of franchise. If this is allow to happen no franchise business is safe!

    FYI… several of these dealers are fighting for their business at great expense because they were unfairly closed. Targeted because they used franchise laws to protect their business which upset Chrysler…. Closing viable profitable dealerships is just bad business practice! No wonder these companies are in trouble!

  • avatar
    agenthex

    ‘Bankruptcy’

    It doesn’t matter how the numbers end up or how you play them. Once a car company has filed for Chapter 11, dealers will be cut.

    That’s it. End of story.

    Yeah, it’s hilarious how many consider it a right to have special legal protection despite the fact that everyone knows what bankruptcy is.

    I mean, maybe some should be rescued and continue to be subsidized through cash on the hood, but the gov has already saved the majority of dealers by not letting the car companies liquidate. So a portion gets cut, boo hoo, plant and workers and management got cut, too.

  • avatar
    The Walking Eye

    ‘Bankruptcy’

    It doesn’t matter how the numbers end up or how you play them. Once a car company has filed for Chapter 11, dealers will be cut.

    That’s it. End of story.

    Yeah, it’s hilarious how many consider it a right to have special legal protection despite the fact that everyone knows what bankruptcy is.

    I mean, maybe some should be rescued and continue to be subsidized through cash on the hood, but the gov has already saved the majority of dealers by not letting the car companies liquidate. So a portion gets cut, boo hoo, plant and workers and management got cut, too.

    The tone here in the comments has gone from “we gotta get rid of at least 1/2 the dealers” pre-bankruptcy to “we gotta protect all the dealers” post-bankruptcy. I can’t tell you if the same people are arguing both, but this whole thing is NIMBY. So it seems now the prevailing thoughts to many are, “yeah, dealers need to close but not the one in MY town.”

    In Milford, OH a CDJ dealer got cut. They converted to a large used dealer as they’re part of the Kerry Automotive group (so that kinda thing can work out for them). I talked to them yesterday and the guy was disappointed but they’re still in business.

  • avatar
    bryanska

    We’re messing with the free market, which is like messing with nature… Geo-engineering in the economy on a big scale. Bankruptcy is like a forest fire. It clears out dead brush. Those who are afraid to lose unsustainable businesses are operating on the assumption that no new businesses will open and eveything has been invented already.

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