Bailout Watch 572: What Will It Take to Get You Out of a Dealership Today?

by Edward Niedermeyer

Published: July 23rd, 2009

bailout watch 572 what will it take to get you out of a dealership today

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.

Edward Niedermeyer

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The Walking Eye on Jul 24, 2009
‘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.

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Bryanska on Jul 24, 2009

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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